This Week in AML

Should FinCEN's Standing in the National Security Apparatus be Enhanced?

This week, Executive Vice President John Byrne, and Creative Director Elliot Berman of the AML RightSource staff talk about the policy paper on improving FinCEN’s role in national security, issued by Global Financial Integrity. John and Elliot discuss the views expressed in the paper and some of GFI’s recommendations to enhance FinCEN to meet the growing national security threat posed by money laundering.


Should FinCEN's Standing in the National Security Apparatus be Enhanced? TRANSCRIPT

Elliot Berman: Hi, John, how are you today?

John Byrne: Hi Elliot, how are you doing - a lot going on both in Washington and beyond with some of the things we've talked about previously. It's been pretty amazing - all the things that are going on. I would just highlight something for folks later on in the month, there's going to be hearing on human trafficking and the financial sector. So that'll be something we'll certainly report on that's coming up in a couple of weeks.

Elliot Berman: Yeah. And that's something that we've done a lot in terms of a webinar and other information. I think it's great to see that [this is] really getting some traction finally, as opposed to just being in the backwater of investigation.

This week, the global financial integrity issued a policy paper related to their recommendations about improving FinCEN’s role in national security. I wonder if you saw that release?

John Byrne: Yeah, and I did, and we had the ability to sit down with their CEO, Tom Cardamone a few weeks ago to talk about the issues that global financial integrity pays attention to, on transparency and corruption.

And I appreciate the way they couch this report. They got a number of AML experts together under what everybody knows as the “Chatham House rules”, which means open discussion, but nothing is attributed to an individual. And they came out with a series of recommendations - not all the recommendations were certainly supported by all members of that roundtable, if you will, but I think it's always useful when organizations put something out to public discourse, especially with the new administration. So I definitely saw it.

FinCEN has been an organization that I've been working with since it began in the late eighties, actually in 1990, I think it was the first year it was in place - it's always been central to the AML world, but there's always been some questions.

“Could they do more?” I think global financial integrity certainly came up with some ideas that are certainly worth talking about.

Elliot Berman: Agreed. And again, the lens that they are putting on this is the whole question of national security. When FinCEN was first formed I think national security was not high on people's list of what it was going to get involved in, but certainly the world has changed substantially since 1990. And so that's the lens. So, my reading is they came up with five recommendations. Do you want to just quickly talk about those and what you think about them?

John Byrne: Sure. So a couple of them are on data collection to create a national anti-money laundering data center. Obviously there's a lot of data that FinCEN does currently collect, but to create the center for advanced data collection, synthesis, that sort of thing, what they're terming a “Manhattan project” to identify, develop, and operationalize state of the art technologies.

I think that's always useful when you're talking about data use, and making it best-in-class, if you will. The one that I think makes a lot of sense is - launch within FinCEN, a national anti-military training center - and that training center would put together knowledge and other educational tools for not just staff, but financial institution, regulators, law enforcement, local state federal prosecutors, and then putting a team together on strategic analysis to look at long-term threats. All that made sense.

The one that I think is pie in the sky is they want to give the FinCEN director a seat on one of the committees, the national security council. I don't have a strong view on that, don't think that's going to happen, but I don't think it's wrong to put something like that out there for debate and comment.

Elliot Berman: Yeah. And I think that one (FinCEN director on committee) in particular is really about raising the stature of them in the national security community, which, a seat at the table as we always talk about can be really important, not only functionally, but optically. So again, I agree with you. It's hard to see the path for that happening in the near term, but I think it's actually a great idea.

So what else caught your eye in the report?

John Byrne:Yeah, so later on the report, they talked about the tactics that we'd get to achieve these changes and things like studies, changing the FinCENs personnel system.

To be accepted from federal civil service for certain levels that makes a lot of sense. You're able then to attract, potentially, future employees that maybe wouldn't have considered government service - that may be because of the pay - probably too simplistic, but I think that's certainly worth looking at the one that.

The two issues quickly that I want to mention is they want to amend section 314b, which is such an important part for the PATRIOT act. The ability to share information between financial institutions - by eliminating the requirement that they [financial institutions] provide notice to treasury before that sharing - I really liked that.

I think sometimes we get too caught up in the process. But another part of it is they said they would want to make information sharing mandatory. My humble opinion, that's not gonna work. It may sound great from the sidelines, but financial institutions are, have had too much experience with, “mandatory requirements that focus more on process than the end game”.

So again, putting that out there for conversation, as a tactic makes sense. I like saying no notice to the treasury before sharing, not so crazy about the idea about mandatory 314b processes. I don't think it's going to happen […]

But again, overall, putting all this out there for debate and conversation with the new administration make a ton of sense.

Elliot Berman: Yeah, I agree. The mandatory information sharing caught my eye as well. You know, a little tongue in cheek, but not entirely - if we're going to do mandatory information sharing, I'd like it to go in phases.

And the first phase would be that government would have a mandate to share with the industry and the community, because that's been an inconsistent kind of thing over the years.

And secondly, I'm also concerned about it because in some ways it feels like we're going to end up with a FI-to-FI SAR reporting regime, which again, based on our history of how smoothly SAR data has moved around and, it's “unshakeable” in current format, just feels like we're going to get a lot of process for not a lot of bang.

John Byrne: So yeah, I agree with that, but good job by global financial integrity. They're active members in this debate and it's always useful, even if there's not agreement on every aspect of this to have more and more conversation on proving the AML infrastructure.

Elliot Berman: Yes. I liked how they did it. And again, if it helps the conversation move forward, then it's a positive.

John Byrne: I agree. Elliot. Thanks again. Stay safe. We'll talk next week. You

Elliot Berman: You too. Have a good weekend.

John Byrne: See ya.

Elliot Berman: Bye bye.