CATF Reports Oct. 1, 2015, 12:59pm


Late in the 1990s, Colombian narcotrafficking - which fed the domestic “crack” cocaine epidemic - reached crisis proportions. In response, the CIA created a new analytic Counter Narcotics Center and the Drug Czar and FBI established their own capability in the National Drug Intelligence Center. Throughout the government, a definite premium was placed on new data mining and analytic protocols to sift through and make sense of collected intelligence. Not to be outdone, the Treasury Department responded with a program to analyze and share Currency Transaction Reports (CTRs) filled out by bank personnel when cash transactions exceeded a $10,000 threshold.

To crunch through the thousands of CTR’s completed monthly, Treasury created its version of a model analytic center: the Financial Crimes Enforcement Network (FinCEN). It provided a clearinghouse on money laundering and other financial crimes mainly tied to drug trafficking, by enlisting compliant institutions that were parties to the very bank transactions they were reporting—and which impacted customers who just might be up to their necks in criminal activity. Needless to say, Treasury’s CTR program initially met with mixed success. However, augmented by FinCEN’s strong direction the initiative was regarded as a promising start.

Convinced the CTR database contained numerous indicators of money laundering, FinCEN applied artificial intelligence tools to snag questionable CTRs for closer scrutiny. Later, FinCEN transferred the onus of plucking probable laundering transactions from software analytics to a specially prepared Suspicious Transaction Report (STR) form completed by wary bank personnel, many of whom were prior investigators and auditors. Later, the form became known as a Suspicious Activity Report (or SAR).

Other vigilant nations soon began to replicate FinCEN’s suspicious reporting initiative—most notably Australia’s AUSTRAC. Thus emerged a fledgling international program to combat money laundering through a new type of financial watchdog; one centrally dependent on banks to report customers believed engaged in questionable transactions.

Eventually, agencies modeled after FinCEN became labeled Financial Intelligence Units (FIUs) because nations’ new databases of suspicious financial transactions were regarded as financial intelligence. Although the FIU movement was a response to 1980’s narcotrafficking, motivations for establishing FIUs soon expanded to all modes of laundering that involved financial institutions and helped conceal a myriad of other, often non-drug crimes. By the early 1990s, FIUs were fully operational in several Western nations but their creation was still viewed as a country-driven reform that responded more to the loss of confidence in the nation’s banking system than underlying criminal activity that led to the crisis of confidence.

Beginning in 1995, several FIUs began coordinating their efforts in an informal network they named the “Egmont Group” - taking the name of the Belgian the site of the kickoff meeting at the Egmont-Arenberg Palace in Brussels. One of the Egmont Group’s most important actions was the standard definition of an FIU:

"A central, national agency responsible for receiving (and, as permitted, requesting), analyzing and disseminating to the competent authorities, disclosures of financial information: (i) concerning suspected proceeds of crime and potential financing of terrorism, or (ii) required by national legislation or regulation, in order to counter money laundering and terrorism financing."

Today, the Egmont Group of FIUs meets periodically to identify steps to promote the development and improvement of FIUs and to cooperate on such key issues as information exchange across its 151 members, specialized training, and the sharing of lessons learned. The group is structured as a confederation with central information sharing secretariat and a self-financing fee structure determined by member nation economic and other data.

As money laundering schemes have evolved and become more challenging to detect and combat, the Egmont Group has published a series of special reports. The issue of terrorist finance is an excellent example of the group’s capacity for embracing new challenges and reconstituting its core mission. Today, the Egmont Group acts as a multinational leader in the fight against terrorist finance and the general financial scourge of money laundering.    

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