Tokenisation is increasingly being viewed as a practical solution to one of the financial services sector’s most persistent challenges: how to share meaningful anti-money laundering (AML) intelligence without breaching stringent data privacy rules.
As personal data becomes both more valuable and more vulnerable, financial institutions are under growing pressure to protect customer information while still identifying financial crime risk across increasingly complex networks, said RelyComply.
Criminals continue to trade stolen identities, bank credentials and official documents across global channels, including the dark web, making traditional AML collaboration models harder to sustain.
Regulation alone has struggled to keep pace with this evolution, placing greater emphasis on collaboration between regulators, governments, intelligence bodies, data providers and financial institutions. Yet customer data sharing for KYC and AML purposes remains highly constrained. Tokenisation and other privacy-preserving technologies are emerging as a way for institutions to collaborate on risk detection without exposing sensitive personally identifiable information, offering a potential middle ground between compliance and operational effectiveness.
The importance of customer data capture sits at the heart of this debate. Beyond regulatory requirements, consumers increasingly expect control over how their data is used, creating a trust-based exchange between institutions and individuals. Data privacy legislation has tightened globally to prevent misuse, but inconsistencies between jurisdictions create additional friction. While regions such as the EU under GDPR and South Africa under POPIA have robust frameworks, gaps remain. Around 21% of the world lacks comprehensive data protection legislation, according to UN figures, leaving vulnerabilities that criminals can exploit, particularly in cross-border payment flows.
The problem is further compounded by decentralised technologies and new asset classes. Cryptocurrencies and blockchain-based systems can obscure ownership and sources of funds, exposing the limitations of traditional AML approaches. Proposals such as shared global data lakes have been discussed, but concerns over governance, liability and control have slowed adoption.
Tokenisation offers a more realistic path forward. By replacing sensitive data with meaningless tokens, financial institutions can match identities and detect patterns without revealing underlying information. Techniques such as payment tokenisation, hashing and homomorphic encryption enable analysis on protected datasets while keeping original data secure. These methods allow institutions to identify repeat risk indicators, such as mule accounts, across multiple organisations without sharing raw PII.
In practice, a suspected mule account could be retained as a token within one bank’s system. If the same token appears at another institution, it can be flagged within a privacy-preserving consortium, allowing risk to be identified collectively while remaining compliant with GDPR, POPIA and similar frameworks. The tokens themselves are useless outside the secure environment, meaning data breaches yield little value to attackers.
Looking ahead, a federated, tokenised data ecosystem could enable real-time intelligence sharing in high-risk AML areas such as onboarding and transaction monitoring. Crucially, control of cryptographic keys would remain with the original data owners, reinforcing trust and accountability. Over time, this collaborative model could extend beyond financial services into sectors such as healthcare, aviation and retail, creating broader safeguards against illicit activity.
This shift represents a new frontier for AML technology. Automated RegTech platforms can scale monitoring, deliver real-time alerts against trusted watchlists, and reduce false positives through more accurate identity matching. By embedding privacy-preserving collaboration into compliance frameworks, institutions of all sizes can strengthen controls without creating new data siloes.
While the vision is ambitious, the steps toward tokenised AML collaboration are tangible. As criminals adapt and customers demand stronger safeguards, privacy-first data sharing is likely to become a cornerstone of effective compliance. Tokenisation is not just a technical upgrade, but a strategic move towards a more trusted, collaborative and resilient financial ecosystem.
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