Banks governance and public‐private partnership in preventing and confronting organized crime, corruption and terrorism financing

Abstract

PurposeThe financial sector is critical for the effectiveness of the fight against organized crime, corruption and terrorism. The purpose of this paper is to discuss principles of governance of the sector and the complexity of the activities targeted. Its aim focuses on the need for public‐private partnership.Design/methodology/approachThe paper is based on a definition of the strategic situation of the financial sector, a review of basics of its governance at global and firms levels and an analysis of activities targeted. It discusses global harmonization versus local diversity; know your customer principle, separation of the compliance function, definition of risks; difficulties of investigation, facets of organized crime, “follow the money” principle and terrorism; size of terrorist and organized crime money, money laundering and terrorist financing; chain of terrorist financing (sourcing, moving including reverse money‐laundering and Hawala, storing, using funds); relationship between organized crime and terrorism; complementary roles of informal and legal channels. This leads to the definition of the role of states and of the financial industry and of their cooperation.FindingsA public‐private partnership is needed, based on anti‐terrorism networking and a strategy for cooperation aiming at reinforcing national and private capabilities with respect and adaptation of the legal framework.Research limitations/implicationsBased on an in‐depth investigation of terrorism financing and links with organized crime, the paper does not investigate corruption finances.Practical implicationsThe paper gives a design of the practical content of a strategy for public‐private cooperation.Originality/valueThe paper provides banks and public agencies with an integrated analysis of the need for public‐private partnership and of its content.