By Brian Monroe
bmonroe@acfcs.org
March 1, 2021

A top transparency watchdog is pushing for a bevy of updates to the chief U.S. agency responsible for crafting and implementing the country’s financial crime compliance defenses in a bid to better keep pace with illicit and ignoble groups laundering trillions of dollars annually.

After months of engagement with current and former public and private sector thought leaders in the field of anti-money laundering (AML), Global Financial Integrity (GFI) culled, coalesced and condensed a series of critical updates for the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) to better uncover connections to international organized criminal syndicates, terror networks, felonious fraudsters and grand corruption schemes.

At the heart of the suggestions for FinCEN, which many experts call a chronically underfunded agency stretched too thin for its many priorities, GFI is calling for a heftier budget, more authority tied to national security objectives, more advanced data collection and analytics capabilities and more technical and tactical training for regulators and investigators.

If implemented, GFI believes FinCEN could change from a stoic, stagnating and staid bureau, with “bad morale” and lacking focus – the bureau must create AML policy, update laws and regulations, investigate and enforce AML failures and analyze millions of filings tied to suspicious activity and report trends back to law enforcement and banks – into an agile, focused and results-driven operation.

“An innovative, technology-centric, nimble and forward-looking approach is needed to effectively protect the country from the array of harms resulting from the laundering of illicit financial flows,” GFI stated in its report.

“Such a comprehensive framework can only lead to multi-dimensional actions that robustly target the growing threats posed by today’s bad actors and networks exploiting our global trade and financial systems.”

To read the full GFI report, click here.

These suggestions by GFI, combined with congressional and legislative AML updates wending into being currently to nudge the sector away from rote regulatory tasks to crafting intelligence with a “high degree of usefulness to law enforcement” should help address the array of entrenched and endemic “challenges” at FinCEN.

FinCEN “is an agency that is struggling…for various reasons to meet the nation’s emerging money laundering challenges of the coming decade and beyond,” according to the report. “Technology is outdated, innovation is limited and morale is poor.”

Part of that resentment is tied to lack of support when it comes to budget time.

“Further, there is a general frustration that despite having decades of experience fighting money laundering their repeated attempts to provide ideas for critical improvements were rebuffed and the agency’s approach has changed little over the years to the detriment of its ability to fight money laundering or to bolster national security,” according to GFI.

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Raise FinCEN’s profile with a national security ‘seat at the table,’ technology innovation, data divination

Needless to say, GFI has taken those sentiments into consideration when crafting what it considers the most important updates to FinCEN’s mission, position in the overall government pantheon of intelligence, law enforcement and national security agencies and nuts-and-bolts upgrades on the data collection, analytics and human expertise side of the countercrime equation matrix.

GFI has taken the wide array of suggestions made by the participants and has distilled them into the following recommendations:

1. 1. 1. Give the FinCEN Director a seat on the Deputies Committee of the National Security Council (NSC) to raise the agency’s stature within the national security community.
      2. Create in FinCEN a National Anti-Money Laundering Data Center (NALDC) for advanced data collection, synthesis, analysis and distribution to law enforcement for AML activity.
      3. Establish a “Manhattan Project” to identify, develop and operationalize state of the art technologies needed to fulfill the technology needs of a NALDC.
      4. Launch within FinCEN the National Anti-Money Laundering Training Center (NALTC) which will be an anti-money laundering knowledge and education hub for FinCEN staff, financial institution regulators, law enforcement at the federal, state and local levels and for state and federal prosecutors.
      5. Create a Strategic Analysis Team to examine emerging and long-term trends in money laundering methods and computer technologies to counter those threats.

Practical, tactical changes: More pay for ‘highly-skilled’ positions, broader, mandatory bank 314(b) sharing

GFI also details what it calls a series of needed “tactical changes” FinCEN should make, to improve budget flexibility to attract and keep individuals with rare and special investigative and analytical skillsets – vital to counter the “brain drain” many federal investigative agencies face when coveted agents with decades of experience are tempted away to the private sector.

Part and parcel of the suggested updates would allow banks to better arm themselves with knowledge through broader information sharing under Patriot Act Section 314(b), which allows institutions to share information on suspected instances of money laundering and terrorist financing.

1. The NSC should establish a six-month commission to study the personnel and technology requirements needed at FinCEN to implement these strategic improvements in order to establish a budget and personnel count in time to be included in the FY2022 budget appropriation request.

2. Change FinCEN’s personnel system to be excepted from federal civil service for all non-administrative positions in order to increase pay levels for highly-skilled positions and to allow for flexibility of hiring and the removal of non-performing personnel.

3. Amend Section 314(b) of the USA PATRIOT Act which “permits financial institutions. . . to share information with one another in order to identify and report to the federal government activities that may involve money laundering or terrorist activity” by eliminating the requirement to provide notice to the Treasury Department prior to sharing information.

4. Work to make information sharing among financial institutions (the section 314b provision) mandatory.

5. Investigate the efficacy of financial institutions using blockchain technology to provide SAR and Currency Transaction Reports to improve the security of the data contained in the reports. The recommendations provided here are not exhaustive but are noted to establish a baseline of strategic initiatives which would enable FinCEN to increase its ability to anticipate future threats.

GFI suggestions would add more momentum to FinCEN, Congressional efforts to bolster AML

With estimates the U.S. and global, law enforcement efforts to investigate, seize and freeze the trillions of dollars in illicit account to less than one percent of that monumental haul, FinCEN, lawmakers and bank lobbying groups have been exerting political power to update the domestic AML regime and remove criminal enablers and investigator stumbling blocks, such as impenetrable ownership structures.

In the U.S., the centerpiece of the country’s efforts come in the form of the recently passed Anti-Money Laundering Act (AMLA), what many are calling a “once in a generation” event.

The AMLA Act is built around creating richer and more relevant intelligence by fincrime compliance teams, more weapons and funding for FinCEN to analyze data to mine for domestic and international criminal trends and closing the loop with stronger public-private information sharing partnerships.

The initiatives are part and parcel of parallel efforts to finally remove the bane of investigative agencies the world over: the proliferation of shell companies with hidden flesh-and-blood owners, a magnet for criminal groups of all stripes, from terror financiers to corrupt oily oligarchs, Nigerian fraudsters to narco traffickers.

The AML upgrades in Congress parallel initiatives at FinCEN.

They are part of a multipronged approach by the U.S. government to strengthen fincrime compliance countermeasures, shift the needle toward “effectiveness” and create richer and more relevant intelligence to law enforcement.

In all, the U.S. Treasury is engaging in an expansive and far-reaching overhaul of the country’s financial crime compliance defenses.

For banks, AML efforts would be shifting more toward creating “effective and reasonably designed” programs that produce filings with a “high degree of usefulness” to law enforcement – even though the term has no “consistent definition” in current rules, according to a September notice.

FinCEN is also engaging stakeholders to glean if they could better manage risks, resources and threat actors if the bureau created national AML priorities – a similar refrain as in the AMLA – which would be informed by other national illicit finance, proliferation and terror risk assessments published in recent years.

To read the full notice in the Federal Register, click here.

Monroe’s Musings: Unfortunately, according to GFI, many of these lofty updates, tectonic changes and potentially transformative approaches to better arm FinCEN could all be for naught without the most basic foundational support for the bureau: more money – significantly more money.

The AML Experts Group engaged by GFI agreed that FinCEN’s current budget of $127 million is “far too low to provide the staff, skills and technologies needed for today’s challenges let alone those of the 2030’s.”

Even with a modest bump as part of the Congressional AML update, the consensus among the group is that the “budget should follow the function of the agency and that can only be determined with a bottom-up review of its mission and how it hopes to be effective in the future.”

FinCEN is one of, if not, the most important government agency when it comes to the country’s ability to investigate domestic and international money laundering syndicates.

So it should finally get the attention, stature in the government and financial support it needs to better capture data, analyze the filings it has, knit together, communicate and coordinate with sibling agencies and offer the guidance and leadership needed for private sector financial institutions to stop the illicit financial flows propping up criminal groups the world over.