Cross-border trade is growing across North America. U.S. trade with Canada and Mexico reached a record $1.78 trillion last year.¹ Mexico emerged as the top trade partner for the U.S. this year, with trade totaling $263 billion between the two countries during the first quarter of 2023 alone.² Mexico is well positioned to continue benefiting from investments driven by “nearshoring,” where production of goods is moved to North America, primarily at the expense of Asia.³

While trade across the continent expands, we must also recognize the potential for various risks to grow accordingly, including financial crimes such as money laundering, as well as the need to act decisively and collaboratively to address these risks. The U.S. and Mexico have shared well-established and long-standing national security concerns; many of these relate to violent transnational organized crime groups operating across the region that generate billions of dollars in annual profits. These massive profits need to be laundered to a great extent through the financial sector, and growth in overall trade flows will provide additional opportunities to hide and move these criminal proceeds.

Mexico continues to cope with powerful drug cartels based within its borders that are responsible for the transportation of illicit narcotics, including fentanyl, into the U.S., its primary consumer market. These groups are, meanwhile, often bolstered by arms illegally trafficked southward from the U.S.⁴ These highly profitable criminal groups typically do not just traffic drugs and guns. They also participate in a range of other criminal activities, including human trafficking (HT) and fraud, making them resilient to enforcement efforts.⁵ Collaborative and innovative approaches are essential to combat these threats more effectively.

As a response to increasingly complex and globally interconnected financial crime threats across the world, we have seen numerous financial information sharing partnerships (FISPs) emerge over the past decade, according to the Future of Financial Intelligence Sharing (FFIS) research program.⁶

What Are FISPs?

According to FFIS, FISPs are “A type of public-private partnership (PPP), specifically voluntary initiatives between financial regulators, law enforcement [LE] agencies, governments and the private sector that provide a forum for strategic or tactical intelligence sharing. They encourage all parties to share information on individuals, entities, and organizations engaged in or reasonably suspected, based on credible evidence, of engaging in financial crime activity, or information on red flags and typology indicators in order to inform typology co-creation.”⁷

These partnerships bring key stakeholders together from across the public and private sectors to share information and collaborate on top and emerging financial crime threats. As recent FFIS research has demonstrated, these partnerships have already shown positive results in many countries like the U.S. and Canada through enhanced information sharing and dialogue, improved suspicious activity reporting and risk mitigation by financial institutions (FIs). In addition, these partnerships have resulted in impactful government enforcement actions such as arrests, sanctions and asset seizures. FISPs can generate productive leads for suspicious activity related to financial crime, helping FIs to find more financial crimes and faster. They can also help eliminate unnecessary customer friction and frontline distraction by allowing FIs to pinpoint risk and target financial crime activity more precisely. Mexico is in the initial stages of developing its own FISP and the time to help foster this important progress is now.

Global FISP Formation Efforts

There are now more than 20 FISPs in the world, according to FFIS, a research initiative run through the Royal United Services Institute, a leading U.K.-based think tank.⁸ FISPs are increasingly viewed as best practices for national-level efforts to combat financial crime and as critical components of more effective anti-money laundering/counter-terrorist financing (AML/CTF) frameworks.

• According to the Wolfsberg Group, “PPPs often provide the most direct and impactful opportunity for FIs to collaborate with public sector stakeholders to identify and address financial crime risks.”⁹ Furthermore, providing highly useful information to relevant government agencies in defined priority areas is one of the three key elements of an effective AML/CTF program and FISPs have been credited with improvements on this in several countries.
• According to the Financial Action Task Force (FATF), “public-private sector partnerships should be playing a much more effective role in safeguarding the integrity of the international financial system and contributing to safety and security.”¹⁰

There are many different partnership models in operation—from partnerships that share strategic-level information such as financial crime typologies and trends to partnerships that share tactical-level information, such as transactional data and customer information, to partnerships focused on specific financial crime types such as HT or illegal wildlife trade (IWT).

• In the U.K., for example, the National Economic Crime Centre-led Joint Money Laundering Intelligence Taskforce (JMLIT) brings together government agencies, FIs and civil society to exchange and analyze information relating to money laundering and wider economic threats. Within JMLIT, “Financial sector-led public-private threat groups provide a platform for members to discuss current or emerging threats, and to identify innovative ways of collectively combating these threats.”¹¹ To date, more than 60 advisories have been issued through JMLIT to the U.K.’s financial sector to inform risk mitigation and suspicious reporting efforts.
• In Canada, multiple partnerships have been formed to address specific financial crime types, namely HT and IWT. Earlier this year, the Canadian financial intelligence unit, Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), and a network of public and private sector entities united to launch “Project Anton” focused on addressing growing IWT-related concerns. Under Project Anton, a toolkit and Operational Alert were developed to enhance the detection and reporting of illicit financial activity related to IWT.¹²

There are several key elements to the formation and maturation of successful partnerships, along with challenges to overcome. The following are just a few of the critical components for success.

• Trust: Building and maintaining trust is fundamental to effective information sharing and collaboration. Government agencies and FIs, meanwhile, need to agree on shared goals and outcomes, clarify expectations and align incentives for cooperation, according to FFIS research.¹³ FISPs should seek to drive mutual benefits across the public and private sectors; LE agencies, for example, should benefit by receiving higher quality and more timely reporting from FIs, while FIs should gain an improved understanding of the financial crime risks they face so they can strengthen their control frameworks.
• Legal framework: According to the Wolfsberg Group, “A legal framework that permits and recognizes information sharing and collaboration is an essential requirement.”¹⁴ In the U.S., for example, Section 314(b) of the USA PATRIOT Act allows for FIs to safely share a range of information, including transactional data when suspicions of money laundering or terrorist finance are present. As of 2020, more than 7,000 U.S. FIs were taking advantage of 314(b) sharing annually, according to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).¹⁵ Privacy concerns must be balanced, of course, with the need to understand financial crime risk and sharing valuable information with government agencies in a timely fashion.
• Formal structure: Successful partnerships have a clearly defined framework that establish requirements for such areas as membership and meeting periodicity. These requirements help define desired outcomes and foster collaboration; simply bringing people together regularly breaks down barriers that might exist between and across organizations that would normally only interact on a transactional basis.

Mexican FISP Formation Progressing

Conditions in Mexico have aligned in recent years to meet several of the key conditions for successful FISP formation. In 2022 and 2023, public and private sector leaders in Mexico have come together under the auspices of multiple fora to meaningfully discuss the development of a FISP that addresses Mexico’s most pressing national security and financial crime concerns.

• The Mexican Bankers Association (ABM), a private association representing commercial banks established in 1928, has been supporting meaningful discussions about FISP formation in close collaboration with key Mexican government agencies.
• Earlier in 2023, FFIS hosted a roundtable discussion in Mexico City that brought together key stakeholders from across the public and private sectors; the event included leaders from Mexican government agencies and FIs, remarks from FATF senior leadership and international perspectives on FISP formation in other jurisdictions.¹⁶
• The legal framework in Mexico now allows for private-to-private sharing and, in some respects, goes further than the PATRIOT Act’s Section 314(b) framework, which supports sharing on a fully voluntary basis. In certain instances, the ABM information-sharing agreement mandates private-private sharing when financial crime indicators are present. According to the Wolfsberg Group, private-private information sharing is essential for FIs to assess criminal networks and related payment flows effectively, as without this, they have a siloed view of relationships and activity.¹⁷
• Several leading Mexican FIs have come together in recent months and begun working on financial crime investigations jointly on top risk areas, such as HT. This nascent effort includes private-private sharing, agreed-to topics and outcomes and regular meetings. This is a promising start and demonstrates a commitment to improving financial crime-fighting efforts.

Progress is being made in Mexico, but the pace must be accelerated to meet the quickly evolving security environment.

• To build the best possible FISP in Mexico, we must consider how we can incorporate technology to advance our collaborative efforts. Adopting a common technology platform which has been mandated by regulation, for example, will allow for improved information sharing, safer information sharing, and the incorporation of advanced analytic capabilities and different data sets that will help spot relationships unseen by the naked eye.
• Mexican regulators could consider ways to further incentivize formation and participation in FISPs, and supervisors could recognize such efforts as positive elements of an institution’s financial crime risk management program. Outcomes and performance metrics of this newly formed partnership should be tracked and studied closely.
• Mexican authorities could also publish their top financial crime priorities and guide FIs and government agencies alike to align their agendas and prioritize their work on the most pressing national security issues; these efforts can be directly informed through the FISP on a pilot basis.

Conclusion

We all know that no single organization has all the puzzle pieces to fully understand the illicit financial risks they are facing. Organized crime groups count on this and exploit the gaps in knowledge between FIs and across the public and private sectors. This can change with FIs collaborating closely and openly with one another and with government agencies, making the use of banking services more challenging for criminals. The time to build an information sharing partnership in Mexico that helps government agencies and FIs alike identify more financial crime faster and work more collaboratively toward combating these shared concerns is now. In time, this partnership should also pursue engagement with regional partnerships in the U.S. and Canada to maximize information sharing and cooperation in North America.

Jose Luis Stein, Latin America/Mexico regional head of Financial Crime, HSBC,

Nick Schumann, CAMS, U.S. head of Financial Crime Program, Framework, and Engagement, HSBC, USA,

1. Paul Wiseman, Mark Stevenson and Tom Krisher, “Three years after new North American trade pact, optimism is rising for US and Mexican workers,” Chattanooga Times Free Press, July 8, 2023, https://www.timesfreepress.com/news/2023/jul/08/
   north-american-trade-pact-on-3rd-anniversary-tfp/
2. Luis Torres, “Mexico seeks to solidify rank as top U.S. trade partner, push further past China,” Federal Reserve Bank of Dallas, July 11, 2023, https://www.dallasfed.org/research/economics/2023/0711
3. Anthony Esposito, “Mexico sees growth of up to 3% this year, eyes nearshoring boost,” Reuters, March 31, 2023,  https://www.reuters.com/markets/mexico-draft-budget-sees-economic-growth-up-3-inflation-cooling-2023-03-31/
4. “Treasury Sanctions Illicit Fentanyl Network Run by Key Sinaloa Cartel Family Members,” U.S. Department of the Treasury, July 12, 2023, https://home.treasury.gov/news/press-releases/jy1607; “Treasury Sanctions Individuals Linked to CJNG’s Arms Trafficking, Fuel Theft, and Money Laundering,” U.S. Department of the Treasury, June 6, 2023,  https://home.treasury.gov/
   news/press-releases/jy1523
5. “International Narcotics Control Strategy Reports,” U.S. Department of State Bureau of International Narcotics and Law Enforcement Affairs, https://www.state.gov/international-narcotics-control-strategy-reports/; “Remarks by Under Secretary Brian E. Nelson at the Financial Crimes Enforcement Network Exchange in San Antonio, Texas,” U.S. Department of the Treasury, July 12, 2023, https://home.treasury.gov/news/press-releases/jy1608
6. Future of Financial Intelligence Sharing homepage, Royal United Services Institute, https://www.future-fis.com/about--contact.html
7. Ibid.
8. Ibid.
9. “Effectiveness through Collaboration,” The Wolfsberg Group, 2022, https://db.wolfsberg-group.org/assets/3a77405c-8a6d-4fcb-8f97-206d5a0873b6/Wolfsberg%20Effectiveness%20Through%20Collaboration.pdf
10. “AML/CFT and public-private sector partnership,” Financial Action Task Force, May 20, 2016, https://www.fatf-gafi.org/en/publications/Fatfgeneral/Public-private-sector-partnership.html
11. “Improving the UK’s response to economic crime,” National Crime Agency, https://www.nationalcrimeagency.gov.uk/what-we-do/national-economic-crime-centre
12. “Operational Alert: Laundering the proceeds of crime from Illegal Wildlife Trade,” Financial Transactions and Reports Analysis Centre of Canada, https://fintrac-canafe.canada.ca/intel/operation/oai-wildlife-eng
13. Future of Financial Intelligence Sharing homepage, Royal United Services Institute, https://www.future-fis.com/about--contact.html
14. “Effectiveness through Collaboration,” The Wolfsberg Group, 2022, https://db.wolfsberg-group.org/assets/3a77405c-8a6d-4fcb-8f97-206d5a0873b6/Wolfsberg%20Effectiveness%20Through%20Collaboration.pdf
15. “Information Sharing Insights: 314(b) Participation and Reporting,” Financial Crimes Enforcement Network, https://www.fincen.gov/sites/default/files/shared/314(b) Infographic - Participation and Reporting CY2020.pdf
16. For more information on the event, please see the following LinkedIn post from Nick Maxwell: Nick Maxwell, LinkedIn, https://www.linkedin.com/posts/nickjmaxwell_ffis-aml-mexico-activity-7032093791222210560-YPnS/?utm_source=share&utm_medium=member_ios
17. “Effectiveness through Collaboration,” The Wolfsberg Group, 2022, https://db.wolfsberg-group.org/assets/3a77405c-8a6d-4fcb-8f97-206d5a0873b6/Wolfsberg%20Effectiveness%20Through%20Collaboration.pdf