The Financial Crimes Enforcement Network (FinCEN) is tasked with protecting the financial system both within the United States and internationally. Financial criminals are working hard, using technology and innovation to their advantage, to stay one step ahead of FinCEN and financial institutions. At the recent NYU Law Program on Corporate Compliance and Enforcement, FinCEN Director Kenneth A. Blanco discussed the organization’s active approach toward addressing the top financial threats to our financial system, our national security, and our communities and families. He stated that the most effective ways to deter bad actors is to follow the money, expose criminal activity, and prevent illicit networks from benefiting from the power of our economy and financial system.
He emphasized the six most significant finance threats facing financial institutions and how FinCEN is currently tackling them:
- Human Trafficking
- Virtual Currency
- Cyber-Enabled Crimes and Threats
- Money Laundering Through Real Estate
FinCEN is actively working to combat each of these threats, but there are ways that financial institutions (FIs) can also help stop these nefarious actors.
Terrorism: Fighting terrorism is at the heart of the work FinCEN does every day. Terrorists need funds to develop and execute their deadly attacks, and disruption of the money flow effectively stops these threats before they occur.
Each day, FinCEN creates a “Flash Report” that is distributed to law enforcement and regulatory partners. This report contains the SARs filed by financial institutions that are considered the highest priority to allow quick response to potential terrorist acts. According to Director Blanco, this is “incredibly valuable information that helps keep us all safe.”
In addition, FinCEN has a Crisis Response team that works around the clock when a terrorist attack occurs anywhere in the world. This team works with law enforcement domestically and overseas to build intelligence connected to the terrorist act including the transactions, location, cars, houses, streets, etc. This helps law enforcement find those involved, locate others that may be helping them, find additional associates before they strike, and hopefully prevent the harm from spreading.
- Financial Institution Response: Terror financing is difficult to detect from a transaction monitoring standpoint, as it is typically funded with lower dollar amounts than what an institution would generally monitor. FI’s should have automated Anti-Money Laundering (AML) monitoring solutions in place to alert on potential terrorist financing typologies such as high velocity of amounts under the regulatory SAR reporting threshold. The review period may need to be longer to see the big picture and aggregated stream of transactions. Submitting a SAR with the “terrorist financing” box checked (box 33), along with the keywords “terror financing” written in the SAR narrative, will ensure that law enforcement understands what the FI believes to be suspicious. Train your front-line staff on the signs and behaviors as well; they are the first eyes of detection for any FI.
Corruption: FinCEN is taking a strong and active stance in combatting political corruption, or kleptocracy, particularly in Venezuela. Under the corrupt regime of President Nicolas Maduro, the Venezuelan people are suffering a tragedy greater than what is usually seen in the Western hemisphere. The corruption of the regime consists of theft, bribery, extortion, drug trafficking, and other crimes that steal from the country and the people of Venezuela, hiding much of these illicit funds in the U.S. These kleptocrats are buying homes, yachts, and airplanes in the U.S., while creating more wealth to Maduro’s regime for inhumane human rights violations and criminal purposes.
FinCEN is actively fighting this battle by working with Argentina, Colombia, Mexico, Panama, Switzerland, and Lichtenstein, to trace the illicit flow of dirty money leaving Venezuela. FinCEN has issued numerous advisories concerning the corruption in Venezuela, as well as Nicaragua and Iran. Like other FinCEN advisories, they contain common typologies, red flags to look for, and guidance on complying with FinCEN regulations to address those threats and vulnerabilities.
- Financial institution Response: FIs should use this information provided by FinCEN to enhance their AML monitoring systems for more valuable suspicious activity reporting. Funds or other transactions flowing from areas of concern, particularly Venezuela, should be considered higher risk and should alert for further review. Compliance professionals should familiarize themselves with the Foreign Corrupt Practices Act (FCPA) as well as FinCEN advisories concerning corruption, Senior Political Figures, and other Politically Exposed Persons (FIN-2018-A003, FIN-2017-A004, FIN-2017-A006, FIN-2008-G005).
Human Trafficking: Director Blanco stresses the fight against human trafficking is about protecting people and families. Stopping human trafficking is about saving lives.
FinCEN leads a global project on human trafficking with the Egmont Group in conjunction with 159 other countries. This has helped U.S. law enforcement discover unknown human traffickers, resulting in almost 100 successful law enforcement actions.
- Financial Institution Response: FIs are in a unique position to make observations when interacting with customers, observations that can help them detect and report suspicious financial activity that may be related to human trafficking. As with terror financing, the smaller transaction amounts associated with human trafficking are difficult to detect, but proper transaction monitoring systems will alert on the typologies and red flags. The AML system should also detect keywords to locate transactions such as “red box”, travel agency, airline tickets, lingerie, and high-volume fast food purchases.
FinCEN issued advisory FIN-2014-A008 with red flags that FIs should be on the lookout for to identify possible human trafficking. This advisory should be used for your AML procedures and customization of your AML monitoring system. By reporting the detected information, FinCEN can ensure that law enforcement is aware of the activity and thereby prevent trafficking from happening, rescue victims, and apprehend the perpetrators.