In my previous post I talked to John Cassara about the growing threat of mobile payments and how mobile phones can be used to launder illicit funds globally. I spoke with him again recently on the topic of financial intelligence. Here are the highlights from our discussion.
So what is financial intelligence?
John: Financial intelligence originated during the “War on Drugs” to help criminal investigators follow the money trail. It started about 1970 with the passage of the Bank Secrecy Act or BSA. Bank secrecy is actually a misnomer. It equates to financial transparency. That’s why today “financial intelligence” is also sometimes known as “BSA data” or “financial transparency reporting requirements.”
Interesting. But what does it do?John: Quite a bit because there are a variety of types of financial intelligence. The largest category is the Currency Transaction Report or CTR now known as the FinCEN Form 104. It originally was an IRS form and is filed most commonly by a bank after a transaction (deposits, withdrawals, payments/transfers) of $10,000 or more. The Currency and Monetary Instrument Report or CMIR now known as the FinCEN Form 105 was originally a U.S. Customs form. It requires those transporting $10,000 of cash or monetary instruments into or out of the United States to file a form. Form 8300, also an IRS form, is required for cash transactions over $10,000 in businesses not otherwise covered by BSA reporting such as car dealerships, real estate agencies, and jewelers. Perhaps the most useful is the Suspicious Activity Report or SAR. These reports are filed by financial institutions and money service businesses when they believe a transaction is unusual or suspicious in nature. In addition to identifying data, SARs also contain a narrative that actually explains the nature of the transaction and why it's considered suspicious.
Isn’t financial intelligence warehoused at Treasury’s FinCEN? Didn’t you work there?
John: Yes. I worked there for six years. The Financial Crimes Enforcement Network or FinCEN was created in 1990. Its mission continues to evolve, but originally it was created to receive, analyze and disseminate financial intelligence to law enforcement. Today FinCEN is also very active in administering the BSA. FinCEN is considered the “financial intelligence unit” or FIU of the United States.
How much financial intelligence is produced every year?
John: The numbers vary, but roughly 16 million pieces of financial intelligence are filed every year in the United States. Only about one million SARs are filed. CTRs are the largest category. And we must also remember that today there are almost 150 foreign FIUs or FinCEN equivalents. So the amount of financial intelligence filed around the world is staggering.
But getting back to my original question, what is financial intelligence used for?
John: It's instrumental in helping law enforcement make cases. Some cases involve money laundering and terrorist finance, but there are many other types of criminal cases where financial intelligence proves helpful. Often the identifying data contained in financial intelligence is vital. Or sometimes the financial data can be used proactively by law enforcement in examining criminal activity not previously known. Of course, most of the cases are routine. But take a look at some recent high level cases revolving around the filing of financial intelligence that were recognized by FinCEN.
Impressive! These are great case examples.
John: I’m so happy that SAS is involved with helping produce financial intelligence and helping governments better exploit the data. Financial intelligence is a perfect example of big data. And analytics must be increasingly used to take full advantage of the information.
John: Can I add one more thing?
John: I just want to take advantage of this opportunity to thank all of those in banks and elsewhere that produce financial intelligence. I know it can be time consuming and sometimes costly. But your work greatly assists law enforcement. Unfortunately, producers of financial intelligence don’t often get feedback and acknowledgement but please take it from me that your work is much appreciated!
For more information, you can watch this short video clip of John discussing how governments can better exploit financial intelligence. Or you can read more about financial intelligence in John’s article, Follow the Money.