PHACKS | Banks & Financial Institutions

Banks and financial institutions are subject to a wide range of financial regulatory requirements, nationally and internationally, including EU legislation and regulations. These include Anti-Money Laundering regulations, MiFID and Payment Services Directive 2, which has requirements for Strong Customer Authentication that equates to the eIDAS Regulation (EU) 910/2014) for digital identity, authentication and digital signatures at a HIGH Level of Assurance. If a natural or legal person seeks to open a bank account in any country and be issued with a digital credential so that they can have some form of digital access to their money, their user account and their private information, they must undergo a process of Customer Due Diligence (CDD). If the level of risk is higher than normal then the person may have to pass Enhanced Due Diligence (EDD). Some of the checks in EDD also relate to requirements for High Net Worth persons, Politically Exposed Persons, or Ultimate Beneficial Owners. The European Parliament and Commission (DG CNECT and DG FISMA) have published, increasingly strong Anti-Money Laundering (AML) regulations and directives in the fight against financial crime involving international organisations such as the OECD, FATF, FSB, World Bank and Interpol.

In its guidance, FATF lists financial and economic offences that are “necessary for money laundering”:

• participation in an organised criminal group and racketeering;
• terrorism, including terrorist financing;
• trafficking in human beings and migrant smuggling;
• sexual exploitation, including sexual exploitation of children;
• illicit trafficking in narcotic drugs and psychotropic substances;
• illicit arms trafficking;
• illicit trafficking in stolen and other goods;
• corruption and bribery;
• fraud;
• counterfeiting currency;
• counterfeiting and piracy of products;
• environmental crime;
• murder, grievous bodily injury;
• kidnapping, illegal restraint and hostage taking;
• robbery or theft;
• smuggling; (including in relation to Customs and Excise duties and taxes);
• tax crimes (related to direct taxes and indirect taxes);
• tax evasion;
• extortion;
• forgery;
• piracy;
• insider trading and market manipulation.

Collaboration is increasingly required to prevent, detect and respond to these crimes and this is made harder as criminals are increasingly collaborating to find more sophisticated and criminally productive methods. Privacy-preserving data validation and anomaly detection are becoming recognised as key tools to reduce risks and increase the ability to collaborate successfully.

Search Terms

As part of the project an analysis of a range of search terms on the Internet is being conducted which is beginning to capture specific search terms that are used by persons seeking to find a bank but avoid KYC and AML checks. The results can include rankings of financial organisations considered most likely to satisfy the search term, which could harm the reputation of some financial organisations. Addressing this situation may be of interest to financial participants in the PHACKS project.

Realising Value through PHACKS

Today, the requirements coming from banks mostly involve ways to improve regulatory compliance, AML and KYC, and also to reduce financial crime. In particular, they recognise significant value in validating specific data from authoritative sources more frequently and in real time. Validating personal data, passport data, address data is possible digitally today in some countries, and additional attributes are slowly being requested.

Preparing for tomorrow, leading banks want PHACKS to be instrumental in achieving significantly greater cross-border privacy-preserving data validation. They also want PHACKS to support privacy-preserving data validation in relation to the gradual introduction of government-approved digital wallets for citizens and consumers (natural persons) as well as companies and organisations (including legal persons).

How to Participate in PHACKS

If you are inerested in getting involved, please visit our How to Participate page or Contact Us.