President Bush toured Wednesday what he called “the front line of our war”: “a collection of cubicles and computers at the offices of the Financial Crimes Enforcement Network,” the Washington Post reports. What is the Financial Crimes Enforcement Network, or FinCEN, and what does it do?
FinCEN was established in 1990 as the financial-intelligence gathering arm of the U.S. Treasury as part of the fight against money laundering and other financial crimes. It employs fewer than 200 people, with an expected budget of $46 million for fiscal 2002 (though that’s double its budget for fiscal 1997). Under the Bank Secrecy Act, FinCEN requires financial institutions to preserve financial paper trails behind transactions and to report suspicious transactions to FinCEN for its database.
FinCEN matches its database with commercial databases such as Lexis/Nexis and the government’s law enforcement databases, allowing it to search for links among individuals, banks, and bank accounts. FinCEN doesn’t actually conduct investigations on its own, though. Instead it supports local, state, and federal law enforcement agencies with information and leads for ongoing criminal investigations. FinCEN also analyzes its databases for trends and patterns in order to provide strategic “big picture” reports, and it coordinates its efforts with financial intelligence units in 58 other countries.
What kind of reports do banks file with FinCEN? The two most important are currency transaction reports and suspicious activity reports. A currency transaction report must be filed for each deposit, withdrawal, exchange of currency, or other payment or transfer of more than $10,000. Banks file about 13 million CTRs every year. A suspicious activity report must be filed for a variety of activities in excess of $5,000, including check fraud, check kiting, credit card fraud, and loan fraud. (Another example: Attempting to avoid a CTR by making multiple transactions of just less than $10,000 is known as “structuring” and should trigger an SAR.)
Banks have been required to file SARs since April 1996. Last year, roughly 162,000 were filed, and nearly 60,000 were filed through April 2001. SARs rankle privacy advocates and civil liberties organizations, particularly because under the Bank Secrecy Act banks are not allowed to tell their customers when they file SARs.
Money service institutions such as Western Union (and the informal exchanges known as hawala) will be required to register with FinCEN at the end of this year. They will be required to file CTRs and SARs in spring 2002, though a specific date has not been set yet.