On December 4th, the Financial Intelligence and Information Sharing (FIIS) Working Group hosted its winter symposium at the American Bar Association in Washington, DC. It was the first event hosted by the Working Group since becoming an element of the American Security Project’s Threat Finance and Financial Intelligence research program. Six speakers presented on a broad range of counter-threat finance and anti-money laundering (CTF/AML) topics to a packed room of experts and practitioners. A brief synopsis of each presentation follows.
Revised FATF Standards. The program kicked off with an update on several changes to the FATF standards. The new standards represent efforts to better facilitate the sharing and integration of threat finance and money laundering (TF/ML) information. Having noted that terrorists are turning to criminal activity to fund operations with increasing frequency, the new standards aim to harmonize the roles of regulators and examiners. This includes a risk-based approach to assessing clientele, geography, and services rendered. However, information sharing remains central to CTF/AML efforts, and domestic Financial Intelligence Units (FIUs) and law enforcement must further develop their capacity for information sharing and coordination on CTF/AML investigations.
Wells Fargo Risk Management. The second presentation illustrated one of the ways in which a private industry actor might approach risk mitigation. Examining Wells Fargo’s risk mitigation practices, the presentation underscored the importance of the private industry in CTF/AML efforts. Financial institutions, such as banks, are ideally positioned to identify and monitor trends or activities that may assist law enforcement in disrupting criminal operations.
Iranian Sanctions Regime. The third presentation provided a review and explanation of existing sanctions against Iran, which have been enacted against the nation due to the continued expansion of its nuclear program.
Russian Banking System. The Russian banking system continues to exhibit several structural weaknesses that make it susceptible to financial crimes. This presentation highlighted the oversupply of banks, the lack of transparency, state involvement in the banking system, and an absence of foreign banks as the primary weaknesses in Russia’s banking sector. However, the Russian government’s movement towards creating a “super regulator” of the industry may assist in tightening regulations while the International Financial Center is expected to improve transparency in the nation’s banking system.
Virtual Currencies. Virtual currency is a growing means of value transfer and presents new investigative challenges for CTF/AML efforts. While many are familiar with peer-to-peer (P2P) decentralized currencies, such as Bitcoin, and precious metals-backed exchanges, game-based currencies and “next generation” payment systems are a growing presence in this field. Exchanging between physical and virtual currencies is becoming easier, and the lack of reporting requirements is an impediment to investigations into suspicious activity.
Shell Companies and Fraud. The final presentation of the day asked the audience to take a step back and remember some of the foundational techniques used in TF/ML. The use of shell companies is among the most widespread practice in TF/ML, yet the number of such organizations remains surprising. Noting that the US is home to the greatest number of shell companies, the presentation highlighted the importance of verifying the beneficial ownership of organizations in addition to locations and activities.
As the the threat from TF/ML evolves and CTF/AML efforts expand, it is critical that investigators do not overlook obvious signposts while examining developing trends. Solid investigative work must continue to look at all aspects of TF/ML; and these efforts would be bolstered by improved information sharing between industry and law enforcement.
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The Financial Intelligence and Information Sharing (FIIS) Working Group is an element of ASP’s Threat Finance and Financial Intelligence program. For further information about the Working Group, or to sign up for its mailing list, the FININT Dispatch, please contact Danielle at firstname.lastname@example.org.