Referenced in our Newsletter Volume 5, Issue 4 - December 2006
Financial Intelligence Units (FIUs)
and governments around the world have stepped up their oversight and regulation of different financial industries.
A fundamental issue being addressed is the compliance of these regulated
institutions to properly, timely, and accurately submit the required information. Recently, in the United States, there
has been a heavy crackdown on different violations including failure to monitor accounts or file reports,
inadequate Anti-Money Laundering (AML) procedures to detect and report suspicious activity, the inability to designate
a compliance officer, and failure to implement a client identification program. The following are examples of some
of the more recent fines imposed:
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| Oppenheimer & Company | US $2.8M |
| ABN AMRO Bank, N.V. | US $80M |
| Israel Discount Bank | US $25M |
| Bank of New York | US $38M |
| Banco de Chile | US $6M |
| Arab Bank Plc | US $24M |
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There have been serious concerns raised throughout financial industries regulated by various governments involved in
AML operations, to remain compliant with respect to the required filings. In fact, a new wave of "defensive" filings
has flooded many FIUs because the institutions want to cover any item that may be of concern. Many of these defensive
filings are not appropriate, but the institutions do not want to be liable for criminal penalties or fines that could
easily reach millions of dollars.
Additionally, in the U.S., due to strict Patriot Act requirements, including Section 312, many financial institutions
are dropping correspondent accounts and private banking clients or even complete industry classes (such as Money
Service Businesses - MSBs) to avoid exposure to compliance or reporting deficiencies. Closing these accounts by the
institutions to prevent these penalties is often based on generic guidelines rather than specific issues, violations,
questionable behaviors, or unusual activity.
This is due in part because MSBs have traditionally been hard to regulate because they are often franchised businesses and
individually receive minimal oversight with respect to their compliance and operations. In fact, there are many MSB
operations that are fully aware of the nature of the illegitimate transactions they conduct; however, these monies also
represent a primary revenue stream for the franchise. Therefore, they are easy to corrupt with large tips (kickbacks) to
the tellers who turn a blind eye to the multiple driver licenses presented, large frequency of transactions, or excessive
dollar amounts conducted by the perpetrators. MSBs have traditionally represented a less stringent and more effective
vehicle by which to launder money.
As Law Enforcement strives to tighten their grip on the flow of illegal currency, criminals continue to look for ways
of moving their ill-gotten gains. Knowing that MSBs are often favored by certain types of criminals, a proactive
investigation was started by an FIU looking for a specific pattern of money movement into towns near an international border.
The case started with two reports and a name (shown in Figure 1) that fit into the pattern of currency flow being
investigated. In this situation, the subject only reported the currency after being questioned by Customs
officials at a port of entry check-point. While the investigators thought this was suspicious, they were unable
to find enough data to continue building their case.
Through VisuaLinks ability to link seemingly unrelated documents and a review of the associated text of the reports (e.g., the narrative), it was determined that there was a pattern of money moving to the same individual from several different states. The subject was providing altered names on the reports but was identified and linked by the associated data found by VisuaLinks (Figures 2 and 3).
The network grew as the case developed. Soon, other reports from states that were not part of the initial proactive targets appeared. The pattern of money-flow was the same even as the scope of the case changed - and the total amount transferred to this person now exceeded over $500,000. Essentially, this person was crossing the border (out of country) to collect the money and then came back into the country without declaring it.
Outside sources of data added weight to the case. The information was returned to Customs for a full investigation based on the results presented in Figure 4. It was determined this person was involved in an alien smuggling ring and the money was laundered through a used appliance business.
For additional information on this type of pattern, see our May 2003 issue of the LinkLetter.
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