FIU Information Sharing in Action
I will now turn to more practical examples of what it means in practice to share financial intelligence among FIUs and the benefits to this mechanism for combating global threats of money laundering and terrorist financing. In summary, the advantages of FIU exchanges can be characterized by a common purpose, but also financial analytical expertise, speed, and confidentiality.
With respect to analytical work, FIUs must be experts in understanding and interpreting the financial information that is reported to them from financial institutions in the context of all other data available to them. The importance of this specialization over time cannot be underestimated, particularly as compared to the FIU's domestic counterparts in law enforcement and prosecutorial authorities who are often generalists dealing with a range of criminal cases without necessarily specializing in financial transactions. This has become increasingly apparent as the financial markets become ever more complex in a globalized world. Moreover, vulnerabilities to criminal abuse are increasingly seen in emerging payment technologies and there has been an increased focus in recent years on AML/CFT compliance obligations for banks with respect to correspondent banking.35
There is a generally accepted distinction between what is known as tactical and strategic analysis, with the application of financial expertise having the potential to become geometrically more valuable with respect to the latter. Tactical analysis in its simplest form involves the matching of data. For example, if the police have identified a criminal suspect, they will seek to search against all available databases to obtain further identifier information, such as full name, address, date of birth, social insurance, passport or other unique identifier number. In addition to any of the foregoing, the databases of financial information available to FIUs may also contain with respect to that suspect information on bank accounts, including co-owners, and specific transactions. This information can be immensely valuable in "following the money" and in identifying ill-gotten gains for civil or criminal forfeiture proceedings.
While sometimes fairly straightforward, tactical information can be very difficult to obtain with respect to a foreign suspect were it not for the assistance of a foreign FIU. For example, if a suspected criminal is wiring funds from his bank to the account of a corporation abroad, it would be incredibly useful to law enforcement to know whether the recipient is a legitimate entity as opposed to a front company for which the criminal himself is a disguised beneficial owner merely seeking to hide funds overseas.36
In its Fiscal Year 2007, FinCEN reached an all-time record of 855 information sharing requests received from other Egmont Group FIUs. In a strong effort to eliminate a backlog of requests carried over from the previous year, FinCEN actually responded to 949 separate FIU requests. For many FIUs, FinCEN is a significant partner in terms of volume of exchange of information, reflecting in significant part the size and importance of the U.S. financial markets and transactions in dollars. Additionally, FinCEN works with U.S. law enforcement agencies to initiate requests of foreign FIUs to obtain additional intelligence from abroad for ongoing financial crime cases and investigations. Last year there were a total of 167 such requests from U.S. domestic law enforcement that resulted in 323 referrals (one case might lead to a referral to more than one FIU in different jurisdictions) to a total of 82 different FIUs over the course of the year.37
In contrast to tactical analysis, strategic analysis is undertaken not with respect to a particular criminal target, but rather to analyze or discover particular trends or patterns, such as on a regional basis, over time, or with respect to vulnerabilities in particular products or industries. Examples where FinCEN has made public its analysis (in addition to many non-public studies containing more sensitive analysis for law enforcement) include recent studies with respect to mortgage fraud,38 suspicious activity reporting by the insurance industry,39 and domestic limited liability companies.40
With respect to the timing of cross-border information sharing, it is particularly illuminative to consider what other options might be available for a law enforcement authority to obtain information from a counterpart in another jurisdiction. I caution that the Egmont exchange of information is generally limited to lead information (analogous to a "tip") that is not necessarily admissible in court as evidence, meaning that the FIU request will not necessarily end the resort to other means, but the FIU sharing process most certainly is meant to facilitate quick assistance in support of criminal investigations.
In recognition of the first speaker at today's session, Mr. Mariano Simancas, Head of Serious Crime at Europol, I should note that the European Council has decided explicitly that in promoting the exchange of information among Member State FIUs, that this would not substitute for the Member State obligations towards Europol.41 It remains the case, however, that a request under a Mutual Legal Assistance Treaty or from one judicial authority to another pursuant to letters rogatory could take months or even years for a response. In comparison, under the Egmont Group's Best Practices, a response should be provided within a month, with urgent requests such as those related to terrorism investigations often answered within a matter of days.
I am proud to be able to say here today that FinCEN "worked closely with the Spanish FIU following the Madrid bombing."42 It is also public information that FinCEN "offered assistance to the British FIU following the subway and bus bombings in London" on July 7, 2005 ("7/7").43 "FinCEN routinely serves as an intermediary between U.S. law enforcement and its FIU counterparts by requesting information on terrorism-related investigations. All requests from foreign FIUs relating to terrorism or terrorist funding receive immediate attention and comprehensive research and analysis."44 The dedicated men and women of FinCEN need no encouragement in this role,45 and we will continue to do the utmost within our authority together with our law enforcement and intelligence community partners to collaborate with counterpart FIUs to prevent and investigate terrorist attacks.
Finally, it is critical to emphasize the importance of confidentiality and protection of the sensitive commercial, financial, and personal information that is entrusted to FIUs. While initially one might consider this a problem for international sharing among FIUs, instead the Egmont Group has worked to ensure protections that have led to the promotion of the FIU channels as a preferred legal means for the cross-border sharing of information.
FATF Recommendation 4 states that "Countries should ensure that financial institution secrecy laws do not inhibit implementation of the FATF Recommendations." Furthermore, FATF Recommendation 40, clause b, states "Countries should not invoke laws that require financial institutions to maintain secrecy or confidentiality as a ground for refusing to provide co-operation." The EU Data Protection Directive specifically allows Member States to provide exceptions in order to promote criminal investigations.46
In addition to the focus on confidentiality outlined above, the Egmont Group is very clear in this regard. For example, the Principles for Information Exchange state, inter alia: