By John A. Cassara
November 1, 2011
Financial intelligence is one of the strongest weapons against terrorist and drug networks, but agencies must keep up with the changing threat.
This year is noteworthy for more than the 10th anniversary of the Sept. 11, 2001, terrorist attacks. Forty years ago, President Nixon declared a war on drugs. What do the two dates have in common? Arguably the most important countermeasure against both terrorism and narcotics trafficking-financial intelligence.
Most criminal activity is about greed, i.e. money. To help criminal investigators follow the money, Congress in 1970 passed a series of laws and regulations collectively known as the Bank Secrecy Act. "Secrecy" is a misnomer, however. A better term is "financial transparency" or "financial intelligence."
The data that emerged quickly proved its worth, helping combat money laundering related to narcotics and many other crimes. In 1990, Congress' confidence in financial intelligence was further evidenced by the creation of the Financial Crimes Enforcement Network, or FinCEN, at the Treasury Department. FinCEN's mandate was to collect, analyze and disseminate financial intelligence to more effectively support law enforcement.
Long before the idea of breaking down bureaucratic walls became popular, FinCEN was sharing financial intelligence with non-Treasury agents at the federal, state, local and, increasingly, international levels. FinCEN also is a network, a link among law enforcement, financial and regulatory organizations. Subsequently, Treasury gave the agency responsibility for enforcing the Bank Secrecy Act.
Approximately 16 million to 18 million pieces of financial intelligence are filed with FinCEN each year, many of which include names, addresses, account numbers and other identifiers used to root out criminal activity. Currency transaction reports filed with FinCEN for cash deposits or withdrawals of $10,000 or more have approximately 150 data fields. Similar reports are filed for cross-border transport of cash or assets and large business transactions at places such as car dealerships, real estate agencies, jewelers and precious metals dealers.
Particularly during the war on drugs, bankers were considered the first line of defense against money launderers.
Bankers are supposed to know their customers. If they sense a customer's activity is inappropriate, they file a suspicious activity report. In addition to identifying information, the reports often contain narratives that detail suspicious activity. FinCEN receives around 1 million SARs annually, about half of which are generated from banks and half from money service businesses.
Most financial intelligence is used reactively. A criminal investigator or analyst assigned to solve a crime queries the financial databases seeking information that could prove useful, including information about a subject's assets. While financial intelligence by itself does not generally solve a crime, it often buttresses other investigative techniques, such as interviews, informants, surveillance and undercover operations.
But analysis of financial intelligence also can be proactive when crime has not yet occurred. In such cases, law enforcement officials examine data to identify anomalies, patterns and trends to intercept or prevent criminal activity.
Analytics add value to financial intelligence by combining it with other databases, including criminal records, immigration records, trade data, commercially available business information and social networks. Connections spotted between individuals, companies, bank accounts and other links, can uncover suspicious financial relationships and money flows, expanding the money trail.
Financial reporting was originally intended to detect large amounts of dirty money related to the war on drugs, and it has helped uncover terror activity in the United States and overseas. It is difficult to detect the small amounts of money used to finance terrorism. A plot in the Arabian Peninsula to send explosive devices to the United States in a printer, mobile phones and other air freight cost about $4,500. When the scheme was intercepted by authorities, al Qaeda in the Arabian Peninsula proclaimed, "It is such a good bargain for us to spread fear among the enemy and keep him on his toes in exchange for a few months' work and a few thousand dollars."
In another recent attempt, the Pakistani Taliban used an underground money transfer system-a crack in U.S. countermeasures-to finance an attempted bombing in New York's Times Square. That operation cost approximately $12,000.
The Way Forward
Criminal and terrorist methodologies have evolved during the past 40 years. Law enforcement and intelligence communities need to do a better job of recognizing new threats and developing innovative countermeasures.
FinCEN and other government entities must employ state-of-the art analytics to effectively exploit financial intelligence. Advanced analytics help identify anomalies, outliers, typical versus atypical behavior and patterns, and apply early-warning detection, predictive modeling, data integration, entity resolution, sentiment analysis and social media analytics. And industries must develop robust programs to comply with Treasury's financial reporting mandates. Adversaries, criminal methodologies and threats do not remain static. They shift and change, yet money will remain the essential ingredient in crime and terror. Successfully collecting, analyzing and disseminating financial intelligence will be their nemesis.
John A. Cassara spent more than 25 years as an intelligence officer and Treasury Department special agent and is author of several books on money laundering and terror finance. He also is an industry adviser to SAS Federal LLC.
By John A. Cassara
November 1, 2011