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Why Financial Crime and Anti-Money Laundering Compliance Matters
New technologies give investigators the upper hand in the fight against money laundering and other financial crimes.
The need for financial institutions to monitor transactions and identify suspicious activities has reached a new level of urgency as money laundering, terrorist financing, transcontinental organized crime, and other illicit activities threaten the integrity of banking institutions and global financial security.
In money-laundering schemes alone, there are estimates that between 2%-5% percent (exceeding $2 trillion dollars) of global GDP is laundered each year. This is why adherence to policies like the Bank Secrecy Act (BSA) overseen by the Financial Crimes Enforcement Network (FinCEN) are so important in the fight to protect the principles of our financial marketplaces, and why new technologies like Decision Intelligence and Entity Resolution are playing such a critical role in compiling, understanding, and sharing the data collected.
How FinCEN has helped the AML fight
Expanding the fight against illicit financial activities, the Financial Crimes Enforcement Network (FinCEN) was established in 1990 and has grown to become the U.S. Treasury Department's primary weapon against money laundering. Its mission has steadily expanded over the past 35 years to encompass a broader range of actions to combat financial crimes, terrorist financing, human trafficking, transnational criminal organizations, and crypto-currency crimes.
FinCEN's central role involves administering the Bank Secrecy Act to report on various financial transactions, including:
Currency Transaction Reports (CTRs): Cash transactions exceeding $10,000 must be reported for any deposits or withdrawals – plus other forms (8300 & CMIR) for commercial purchases, payments, or transportation more than $10,000.
Suspicious Activity Reports (SARs): Any activity suspected of being linked to money laundering, illicit funds, proceeds of crime, or other improper financial activity requires reporting.
Foreign Bank and Financial Accounts (FBARs): Individuals with financial interests or oversight in foreign accounts exceeding $10,000 must report this to FinCEN.
In addition to supporting the BSA, FinCEN provides regulatory oversight, ensuring financial institutions comply with established regulations and BSA statutes. FinCEN also develops and implements strategies to prevent terrorist organizations, drug cartels, and state-based actors from compromising financial systems in the US.
Perhaps most important, FinCEN is responsible for disseminating financial intelligence by sharing vital data with law enforcement and intelligence agencies to support investigations into financial crimes. More recently, FinCEN was tasked with overseeing the reporting of beneficial ownership information (BOI), a key step in identifying the true owners of corporations in the fight against shell companies used to launder funds.
Over the years, FinCEN has undergone significant modernization efforts. In 2012, they consolidated various reporting methods into a unified FinCEN Query System (FCQ). This standardized system streamlined data management and facilitated information sharing with law enforcement, task forces, and financial investigative units.
FCQ offers a standardized query interface, via the FinCEN Portal, to seamlessly access BSA data. The system utilizes well-documented formats ensuring data interoperability for supporting analysis by law enforcement agencies. Figure 1 shows a simplified workflow used to access and query the FCQ system.
Figure 1
Technologies’ role in tracing criminal networks
Today, FinCEN oversees 260,000 regulated filers and processes over 55,000 BSA forms daily. Their data repository holds hundreds of millions of records spanning back over a decade. A major challenge is how to facilitate authorized agencies with access to the BSA so they can effectively analyze and utilize it for their specific investigations.
This is where the power of modern technologies utilizing Decision Intelligence (powered by AI) can cut through the clutter to provide a trusted data foundation that, when used with technologies such as Entity Resolution, create dynamically updated, 360-degree views of subjects, suspects, organizations, accounts, addresses, phones, or any referenced entities across all of the data.
Used as an investigative tool, these technologies allow agencies to literally “follow the money” using intuitive visualizations, graph networks, and generative AI techniques. Agencies can visualize entire criminal networks including the key players and influencers, interconnections, commonalities, and money flows to better safeguard the financial marketplace.
