Financial Intelligence: A Band-Aid for Human Intelligence?

By Erin O’Loughlin, Senior Director of Training, ACFCS

With last week’s developments in Afghanistan – the fall of Kabul to the Taliban – hordes of questions are front and center for everyone, particularly within the financial industry.

Our financial institutions (FI) need to act swiftly to review their risk models with regard to money movement in and out of Afghanistan.  ACFCS readers are now armed with the recent history of the 1990’s Taliban takeover of Afghanistan, via this article, and thus can confidently predict how the Taliban will spend and receive money.

Knowing how the Taliban governs, how they use their money, the human rights violations they commit, and the training camps established to attack the west, now is the time to fortify your institution from their money flowing through.

Financial Institutions aren’t the only ones asking questions.  Governments around the globe are pondering: Will our human intelligence (HUMINT) sources, AKA our human beings we rely on for reliable, accurate, and real-time information, be confident to trust us to protect them and their families?

With these events front and center on the world stage, individuals who need to share information with the US government and her allies will go into hiding. This will occur out of fear for their own safety and a lack of trust that they and their families will remain safe.  They will understandably not wish to work with US or allied partners and thus the human intelligence, so critical in developing policy for any nation, will temporarily wane.

This is where review of financial transactions and alert monitoring step in.

Risk

In June 2017, the Financial Action Task Force (FATF) published its “Improving Global AML/CFT Compliance: On-going Process” report where it removed Afghanistan as a country with anti-money laundering (AML)/combatting the financing of terror (CFT) deficiencies, stating the country is “…No longer subject to the FATF’s on-going AML/CFT compliance process,” due to the fact that “..Afghanistan has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies…” that it had originally identified in June 2012.

While the FATF removed Afghanistan as a deficient country, the European Union’s Commission’s list of AML/CFT did not. They retained Afghanistan on its list of deficient countries.  Afghanistan is also categorized by the US State Department as a country/jurisdiction of primary concern in respect to Money Laundering and Financial Crimes.

These two listings by these organizations should help risk and compliance officers inside FI’s to argue that any lax risk rating that Afghanistan experienced within their institution, be raised to a level of high risk.

Training and Communication

Once the risk rating is reviewed by executives and risk offices, the training of compliance and investigations personnel remains paramount.  Getting the word to your FI’s employees about any change in your institution’s risk rating of Afghanistan should be made immediately.  This will help them to make decisions regarding their cases as well as to verify the alert monitoring controls are appropriately established.

Communication should not be limited to within your FI, but to other banks as well, utilizing the means your jurisdiction has established to achieve this.  In the US, the 314B program within the Patriot Act allows banks to communicate with one another when money laundering or terrorist financing issues arise within an institution.  Utilizing this arm of the US regulatory framework will allow FI’s to better understand the financial flows from other banks.

Investigator

Now that you, the investigator, have the updated information regarding your FI’s risk appetite to Afghanistan transactions, now is your time to shine.  If your FI has developed a ‘no tolerance policy’ to transactions to or from Afghanistan within a particular timeframe, then your mission is clear. You are to recommend action on these accounts according to your company’s policy.

If your FI has provided partial guidance and you are unclear how to continue, here are some suggestions for your investigation:

  1. Look at the timeline of the transactions.  If they began weeks or months before Kabul fell to the Taliban, then move on to step two.
    • If they began around or after the fall to the Taliban, consider the following: Is your customer a relative of someone trying to flee the area?  Are they trying to send money to these relatives to allow them to safely evacuate? Is your customer sending/receiving to charities, organizations, or individuals – and why?
  2. Are these transactions normal for the accounts you are reviewing? If they are not, then time to strap on your ‘suspicious mindset’ and dig a little deeper
  3. What mode of currency movement are your customers using?  ACH? Wire? Cash? Credit Card? ACH payments to crypto exchanges?
  4. Conduct your investigation as normally as you would any other investigation into transactions to/from high-risk jurisdictions
  5. Communication: If possible, highlight any and all investigations that have an Afghanistan touch, to your superiors.  The more they know, the more they can highlight up their chain as well. 

All of these tidbits of intelligence can fill the void left by real-time HUMINT sources, at least for the time being.  The aforementioned points and any additional intelligence gleaned from investigations involving Afghanistan should be included inside the narrative of your Suspicious Activity Report (SAR/Suspicious Transaction Report (STR).   

Afghanistan isn’t the only one that should be singled out when you are conducting investigations. These points can also be applied to any region that is listed as high-risk and experiencing a major geopolitical upheaval.

Don’t be afraid to ‘weave a tale’ or to ‘paint a story’ with your words inside the narrative of your SAR/STR.  You don’t know what the feds know about your customer and laying it all out for them could possibly be the kernel of information they had been looking for.

Law Enforcement relationships

Multiple countries around the globe not only approve but encourage FI’s to establish relationships with federal law enforcement in the spirit of information sharing.  Federal law enforcement agents need and want your input. 

From the official transactions information paragraph in your narrative to your assessment regarding what you deem to be suspicious and “report worthy”, all of these pieces of intelligence can be used by federal agents.  Especially if they are experiencing a decrease in HUMINT sources risking their lives to share information in this volatile time.

FI executives should be training and appointing more members of their institution to be individually interacting with law enforcement on a regular basis.  This allows for the sharing of real-time information as well as highlighting the filings of SAR/STRs within your jurisdiction.

Establishing or reinforcing existent ties with federal law enforcement agents will help to strengthen the intelligence coming into your jurisdiction.  This could also contribute to developing foreign policy for your jurisdiction’s lawmakers. 

We now live in one of the most unpredictable, volatile times in modern history.  Financial Institutions can and should fill the void of intelligence for lawmakers – and now stand poised to help protect human lives on a global scale.