The Future - Realizing the Potential of Information Sharing and Strategic Analysis
A recurring theme throughout this presentation thus far has been a building or growing process, which I like to refer to as a type of capacity building. I should not forget to mention in this context the technical assistance and training efforts conducted by FinCEN not only in conjunction with the Egmont Group, but in close conjunction with others in the Departments of the Treasury and State. Some examples were included in FinCEN's 2007 Annual Report, including: "Mentored the Nigerian FIU in an 8-month effort during which five FinCEN employees went to Nigeria to provide guidance to the new FIU on regulatory, analytical, and information-technology-related matters."47 To me personally, such a significant dedication of FinCEN's resources reflects both hope for the Nigerian people that the FIU will be among the government entities leading an emergence from a past marred by corruption and mismanagement, and also an expectation that an investment in the FIU of Africa's most populous country will be leveraged through joint cooperation with Nigeria's neighbors. Indeed the Nigerian FIU, which itself only became an Egmont Group member in May 2007, is co-sponsoring the Kenyan, Ghanan, and Tanzanian FIUs for eventual membership in the Egmont Group. Other examples of recent analytical training that FinCEN has conducted for FIU staff and related officials has been with respect to countries that FinCEN is sponsoring to help become eligible as a functioning FIU for future membership in the Egmont Group, including Afghanistan and Saudi Arabia.48
So where are we heading? International financial standards in the AML/CFT have been initiated and matured. The legal frameworks have been determined and are being implemented. Technical assistance in AML/CFT matters is being promoted both by individual countries and international organizations such as the IMF and World Bank. Individual jurisdictions have established the requisite framework, in particular with the development of FIUs, along with the human and IT resources necessary for them to function. An understanding of the importance of AML/CFT efforts is growing, in terms of those responsible for compliance in financial institutions and supervisory authorities, and with respect to the ability of FIU analysts, law enforcement and prosecutorial authorities to understand illicit financial activity and hold criminals accountable. Data is being collected, and over time trends and patterns will emerge under the guise of skilled analysts. The value of financial intelligence to combat money launderers, terrorist financiers and other illicit actors is growing. What does this all mean with respect to the preferred model that I have laid out for cross-border information sharing through FIUs?
The floodgates of information sharing are about to open.
There can be no other conclusion. In fact, this is what we have all hoped for and should expect, as the reason that we have been building capacity from an international viewpoint is to provide for transnational sharing in order to combat the increasingly global threats of money laundering, terrorist financing, and other illicit activity. We have established the processes; now we must put them to work.
With respect to tactical analytical requests, it is obvious that as the number of jurisdictions with active FIUs increases, the number of inquiries can only go up. Moreover, as law enforcement and prosecutorial authorities come to better understand the unique avenue for requesting foreign information via FIU channels, they will certainly increase the number of requests they initiate. (I am personally convinced of this and have spent a significant part of my efforts in educating domestic U.S. law enforcement agencies of the investigative tools that FinCEN can offer them, including with respect to processing requests to foreign FIUs.) Moreover, for all parties, increasing familiarity and evidence of success will lead to greater interest to use the tools available to them.
As an international community, we have up to this point failed to adequately take full advantage of the opportunity to make "spontaneous" or "voluntary" disclosures. For example, through analysis of reporting my agency receives from U.S. banks, we may become aware that one or more transactions involved the transfer of significant funds to a third country with no apparent personal or commercial motive for the known parties involved. This might not merit opening a case file in the United States, especially when compared with all of the competing claims on law enforcement resources. But shouldn't we at least consider sharing an appropriate subset of that information with the FIU of that foreign country? If the situation were reversed, wouldn't we want to know if that third country FIU were to become aware of unexplained transactions of funds entering the United States? To my knowledge, such voluntary disclosures continue to represent a very small percentage of the total transnational flow of financial intelligence; however, resources permitting, increasing their volume and quality is in the global community's common interest.
To illustrate proactive, voluntary sharing by FinCEN with foreign FIUs on a broader level which I can discuss publicly, I will describe recent sharing of FinCEN guidance to U.S. financial institutions regarding money laundering threats. The first example is with respect to the Republic of Uzbekistan, which through a series of decrees in recent months has suspended implementation of its AML/CFT law, which had only come into effect in 2006 consistent with international standards. Among other measures, Uzbekistan stengthened bank secrecy and actually prohibited law enforcement from inquiring about cash deposits of any size. On March 20, 2008, FinCEN issued guidance that U.S. financial institutions "should take the risk arising from the deficiencies in Uzbekistan's AML/CFT regime into account for increased due diligence."49
FinCEN issued another piece of public guidance that same day, which followed passage of United Nations Security Council Resolution 1803 of March 3, 2008 calling on all States to exercise vigilance over activities of financial institutions in their territories with all banks domiciled in Iran and their branches and subsidiaries abroad.50 The guidance recalled Security Council Resolutions 1737 and 1747 designating Iranian entities involved in proliferation of weapons of mass destruction and their delivery systems, as well as two expressions of concern by FATF regarding deficiencies in the Iranian AML/CFT regime that represent a significant vulnerability in the international financial system. FinCEN provided further information on the Iranian institutions for which the UN obligation of increased vigilance apply. With respect to each of the foregoing pieces of guidance, I immediately shared them with my Egmont Group counterparts around the world, who similarly would wish to take actions to educate their respective domestic financial institutions of these global risks and obligations to mitigate them."
Finally, and perhaps most importantly, I wish to turn to the potential for bilateral and multilateral international collaboration in strategic analysis. All of the understood benefits of strategic analysis domestically - e.g., proactive investigation to get a "big picture" of emerging and larger threats or vulnerabilities - can only be multiplied by the prospects of transnational collaboration through the ability to join expertise and information.
In my first year as Director of an FIU, I have often analogized too much of my career as a central banker. In working for a government agency that by definition is one-of-a-kind in any jurisdiction, one must look abroad to learn from the best practices of counterparts. At FinCEN, I have already put this conviction into practice with respect to our regulatory responsibilities, through very fruitful discussions with our counterpart financial intelligence units and AML/CFT regulators. We gained insights, for example, in our ongoing attempts to focus both financial industry and government supervisory authority efforts on risks: in Canada by the Financial Transactions Reports Analysis Centre (FINTRAC) and the Office of the Superintendent of Financial Institutions (OSFI), and by the United Kingdom in the Serious Organised Crime Agency (SOCA) and the Financial Services Authority (FSA). I expect that we will be able to incorporate some of what we have learned into future efforts to make our domestic regulatory framework more efficient and effective.
It is time to similarly engage in strategic analytical work in collaboration with other FIUs, something that FinCEN has not yet accomplished on any project of significant scale. It is a priority to now make that happen.
This past week, I met in person with my counterpart director of the Mexican FIU, and, separately two days later, my counterpart director of the Canadian FIU. In each case we explored the possibility and specific options for joint strategic analytical projects to combine the expertise of our analysts and consider what answers might arise from posing the same queries through the respective data available to us. I believe that this is exactly what the American people would want - to work with our counterparts to gain any clues that might help us together with our neighbors to secure and protect the homeland's southern and northern borders. If nothing else, wouldn't it be interesting to know about discrepancies between the financial data reported on the respective sides of the border, and, however limited those data sets might be, whether such discrepancies might yield clues or leads for possible illicit activity? We will never know if we don't query the available data.
Two days ago when I arrived in Madrid, I visited the Spanish FIU and posed the same types of questions and explored analogous possibilities for joint strategic analytical work. Here, the options might be more complicated, but even more intriguing. Do the historical, economic, linguistic and cultural ties dating back centuries to the glory days of Salamanca where we gather today for this session somehow contribute to vulnerabilities that criminals are able to exploit? Perhaps we need a trilateral effort among the United States, Spain, and some of our key Latin American partner FIUs to find out. I will leave Spain with a strong impression of the FIU's central role in the active use of financial intelligence to combat organized crime and terrorist financing, as well as not only reaffirmation of the importance of, but also their commitment to join FinCEN in furthering, proactive sharing of information among FIUs and joint strategic analytical work.
I look forward to the next Egmont Group plenary meeting in Seoul, Korea next month together with the leadership of the FIUs of over a hundred other jurisdictions. We will most surely discuss the positive developments with respect to capacity building around the globe, as well as how the financial market outlook has shifted, and some of the new criminal typologies that are emerging. I personally will also advocate for greater information sharing, particularly with respect to voluntary disclosures and possible joint strategic analytical work. It's our responsibility in combating money laundering and terrorist financing.