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Financial intelligence (FININT) is the gathering of information about the financial affairs of entities of interest, to understand their nature and capabilities, and predict their intentions. Generally the term applies in the context of law enforcement and related activities.
- 1 Financial intelligence collection
- 2 United States examples
- 3 Financial intelligence analysis
- 4 Financial intelligence organizations
- 5 Terrorist financing scenarios
- 6 FIU.NET
- 7 References
Financial intelligence collection
One of the main purposes of FININT is to identify financial transactions that involve tax evasion, money laundering or some other criminal activity, which involves transferring undeclared money or other funds, some of which may be proceeds of crime or tax evasion. FININT may also be involved in identifying financing of criminal and terrorist organisations. However, most financial transactions do not involve tax evasion, money laundering or arise from criminal activity.
FININT involves scrutinizing a large volume of transactional data, usually provided by banks as part of regulatory requirements. Transactions made by certain individuals or entities may be studied. Alternatively, data mining or datamatching techniques may be employed to identify persons potentially engaged in a particular activity.
Where financial institutions are required to make manual reports of certain financial transactions, obtaining this information is a type of HUMINT, just as the reports of military police in a combat zone is HUMINT. Not all HUMINT comes from espionage. Many industrialized countries have such reporting requirements.
It may be possible for the FININT organization to obtain access to raw data at a financial organization. From the collection standpoint, if the data are in computer-readable format, this is a type of SIGINT. From a legal standpoint, this type of collection can be quite complex. For example, the CIA obtained access to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) data streams, but this violated Belgian privacy law.
Reporting requirements do not affect Informal value transfer systems (IVTS),  the use of which may simply be customary in a culture, and of amounts that would not require reporting if in a conventional financial institution. IVTS also can be used for criminal purposes of avoiding oversight.
United States examples
The United States has different organizations focused on domestic and international financial activity. The United States has several laws requiring the reporting to the FinCEN. These include the Right to Financial Privacy Act (RFPA) of 1978, the Bank Secrecy Act of 1970 (and other names of revisions), and the Gramm–Leach–Bliley Act of 1999 (GLBA). Some reports also need to go to the Securities and Exchange Commission.
For example, the reports
|Report and definition||Authority||Receiving Agency|
|Currency Transaction Report (CTR). Cash transactions in excess of $10,000 during the same business day. The amount over $10,000 can be either from one transaction or a combination of cash transactions.||Bank Secrecy Act||Internal Revenue Service|
|Negotiable Instrument Log (NIL). Cash purchases of negotiable instruments (e.g., money orders, cashiers checks, travelers cheques) having a face value of $3,000, or more.||Bank Secrecy Act||Internal Revenue Service|
|Suspicious Activity Report (SAR). Any cash transaction where the customer seems to be trying to avoid BSA reporting requirements (e.g., CTR, NIL). A SAR must also be filed if the customer's actions indicate that s/he is laundering money or otherwise violating federal criminal law. The customer must not know that a SAR is being filed.||Bank Secrecy Act||Financial Crimes Enforcement Network|
Actions that can trigger an SAR being filed include:
- Any kind of insider abuse of a financial institution, involving any amount;
- Federal crimes against, or involving transactions conducted through, a financial institution that the financial institution detects and that involve at least $5,000 if a suspect can be identified, or at least $25,000 regardless of whether a suspect can be identified;
- Transactions of at least $5,000 that the institution knows, suspects, or has reason to suspect involve funds from illegal activities or are structured to attempt to hide those funds;
- Transactions of at least $5,000 that the institution knows, suspects or has reason to suspect are designed to evade any regulations promulgated under the Bankruptcy Secrecy Act; or
- Transactions of at least $5,000 that the institution knows, suspects, or has reason to suspect have no business or apparent lawful purpose or are not the sort in which the particular customer would normally be expected to engage and for which the institution knows of no reasonable explanation after due investigation. The language of the RFPA indicates that a SAR filed under this rule comes from an individual transaction, not a profile of activities that make the transaction stand out.
International financial activity comes primarily from the Department of the Treasury and the Central Intelligence Agency. See CIA access to the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
US domestic FININT
At the highest level, US domestic FININT, and also some international work, comes under the Under Secretary of the Treasury for Terrorism and Financial Intelligence, heading the Office of Terrorism and Financial Analysis, including:
- Financial Crimes Enforcement Network: tracks domestic transactions
- Office of Foreign Assets Control: focused on foreign assets in the US
- Office of Intelligence and Analysis
Information developed by these units, when related to domestic security and especially when state and local law enforcement, is disseminated by the Office of Intelligence and Analysis (OIA) in the United States Department of Homeland Security, under the Under Secretary of Homeland Security for Intelligence and Analysis. This Office is not restricted to FININT, but handles collection, analysis and fusion of intelligence throughout the entire Department. It disseminates intelligence throughout the Department, to the other members of the United States Intelligence Community, and to affected first responders at the state and local level.
Depending on the specific Federal violation, law enforcement investigation may be under agencies including the Federal Bureau of Investigation, United States Secret Service, or the Internal Revenue Service.
Financial intelligence analysis
Examples of financial intelligence analysis could include:
- Identifying high-risk housing tenants on the basis of past rental histories.
- Deterring tax payers trying to avoid their fiduciary obligations by moving wealth surreptitiously out of a tax-levying jurisdiction.
- Discovering safe havens where criminals park the proceeds of crime.
- Accounting for how a large sum of money handed to a targeted individual disappears
- Checking to see if a corrupt individual has had any sudden and unexplained windfalls.
- Detecting relationships between terrorist cells through remittances.
Financial intelligence organizations
Government organizations may simply receive and process raw financial reports, and forward them, as appropriate, to law enforcement and/or intelligence agencies, include the multinational Egmont Group of Financial Intelligence Units, and national organizations, including:
- Argentina – Unidad de Inteligencia Financiera
- Australia – AUSTRAC
- Brazil – COAF Conselho de Controle de Atividade Financeira
- Canada – FINTRAC
- France – Tracfin
- India – Financial Intelligence Unit (FIU-IND) Financial Intelligence Unit (India)
- Ireland – Garda Financial Intelligence Unit
- Turkey – MASAK
- United Kingdom – Serious Organised Crime Agency
- United States – FinCEN
Terrorist financing scenarios
Gems as an untraceable currency and source of income for terrorists
Following the September 11, 2001 attacks an allegation was made in The Wall Street Journal that tanzanite stones were being used as an untraceable currency and source of income for terrorists. This has not since been firmly established. See possible examples.
The custom common in Africa, uncut diamonds tend to be the de facto standard currency of the illicit small arms trade. Diamonds may be easily counted with a uniform valuation per carat to people in places of the world where there are no automated teller machines. An entire briefcase filled with uncut diamonds without the serial numbers found on refined precious metals can be used to make large illicit value transfers. The practice coexists with human trafficking, narcotics, weapons dealing, terrorism, and the evasion of economic sanctions and embargoes.
Front-running the market in a terrorist attack
Another intriguing possibility is that a terrorist might buy stocks which are likely to appreciate in the event of a terrorist attack, such as defense industry stocks, or sell short stocks which are likely to depreciate, such as airlines. This possibility led to many investigations of the financial markets subsequent to the September 11, 2001 attacks.
The Financial Intelligence Unit Network (FIU.NET) is a decentralized computer network providing information exchange between the Financial Intelligence Units (FIUs) of the European Union. According to the Egmont Group of Financial Intelligence Units, FIUs are national centres to collect information on suspicious or unusual financial activity from the financial industry and other entities or professions required to report transactions suspicious of being money laundering or terrorism financing. FIUs are normally not law enforcement agencies; their mission is to process analyze the information received. If sufficient evidence of unlawful activity is found, the matter is passed to the public prosecution. FIU.NET is a decentralized system. There is no central database where the information is collected. All the connected FIUs have their FIU.NET equipment within their own premises and manage their own information. Through FIU.NET the FIUs create bilateral or multilateral cases. Ma3tch (autonomous, anonymous, analysis) is a matching tool within FIU.NET. Ma3tch makes it possible for FIUs to match names in order to find relevant data that is possessed by other connected FIUs. As the data is anonymized, there is no breaching of privacy and data protection rules.
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- United Kingdom
FIU.NET is governed by a Board of Partners (BoP) formed by connected FIUs that have volunteered for a seat. The Board of Partners is chaired by an independent Director.
Daily operation of the system is managed by the FIU.NET Bureau, a project bureau of the Dutch Ministry of Security and Justice, which is the main beneficiary of the FIU.NET project grant. The FIU.NET Bureau is housed in the Europol International Headquarters in The Hague.
- United States Department of the Treasury, Financial Crimes Enforcement Network (March 2003). "Informal Value Transfer Systems, FinCEN Advisory Issue 33" (PDF). FinCEN-2003-33.[dead link]
- Farah, Douglas (2003-10-24). "The Role of Conflict Diamonds and Failed States in the Terrorist Financial Structure". The Watson Institute, Brown University.
- "New Requirement for the Precious Metal, Precious Stone, and Jewel Industries", irs.gov. Archived December 13, 2007 at the Wayback Machine
- "Terrorist trade probe widens: Options buying rose in firms that attack affected", by Robert Manor and Melissa Allison, Chicago Tribune, September 19, 2001
- Georgios A. Antonopoulos, Marc Groenhuijsen, Jackie Harvey, Tijs Kooijmans, Almir Maljevic, Klaus Von Lampe (2011). Usual and Unusual Organising Criminals in Europe and Beyond: Profitable Crimes, from Underworld to Upper World: Liber Amicorum Petrus Van Duyne. Netherlands: Maklu. p. 100. ISBN 978-90-466-0429-8.
- "What is an FIU?". Retrieved 7 July 2013.
- "Fundings". European Commission. European Commission - DG Home Affairs (HOME). Retrieved 7 July 2013.
- "Parties involved". Retrieved 7 July 2013.
- Money laundering and the financing of terrorism: 19th report of session 2008-09, Vol. 2: Evidence. United Kingdom: UK- Parliament; House of Lords - The Stationery Office. 2009. pp. 254–255. ISBN 9780108444692.