Skip Navigation

Committee on Financial Services

United States House of Representatives

Archive Press Releases

Statement of

William F. Baity
Acting Director

Financial Crimes Enforcement Network

before the

Subcommittee on General Oversight and Investigations
of the
Committee on Banking and Financial Services
U.S. House of Representatives

April 1, 1998

Mr. Chairman and members of the Subcommittee, I am pleased to appear before you this afternoon to continue our ongoing dialogue about Treasury’s counter-money laundering efforts in general, and FinCEN’s role in those efforts in particular. The continued attention this Committee has paid to our programs has been gratifying. Oversight means interest, in our programs, our initiatives, and even our shortcomings. And this interest furthers a common goal -- effective and cost-efficient measures to fight money laundering.

The stated subject of today’s hearings is a review of several General Accounting Office (GAO) studies of FinCEN’s information sharing, regulatory, and international programs. While the studies are in various stages, and we have not seen two of them, many of the issues reviewed or assigned for review are the same as the issues raised in our own ongoing internal assessments of our work, and I will address those issues this morning.

My testimony concentrates on FinCEN’s regulatory, law enforcement support and international programs. I want to give you a sense of where those programs stand today and how we believe they must evolve. Before turning to the details of the programs, though, I’d like to give you a sense of the larger agency mission which drives each of these programs.


FinCEN has three responsibilities. The first, at the time of its founding in 1990, was to make available and analyze information, as quickly as possible, to support and fuel increasingly sophisticated financial crimes investigations. The second, when the Office of Financial Enforcement was consolidated into FinCEN in FY95, was to administer the Bank Secrecy Act (BSA) to ensure that the financial services community adopts programs to deter and detect money laundering. The third, which grew out of both functions, was to provide knowledge, policy recommendations, and staff support for international anti-money laundering efforts.

People often ask how these three programs fit together. The answer is simple. The Bank Secrecy Act is, and was intended by Congress to be, an information collection device. As you know, we are refashioning its terms along the lines set by Congress, to make the information more useful to law enforcement operations and less burdensome to the financial industry. We should only ask for information we intend -- and have the capacity to use -- and we should build systems to use it, as quickly and productively as possible. The international efforts FinCEN undertakes have the same end in mind -- to build a coordinated system of rules that restrict the use money launderers can make of the financial system. At the same time, these programs build pathways internationally to reinforce the information collection and dissemination systems we are building domestically.

Fitting these programs together, in a new sort of agency, has not been easy. After eight years of building, from the ground up, a constantly evolving network of expertise and cooperation, you, and we, have asked for an inventory of how our program parts are working, singly and together. We are committed to honestly assessing our strengths and weaknesses and soliciting the frank views of all of our partners about where our energies should be directed as we move forward. Your support for and interest in our programs is crucial, and we welcome this opportunity to discuss the state of FinCEN.

I’d like to turn now to the details of our programs. I’ll address them in the general order of the studies undertaken by GAO -- starting with our regulatory programs (including the civil penalty process), then moving to our law enforcement support efforts and our international programs.

FinCEN’s Regulatory Programs

FinCEN’s regulatory program continues to reflect the two principles we set forth before the Committee last year:

* Administration of the BSA to meet the needs of law enforcement for information without creating unjustifiable burdens on financial businesses; and

* Shaping the rules of the BSA so that they can be used by other agencies and so that compliance with their terms can be audited by other agencies -- the five federal financial supervisory agencies (as well as in some cases state banking officials), the Securities and Exchange Commission, the Examination Division of the Internal Revenue Service, and federal and state law enforcement agents and prosecutors.

None of this is easy for a small agency (or for that matter a big agency). It requires us to be flexible and creative in the way we adapt to changes, in regulatory priorities and in the rapidly evolving financial community. More than 200,000 financial services providers -- from the largest money center banks to the scattered currency exchange businesses along the Southwest border, with hundreds of variations in between -- are subject to the BSA’s rules. When you combine the complexity of the issues involved with the number of legitimate public and private interests that must be balanced in their resolution, the process necessarily becomes a complex one, and we have to admit that it sometimes moves more slowly than we would like.

Since FinCEN became responsible for administration of the BSA, in FY95, it has issued ten proposed rules, seven final rules, and an interim rule; an additional final rule and an additional proposed rule are under review at Treasury now. I don’t want to take you back through the history we have reviewed before, but I would like to give you a sense of where we are in each of the major areas of BSA administration affected by the Annunzio-Wylie Anti-Money Laundering Act, enacted in 1992, and the Money Laundering Suppression Act of 1994.

Annunzio-Wylie required issuance of one group of rules (relating to record- keeping for international funds transfers) and authorized issuance of rules relating to recordkeeping for domestic funds transfers, suspicious activity reporting and anti-money laundering programs; these were fundamental changes in the BSA. The Money Laundering Suppression Act required issuance of four groups of rules (mandatory and discretionary exemptions from the CTR filing requirements, single designee for receipt of suspicious activity reports, and registration of money transmitting businesses, now called money services businesses). That statute authorized rules relating to cross-border reporting of foreign bank drafts and expanded coverage of gaming institutions (primarily tribal casinos) under the BSA. Again, several of the changes, including those relating to reform of the exemption system and treatment of money services businesses, were fundamental changes. A detailed description follows:

Exemptions. In the last 12 months, we have finalized the first stage of reform of the system by which banks can exempt transactions by routine users of currency from the CTR reporting requirements. The first stage of relief made use of the "mandatory exemption" provisions of the Money Laundering Suppression Act, in a way that I think was far broader than anticipated; we automatically exempted transactions by most public companies (whose business represents perhaps as much as 65 percent of the gross domestic product) from currency transaction reporting.

Our proposal for second stage relief, aimed at non-public businesses, has been through a thorough vetting in the public comment period. We again used a public meeting, as we had in the case of the money services businesses rules, to make sure that all of the concerns of industry and enforcement officials were communicated and probed by everyone involved. Our final rule, now in clearance at Treasury, should constructively resolve a great many criticisms of the proposed rule. We believe that the new system strikes the proper balance, and banks can use it to decrease, by as much as fifty percent, the present volume of CTR filings.

Suspicious Activity Reporting. We have devoted a great deal of time during the past year to expanding the regime of suspicious activity reporting beyond depository institutions. We proposed rules relating to suspicious activity reporting by money remitters and those in the money order and traveler’s check industries last May; I’ll discuss those rules together with the other "money services business" rules, shortly. A rule relating to reporting of suspicious activities by casinos and card clubs -- based on a system of reporting already in place in Nevada -- is in clearance at Treasury, and a second proposed rule, relating to brokers and dealers in securities, which reflects a several month collaboration with the staff of the Securities and Exchange Commission, should be forwarded to Treasury within the next month.

The Suspicious Activity Reporting System (SARS) for depository institutions now has almost 150,000 reports, which are being analyzed throughout the nation. About 40 percent of SARS filings reported suspected BSA violations, largely instances of structuring of currency deposits. The issue now is how best to direct the capabilities of the System and the obvious willingness of banking institutions to cooperate in implementing the reporting rules so long as the information is used and our expectations are reasonable. Expanding the System’s sophistication and effectiveness is not an overnight task, but our first report on the state of the System will be issued soon, and I think you will see that a good start has been made.

Money Services Businesses. As the Committee is aware, various law enforcement operations, including the recent Geographic Targeting Orders (GTOs) in the New York metropolitan area, confirmed that money launderers are turning to the relatively unsupervised financial services provided by money transmitters, traveler’s check and money order sellers, check cashers, and currency exchangers. I wish to emphasize that most MSB operators and agents are law abiding and as interested in cost- effective financial law enforcement as the Treasury itself.

The rules we proposed last May are largely designed to impose anti-money laundering safeguards on those MSB transactions which are well above the industry’s average transactions.

The proposals generated more than eighty comments, some of 50 or more pages in length. In addition, hundreds of pages of transcript were generated from the five public meetings FinCEN held around the country to examine informally the areas of agreement and disagreement that the registration and reporting proposals generated. The range of comments was significant, and we have been working in conjunction with the Office of Enforcement for some months, trying to revise the rules where appropriate and to meet reasonable objections without sacrificing the ability of enforcement officials to counter the serious abuses found in certain segments (although by no means all) of these businesses.

We have also insisted that the drafting of the rules be considered in tandem with the ability of the various agencies involved to fund and devote time to the implementation of the rules, so that citizens and businesses can obtain guidance and forms easily. Also crucial is the development of a public outreach program that will provide a basis for compliance with -- and acceptance of -- the new rules in the various immigrant and other communities in which their implementation is the most important to our overall efforts. Treasury has indicated it will allocate $2.5 million from Treasury Super Surplus balances in the Treasury Forfeiture Fund to FinCEN for MSB implementation in FY 1999. This amount would be used for guidance, interpretive advice, oversight, coordination and data analysis. We have projected publication of the final rules by early-mid summer.

I should add that we have continued to work with the El Dorado Task Force, and that a second set of Geographic Targeting Orders, aimed at money transmissions to the Dominican Republic, were issued last September. As of this date, the Dominican GTOs are still in effect. The available data suggest that the Dominican GTOs, like the Colombian GTOs, have forced money launderers to use alternative means to launder their drug proceeds, such as bulk shipments of currency, and that money launderers are structuring their remittances to evade the $750 reporting threshold established by the GTO. One of the largest transmitters in this market has pled guilty to felony money laundering and structuring charges, and has had its license revoked by the New York State Banking Department.

Casinos and Card Clubs: Since 1985, when state-licensed casinos were first subjected to the safeguards and controls of the BSA, the size and availability of casino gaming in the U.S. has increased dramatically. I think the BSA has kept pace. We have finalized rules bringing tribal casinos and card clubs within the BSA regulatory system (with little opposition due to our extensive consultation beforehand with the tribal gaming authorities), and the soon-to-be-proposed rules for suspicious activity reporting by casinos reflect a period of intensive work with officials in Nevada; as I mentioned earlier, Nevada’s state regulatory system (that state’s substitute for the national BSA system for casinos) already requires casinos to send reports of suspicious activity to FinCEN, under a system we worked out with Nevada as part of federal oversight of the Nevada state system.

Using the Nevada experience, FinCEN has drafted a notice of proposed rule- making that would require other state-licensed casinos and card clubs to report suspicious transactions to FinCEN. FinCEN expects to publish the proposal within the next two months and plans to hold three regional meetings to provide an opportunity for the industry to comment on the proposal. In addition, FinCEN has been working with representatives from the gaming industry on a guidance document for casinos to assist in identifying suspicious activity. The document lists examples of how a casino’s financial services might be used for illicit purposes.

Funds Transfers. The world’s intricate funds transfer systems move over $2 trillion a day, involving over 500,000 transactions. In the past, wire transfers offered criminal organizations an easy, efficient and secure method of transferring huge sums of money over a very short period of time. However, two funds transmittal (wire transfer) rules issued jointly by FinCEN and the Federal Reserve went into effect on May 28, 1996. Requiring years to design, these wire transfer rules preserve an information trail about persons sending and receiving funds through wire transfer systems, helping law enforcement agencies trace criminal proceeds.

Foreign Bank Drafts: Foreign bank drafts have long served legitimate commercial purposes. However, like other aspects of the financial systems, foreign bank drafts are vulnerable to manipulation and misuse by money launderers. In September 1996, FinCEN issued an advisory which focused specifically on Mexican bank drafts and factored third party checks. The Advisory asked banks to give enhanced scrutiny to these instruments and report suspicious activity to law enforcement when warranted. On January 22, 1997, FinCEN issued a notice of proposed rulemaking that would add foreign bank drafts to the instruments subject to the requirements of the Report of International Transportation of Currency or Monetary Instruments (commonly known as the CMIR). The comment period on this proposal closed on April 22 of last year. In light of the comments, including comments from larger banks, it was determined that the rule as proposed could cause disruptions to their processes. FinCEN is consulting with Treasury experts to determine if there is an alternative way to focus our efforts on the countries whose bank drafts have proven problematic. We know this is an area of particular concern to the Committee, and we will continue to provide updates on any developments.

Know Your Customer Rules. We believe that the rudiments of a know your customer rule are already in place, given the terms of the suspicious activity reporting obligation to which banks are subject, but we agree that a more direct statement of the obligation is an important goal. We are working with a team led by representatives of the Federal Reserve Board on these matters, and we commend the Federal Reserve for getting that process started.

GAO Audit Findings--Regulatory Programs

FinCEN recently had an opportunity to review the draft version of GAO’s report relating to our regulatory initiatives. The Report contains a detailed and comprehensive discussion of the process and procedures FinCEN uses to develop and issue regulations and the status of these regulations. However, in our opinion, the Report does not accurately describe the level of effort FinCEN devotes to its regulatory initiatives or the extent to which FinCEN informs the Congress of our objectives.

The Report’s sole recommendation is that FinCEN submit to the appropriate Congressional committees a multiyear action plan for its regulatory program with target dates for issuing notices of proposed rulemaking and final rules. This plan, which is not required by law or regulation, would be in addition to the annual plan that FinCEN, as well as other federal agencies, is already required to prepare. We strongly agree with the GAO that Congress should be kept informed of our regulatory progress, and we have actively endeavored to meet that responsibility through periodic briefings, as well as hearings before this Committee. As you know, we presented a complete list of our open projects and projections for their completion dates last year, and we have continued to work with members of the Committee and their staffs as specific questions have arisen.

But regulatory drafting -- especially careful regulatory drafting -- is not always a predictable task, especially when the validly competing interests at stake are as complex as they can be under the BSA. There is no set of "instructions for assembly" that comes with these tasks, and few precedents for designing a regulatory system that truly enlists the cooperation of financial businesses in making money laundering harder to carry out and easier to detect. There is no substitute for full and open communication between FinCEN and this Committee, and we believe that that communication has taken place and will continue to take place. In our view, an unrealistic multi-year reporting requirement can only run the risk of prematurely freezing agency priorities and needs.

Civil Penalty Program

One of the matters you have asked the GAO to study is FinCEN’s processing of cases referred to it for potential civil penalties resulting from a violation of the BSA. The subject is not an easy one, because, frankly, the inventory of open cases is far greater than we would like it to be.

Since 1992, FinCEN (and the Office of Financial Enforcement, before it merged with FinCEN in 1995) imposed 57 penalties against financial institutions, totaling more than $9.3 million, for cases in which there were systemic problems with a financial institution’s BSA compliance programs. We also issued numerous letters of warning where BSA violations were less serious but still warranted corrective action by the financial institution. As of mid-March 1998, FinCEN has an inventory of 99 cases.

While FinCEN is responsible for overall administration of these BSA requirements, it relies on examiners from other agencies to determine financial institutions’ compliance with BSA requirements. These include all five federal bank regulatory agencies (Office of the Comptroller of the Currency, the Federal Reserve Board, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, and the National Credit Union Administration) as well as the Securities and Exchange Commission and the Examination Division of the Internal Revenue Service.

Under detailed guidelines issued by FinCEN, these agencies refer to FinCEN specific cases involving potential violations of the BSA from financial institutions subject to their supervision. Other than securities brokers and dealers, IRS Exam is responsible for examining all non-bank financial institutions for their compliance with the BSA. Recent rules proposed by FinCEN refer to these non-banks as money services businesses (MSBs).

Once a matter is referred to FinCEN, it is handled by our Office of Compliance and Regulatory Enforcement (OCRE). When fully staffed, six OCRE employees are assigned to these cases. Because of other significant responsibilities within this office, no one employee works full-time on civil penalty matters. Their other responsibilities include providing guidance and training to regulators on BSA requirements, overseeing the IRS Detroit Computing Center’s processing and governmental dissemination of BSA data, and providing interpretive and specific operational guidance to the full range of financial institutions subject to the BSA. Approximately half of the office’s time is devoted to these efforts.

Staffing is only part of the problem. Penalty cases are not presented as full files. Almost all cases referred to OCRE, whether voluntarily from the institution itself or from its regulator, require substantial investigation and evaluation. Before that evaluation can proceed, OCRE must refer the matters (unless they have been referred from the Examination Division of IRS) to the Criminal Investigation Division of IRS, so that IRS CID can determine whether it wishes to conduct a criminal investigation of the underlying transactions or institution. Once CID clearance is granted, OCRE will generally contact the financial institution involved and seek additional information, including all relevant records relating to the activity or accounts in question. OCRE also routinely requests copies of the financial institution’s written BSA compliance and training programs, any internal and/or independent audits and information tending to show what, if any, corrective action has been taken.

The investigation and processing of these cases are technical, and labor and time intensive. All of this effort is designed to identify the cause of any potential BSA violation and to help determine whether the violation points to systemic compliance problems or simply represents an isolated case of noncompliance. FinCEN administers the civil penalty process not to raise revenue but to match a range of sanctions with the objective of improving patterns of BSA compliance, especially in cases in which lapses from full compliance were not willful or there is no evidence of a faulty compliance system generally. In such cases (those in which overall systems are not faulty), the matter will often be closed with a letter of warning or a determination to close the matter with no action. If more serious issues are involved, the proceedings will become more formal, with attention shifting to negotiation of a civil penalty -- and appropriate corrective steps -- to resolve the matter.

Factors to be taken into account in such cases include the severity, volume and duration of the BSA violations, the strength of the institution’s overall BSA program, the nature of any corrective action taken, the effect of a penalty on the institution’s financial viability, and other valid aggravating or mitigating factors. In our experience, no two matters are identical, none of these factors are dispositive, and all must be evaluated on their own merits. However, only in rare cases is FinCEN unable to reach a negotiated settlement with the institution once the violations have been clearly determined.

While we welcome the GAO’s independent evaluation of our case-processing activities, we do not intend to wait until that audit has concluded. We are conducting our own internal review to determine the causes of these delays and the decline in the number of bank referrals. Rather than speculate on these causes, we think it prudent to begin the process of answering these questions ourselves and to work with the GAO and this Committee to determine if there are ways to improve our handling of this important responsibility. If changes need to be made, we will make them.

Law Enforcement Support

FinCEN provides case support information to law enforcement in two ways: through an in-house staff of experts who respond to field requests for data searches and analysis; and through programs which permit others to take advantage of FinCEN’s services while using their own resources. This approach enables us to accommodate the increasing demand for our services by providing our law enforcement customers with opportunities to access our resources themselves in a variety of hands-on, interactive ways.

In 1997, FinCEN handled more than 4,800 requests for information. Furthermore, other federal agencies tapped into FinCEN’s resources to support an additional 1,500 cases. All told, including carry-over from 1996, FinCEN personnel and resources were responsible for closing more than 6,800 cases last year. Described below are the five primary ways in which we support law enforcement.

Direct Case Support: Since its creation in 1990, FinCEN has provided almost 43,800 analytical case reports involving over 120,000 subjects to federal, state, and local law enforcement agencies. Last year alone, FinCEN worked with more than 150 different agencies. Using advanced technology and countless data sources, FinCEN links together various aspects of a case, finding the missing pieces to the criminal puzzle.

Our compilation of databases provides one of the largest repositories of information available to law enforcement in the country. FinCEN’s technology and expertise draw representatives from 20 agencies--the major federal investigative agencies--in order that they may have direct access to our information. These analysts and agents, who serve long-term details at FinCEN, are critical in the case development process and act as a point of contact on essential law enforcement dissemination issues.

In the past year, we have increased our on-site case support to major investigations. This effort includes forensic accounting, intelligence, research and analysis, a proprietary financial analysis database, grand jury testimony and exhibits, and assistance to U.S. Attorneys. Through these on-site activities, we have contributed to the indictments of major financial crime figures, and the break-up of criminal enterprises.

Artificial Intelligence Targeting System: FinCEN's Artificial Intelligence (AI) system is yet another avenue available to law enforcement in the fight against money laundering. Through the employment of advanced AI technology, the system provides a cost-effective and efficient way to locate suspicious activity in the tens of millions of currency transaction reports required by the Bank Secrecy Act.

FinCEN’s innovative system finds potential suspects during the AI analysis who might otherwise have gone undetected. This technology and the expertise of FinCEN’s analysts essentially find the needle in the haystack. Since the creation of the system in 1993, it has matched more than 50 million BSA reports against the algorithms of the system, revealing approximately 4,000 potential subjects.

We continue to work on ways to improve our targeting system. We are especially concerned with ensuring that it is up-to-date, both in terms of using the latest technology as well as including programming instructions that reflect contemporary trends and patterns in money laundering. To meet these goals, we are developing a link to SARS, our newest tool in the fight against money laundering. We will also call on members of the law enforcement community to share their expertise on money laundering methods and patterns. These enhancements will improve our targeting capabilities, and most importantly, ensure that they keep pace with criminal elements.

Support to ICG: FinCEN also is supporting the Interagency Coordination Group (ICG) whose purpose is to share money laundering intelligence in order to promote multi-agency money laundering investigations. The group includes the Internal Revenue Service, the U.S. Customs Service, the U.S. Secret Service, the Drug Enforcement Administration, the Federal Bureau of Investigation, and the United States Postal Service. FinCEN and the Department of Justice’s Criminal Division, serve as advisors to the group. FinCEN provides a central site for the group’s operations and the support of analysts who provide research and analysis of the intelligence information generated by the group. This coordinated intelligence is then disseminated to case agents currently working major money laundering investigations in the field.

The ICG has been instrumental in supporting a number of issues that are relevant to financial crime investigators. It continues to work on the Black Market Peso Exchange, a major money laundering method. Another project involves the examination of commercial fraud through letters of credit, prime bank guarantees, and other high yield instruments. In addition, FinCEN and the ICG are working together to explore effective and innovative investigative applications of the Artificial Intelligence System and the Suspicious Activity Reporting System.

Platform Access: FinCEN support is also provided to law enforcement agencies through a "Platform" which is a way to permit others to use FinCEN’s resources directly to carry out their work. FinCEN pioneered the Platform in 1994, offering training, office space and database access to employees of other federal agencies who needed to conduct research on cases under investigation by those agencies. Platform personnel are on the payroll of other federal agencies and come to FinCEN on a part-time basis to work only on cases being conducted by their own offices or agencies. These individuals know the needs of their organization and can support that need directly through database access. FinCEN is currently assisting 51 Platform participants from 31 agencies. Work done through Platform is handled the same as traditional FinCEN casework in terms of case management and security. Platform cases accounted for about 25 percent of the cases which FinCEN closed in 1997.

The use of Platform, coupled with a streamlined case-screening process in which, for example, requests for civil investigations or for simple background checks are no longer accepted, allows FinCEN personnel to concentrate on more time-consuming, complex cases. We believe this is a more judicious use of our resources and has improved the quality of case support provided to law enforcement.

Gateway: Through FinCEN’s Gateway System, state and local law enforcement agencies have direct, on-line access to reports of large currency transactions, suspicious activity reports, casino currency transactions, international movements of currency, and foreign bank accounts records filed under the Bank Secrecy Act. This information often provides invaluable assistance for investigators because it is not readily available from any other source. Using FinCEN-designed software, the Gateway system saves investigative time and money because subscribing agencies can conduct their own research and not rely on the resources of an intermediary agency to obtain BSA records. All states and the District of Columbia are now on-line with the system. In FY 1997, Gateway processed 57,663 queries from the 50 states, Puerto Rico, and the District of Columbia.

In addition to allowing subscribing state law enforcement agencies to conduct their own research using BSA data, the Gateway system has a mechanism in place which proactively "alerts" one agency that another has an interest in the same subject. Through this mechanism, Gateway electronically captures the information on all incoming inquiries from Gateway users nationwide. These inquiries result in more than 600 new subjects being added to the subject information Gateway captures each month. The system then automatically compares this information with our internal database and also against our other federal data sources. In FY97, 460 "alerts" were given to agencies who had an interest in the same investigative subject. And, the number is increasing. FinCEN has recently acquired the use of databases from additional federal agencies.

The expansion of our federal database sources has enabled us to increase the number of "alerts" we are able to make. FinCEN has issued 240 such notices just in the first quarter of FY98--a significant increase over the previous year. This technique enables FinCEN to assist state and local agencies in coordinating their investigations among themselves, and with federal agencies, through the sharing and exchanging of case data.

Since the inception of Gateway in 1994, 673 representatives of state and local law enforcement (to include state attorney general offices) have been trained on Gateway. As of mid-March 1998, there were 439 active users of the system.

In all the programs I just described, our goal is to give our customers access to as many tools, and as much information, as possible to build their investigations. Our business is non-parochial -- to share information and expertise and support the efforts of other agencies. With the volume and complexity of the work, it is impossible always to do their analysis and intelligence gathering for them. Nor should we try. Agencies know best what they need for their case work. FinCEN strives to find all the avenues -- whether it be traditional data analysis, detailee support, Platform, Artificial Intelligence System, the ICG or Gateway -- to leverage our resources to serve the greatest number of customers effectively and efficiently.

GAO Audit Findings--Products and Services

The GAO determined that FinCEN needed to develop and implement an audit plan to ensure that only authorized law enforcement personnel have access to FinCEN’s Platform and Gateway systems and use them for legitimate purposes. FinCEN recognizes that we must take steps to ensure that state subscribers have adequate controls in place to guard against the possible misuse of the data. Our Gateway team is currently in the process of developing audit guidelines and visiting states to ensure that only authorized law enforcement personnel access FinCEN’s Platform and Gateway systems and use them strictly for legitimate purposes.

I would like to point out that as with all government agencies with access to sensitive information, FinCEN has carefully proscribed security and information protection policies in place which apply to all FinCEN personnel as well as other agency users of our data resources. Strict procedures are in place governing access to and use of information. Such controls are carefully designed to protect, compartmentalize and channel information only to authorized users so as to ensure compliance with U.S. privacy laws. It is important to stress that preventing unauthorized dissemination of information starts with the management of the analytical process itself. Agencies may receive information from FinCEN only upon a clear specification of the purpose of their request, and after the identity and authority of the requester has been confirmed. FinCEN takes very seriously its responsibility to protect access to the information it holds, to oversee the activities of these employees and, above all, to prevent the misuse of the information with which it is entrusted.

Second, GAO determined that FinCEN needed to take action to better inform potential customers about FinCEN’s services and products. As we told auditors, FinCEN maintains a multi-faceted outreach program that concentrates on federal agencies, but also includes state and local agencies. We strive to ensure that every agency that can benefit from our products and services, knows about them. In addition to visiting field offices, last year, FinCEN representatives gave 110 presentations to federal, state, and local agents, analysts, and prosecutors. In addition, more than 160 law enforcement visitors toured FinCEN’s facilities in 1997.

Each year we participate in important law enforcement conferences such as the Economic Crime Summit and the International Association of Chiefs of Police. These conferences attract thousands of delegates who have the opportunity to meet FinCEN personnel, sample our products, and learn how FinCEN can help them develop complex financial cases. FinCEN’s detailee and Platform programs allow federal agencies to see first hand how valuable our resources can be to important investigations. Finally, FinCEN has updated its Web site to include information on our support to law enforcement and offer the opportunity to viewers to send comments or questions via electronic mail.

FinCEN’s International Initiatives

Secretary Rubin has recently said: "In a global economy, a comprehensive, international effort is required to choke off the threat posed by money laundering. Also, the diffusion of responsibilities throughout government requires a coordinated and cooperative response within each government. In the United States, we have brought together elements of our Treasury, State and Justice Departments, and other agencies, to deal with the issue. Globally, other nations will similarly need to coordinate expertise from across a range of ministries."

Support for this coordinated and cooperative response -- domestically and internationally -- is FinCEN’s mission. As a result of its efforts, FinCEN is now recognized around the world as a leader in the international fight against money laundering. While this recognition clearly has benefits -- such as the ability to set and influence agendas, and the opportunity to participate in many fora -- it also carries with it responsibilities, including the need to respond to constant requests for guidance and assistance. FinCEN cannot shirk its leadership role in this area, but neither can we meet all the requests for assistance we receive.

Thus FinCEN must prioritize its international agenda. We intend to focus our international efforts on the most important activities in the field, and on those where the timing is right for FinCEN’s efforts to really make a difference. Because many of our international partners have gained expertise in combating money laundering, we are increasingly looking to them to play a leadership role in their regions and around the world, as well.

Our international efforts over the next five years will be focused on four principal areas:

Promoting International Anti-Money Laundering Standards -- FinCEN will continue to play a lead role in the world’s premier anti-money laundering organization, the 26-nation Financial Action Task Force (FATF). FinCEN leads the U.S. delegation to the FATF and coordinates the development of the U.S. positions on issues addressed by the task force.

The FATF's ultimate goal is the acceptance and implementation of the FATF 40 Recommendations worldwide. These recommendations provide a basis for improving law enforcement and regulatory agencies’ prospects against money laundering. At its most recent meeting, the FATF agreed to a formal plan to continue into the year 2004, to expand its membership to strategically important countries, and to foster the development of regional FATF-style, anti-money laundering bodies. To this end, and largely as a result of FinCEN’s leadership, sister organizations such as the Caribbean Financial Action Task Force (CFATF) and the Asia/Pacific Group on Money Laundering (APG), along with the Council of Europe, the Organization of American States (OAS), and the Offshore Group of Banking Supervision (OGBS) are now working to ensure the implementation of the FATF 40 Recommendations by their member jurisdictions. As these FATF-style regional bodies mature, FinCEN will increasingly look to other jurisdictions with advanced anti-money laundering regimes to play more active roles in spreading the FATF message in these fora.

In addition, over the next few years, we will look increasingly to Interpol, the United Nations, and the international financial institutions (i.e., the World Bank, the International Monetary Fund, the Inter-American Development Bank, and the Asian Development Bank) to help us bring the anti-money laundering message to the developing world, and to assist us in making determinations as to which countries are most prepared for and in need of direct assistance from FinCEN and other agencies within our government.

Fostering an International Network of Financial Intelligence Units (FIUs) -- Another critical area for FinCEN’s attention will be the continued development of an international network of FIUs willing and able to assist one another in practical terms in the fight against money laundering. Overtime, we want the growing informal network of FIUs to play an ever more critical role in the support of money laundering investigations. Just as FinCEN is able to assist federal, state, and local law enforcement from various regions of the United States by bringing disparate pieces of information and individual (but related) investigations together, so FinCEN can reach out to other FIUs to obtain information that might prove critical to a U.S. federal, state, or local investigation.

Creation of FIUs have caught on dramatically. Just six years ago, there were fewer than a handful of FIUs. Today, there are at least 28 such units. An additional 25 FIUs or so now are under consideration, being planned or in development. The momentum for this development is in part due to several years of intensive effort by FinCEN and its counterparts in Europe and Australia, but the idea would not be so popular if it were not fundamentally sound. Financial investigations are so complex, and so many agencies have roles to play in combating money laundering, that a central, national agency for the collection and analysis of financial information can make the critical difference in whether a government’s effort is effective.

A core group of FIUs -- known as the Egmont Group -- has come together to find ways to cooperate, especially in the areas of information exchange, the sharing of expertise, and assisting newer FIUs. Perhaps the most significant contribution of the Egmont Group has been the creation of a secure Internet web site. Egmont’s International Secure Web System -- developed almost entirely by FinCEN -- permits members of the Egmont Group to communicate with one another via secure e-mail, and to post and access information on FIUs, money laundering trends, financial analysis tools, and technological developments. Currently, 14 FIUs are on-line, with another 8 expected to be operational soon. We hope to have at least 50 FIUs connected to the Egmont Secure Website by FY 2002.

Most importantly, FinCEN has already been able to support a number of federal investigations by gathering information from its FIU counterparts. This is information that might only be obtained with difficulty, or not at all, through other channels. As a participant in this worldwide "network," FinCEN can likewise assist certain foreign jurisdictions in providing them the critical anti-money laundering information they need to investigate a case.

But there remains much work to be done to engage our domestic law enforcement partners to more actively seek assistance through this means. We have committed in our strategic plan to increase the number of U.S. investigative case support requests for information made by FinCEN to foreign FIUs to 100 per year by 2002. But we all know that numbers of requests (like numbers of case files) do not necessarily measure effective investigations. What we really want is to facilitate practical, rapid exchanges of information that will make a difference for all of our federal, state, local and foreign partners in the fight against money laundering.

Devising Solutions to International Schemes -- A third area of emphasis in our international strategy will be to direct attention to international steps to counter specific money laundering systems and methods. The work done by the Black Market Peso Exchange project of the Interagency Coordination Group is an example of what we want to do -- alert public officials and private citizens to the ways money laundering is conducted and bring public and private sector resources to bear, both to detect the laundering and, to the extent feasible, to eliminate the economic preconditions that make recourse to laundered funds attractive. FinCEN was certainly not the first agency to uncover or understand the black market peso exchange -- a system through which perhaps one-half of U.S. narcotics sale proceeds move. But because of FinCEN’s unique position at the intersection of law enforcement and regulatory agencies, foreign and domestic, FinCEN has been able, first, to describe the scheme to investigators, financial services providers, the Congress and the public, and second, to devise and begin to implement inter-agency, international, and public-private approaches to a problem that has until now defied solution.

Providing Training and Technical Assistance -- The fourth area of emphasis is support for international training and technical assistance efforts. FinCEN is recognized around the world for its ability to teach what it has learned about anti-money laundering measures, and its guidance is frequently sought by officials of other governments. FinCEN is called upon, often at the last minute, to travel to foreign countries to resolve controversial issues with respect to laws or regulations before they are passed or implemented. For example, Panama and Mexico have recently made money laundering a criminal offense. Both countries have implemented vigorous "know your customer" policies, mandated reporting of suspicious transactions, and instituted reporting of large cross-border cash transactions. These actions were due in part to our discussions with a number of high-level officials, including the Ministers of Finance, Panama’s National Security Council, and Mexico’s Department of the Treasury.

FinCEN also plays a pivotal role in formulating and implementing policy related to the presidential initiative concerning international crimes. This initiative was announced by the President at the 50th Anniversary of the United Nations in October 1995. In consultation and active participation with the Departments of State and Justice, the Treasury Department has been identifying the most egregious overseas sanctuaries for criminals and their illegally obtained wealth and then working with those governments to end these safe havens. Negotiations have resulted in strengthened anti-money laundering regimes and fewer places for criminals to hide their illicit assets. FinCEN continues to take the lead on behalf of Treasury, drawing on the expertise of our partners in law enforcement, the financial services industry, and international organizations.

Funds invested in international training and evaluation can pay great dividends over time, not only in reducing the spread of money laundering but in strengthening the ability of others to take over burdens now borne by FinCEN and other U.S. agencies.

Over the next five years, FinCEN will continue to respond to bilateral requests for guidance and expertise, but we will do so with a clear sense of priorities. We expect these priorities for the most part to merge with those resulting from the ongoing presidential initiative, previously mentioned, and we will focus on cooperative international efforts -- to get the most return on our investment -- wherever possible. But we will also aggressively pursue opportunities to advance the other, related items on our international agenda that I have described for you today.


FinCEN’s regulatory, law enforcement support, and international programs, all come together for one strategic purpose--making sure that the law enforcement, regulatory, and financial communities have the latest information available about how criminals launder their money. We glean this information from the identification of emerging trends; validation of existing methods; and re-examination of old techniques. For example, our examination of criminal structuring of postal money orders led to an identification of an emerging trend. Also, Geographic Targeting Orders aimed at certain money remitters allowed us to validate what the El Dorado Task Force concluded from its investigations. And our delving into the Black Market Peso Exchange system re-focused law enforcement’s effort to attack a long-known process for shifting illicit funds to other countries.

This is the sort of information that FinCEN should work more intensively to develop and disseminate. The everyday demands of law enforcement investigations naturally focus on what might be termed "battlefield intelligence," and I want us to continue to provide support in that area. But there is no substitute for the sort of "strategic intelligence" that can help us find the new battlefields, and maybe even get there first. That is the sort of information that FinCEN’s three programs should mesh together on a continuing basis.

As we re-evaluate our programs, we are focusing on how to continue our emphasis on prevention and awareness-raising while at the same time directing more resources at our civil enforcement program to ensure the adequacy of programs throughout the financial services community.

On the law enforcement side of the equation, FinCEN has expanded its network of federal agencies to now include partnerships at state and local levels, and we are now working to find ways to employ our analytical and technical expertise to strengthen our existing programs serving this broad mix of the law enforcement community. Our intent is to find a responsive mechanism/system to support their investigative needs.

And finally, in recognition of the increasingly paramount need to bring greater global awareness and cooperation to the fight against money laundering, we are focusing on how to leverage FinCEN’s expertise and leadership in the international arena.

We have addressed many of these issues as we discussed our programs with you today. But I want to leave you with one very important point--FinCEN will always be evaluating its effort. In the changing world of financial services and anti-money laundering programs, flexibility and re-assessment are imperative.

I welcome your interest in working with us to resolve those issues, and I would be pleased to answer the Committee’s questions. Again, the support and interest the Committee continues to show in the role we are playing to combat money laundering is gratifying and we commend you, Chairman Bachus, for your outstanding leadership and knowledge about this complex issue.




E-mail Updates

Sign up to get e-mail updates from the Committee

Committee on Financial Services  •  2129 Rayburn House Office Building  •  Washington, DC 20515  •  (202) 225-7502
For Press Inquiries: (202) 226-0471