Background

In recent years, crime has become increasingly international in scope and the financial aspects of crime are complex due to the rapidly changing advances in technology. International organized crime is an enormous and multifaceted problem. It is not only a law enforcement problem but a national and international security threat as well.

Many countries around the world already engage in a concerted effort to combat international organized crime. Through the enactment of counter-money laundering laws, bilateral and multilateral agreements, and other cooperative efforts, nations have joined together to foster an international awareness of the seriousness and threat of organized crime and to acknowledge this problem directly. An increasing number of countries have moved to deny criminal enterprises unfettered access to their financial systems. While much progress has been made, and despite all these efforts, there are still nations that have not yet adequately addressed this problem. And the international criminal is taking full advantage; moving vast sums of illicit money through the world's financial systems. International criminals know no geographic boundaries and can still find safe havens in which to hide.

If the United States, along with its international partners and allies, are ultimately going to be successful in this fight, then we must make it even more difficult for criminals. Efforts must focus upon those areas where the criminals are now going and foster cooperation, one way or another, with those nations that, heretofore, have allowed criminal enterprise to flourish unchecked.

The President of the United States, during his address to the United Nations on October 22, 1995, authorized a number of actions which provide an even more aggressive approach to dealing with international criminal organizations. Those countries in which these organizations are now allowed to operate and prosper, unrestricted by counter-money laundering efforts, will be compelled to conform to the international goals established to deal with the issue of international crime. These countries will be held publicly accountable for their role in the common effort to deter international criminal activities. In order to implement his goals, the President is assigning a very high priority to negotiating agreements that ensure governments' compliance with internationally accepted anti-money laundering standards. The Department of the Treasury is coordinating this initiative and working with the Departments of State and Justice, the bank regulators, and the intelligence community to expedite this process.

What is money laundering?

With few exceptions, criminals are motivated by one thing - profit. Greed drives the criminal, and the end result is that illegally-gained money must be introduced into a nation's legitimate financial system. Money laundering involves disguising assets so they can be used without detection of the illegal activity that produced them.

The success of organized crime is based upon its ability to launder money. Through money laundering, the criminal transforms the monetary proceeds derived from criminal activity into funds with a seemingly legal source.

This process has devastating social consequences. For one thing, money laundering provides the fuel for drug dealers, terrorists, arms dealers, and other criminals to operate and expand their operations. Criminals manipulate financial systems in the United States and abroad to further a wide range of illicit activities. Left unchecked, money laundering can erode the integrity of our nation's and the world's financial institutions.

Why is it important?

The profits of crime that creep into the financial systems of the United States and other nations are staggering. In just the United States alone, estimates of the amount of drug profits moving through the financial system have been as high as $100 billion.

Consider the fact that money laundering extends far beyond hiding narcotics profits to include monies tied to crimes ranging from tax fraud to terrorism and arms smuggling adding many additional billions of dollars to the criminals' profits. Criminal activities, without restraint, fundamentally destabilize political and economic reform. As history demonstrates again and again, political stability, democracy and free markets depend on solvent, stable, and honest financial, commercial, and trade systems.

There is now worldwide recognition that we must deal firmly and effectively with increasingly elusive, well financed, and technologically adept criminal organizations. These organizations are determined to use every means available to subvert the financial systems that are the cornerstone of legitimate international commerce. As organized crime develops economic power, it corrupts democratic institutions and undermines free enterprise. Money laundering is now being viewed as the central dilemma in dealing with all forms of international organized crime because financial gain means power. Organized crime is assuming an increasingly significant role that threatens the safety and security of peoples, states and democratic institutions.

How is the Department of the Treasury addressing this problem?

The Treasury Department plays a major role in implementing and directing efforts devoted to combating international organized crime. It strives to advance counter-money laundering measures through prevention, detection and enforcement of financial crime, as well as other international criminal activity.

The Financial Crimes Enforcement Network (FinCEN) is a key component of the U.S. international strategy to combat organized crime. The Department of the Treasury has designated FinCEN as one of the primary agencies to formulate, oversee and implement policies to prevent and detect money laundering, serving as the link between the law enforcement, financial and regulatory communities. Its mission: to provide world leadership in the prevention and detection of the movement of illegally derived money and to empower others by providing them with the tools and the expertise needed to combat financial crime.

FinCEN accomplishes this in several ways. It uses counter-money laundering laws and provides intelligence and analytical case support to its customers: federal, state, local and international investigators and regulators.

As the U.S. continues to implement policies to counter global money laundering efforts, FinCEN has become an international leader in the fight against financial crimes and the corresponding corruption of international economies. FinCEN's unique staffing both reflects and sustains its mission. The majority of its 200 employees are permanent FinCEN personnel, including intelligence analysts and criminal investigators as well as specialists in the financial industry and computer field. In addition, approximately 40 long-term detailees are assigned to FinCEN from 21 different regulatory and law enforcement agencies.

An integral part of FinCEN's role in the international community focuses upon its work and support of the following global initiatives.

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FATF Download Adobe Acrobat Reader to view and print 40 Recommendations

The Financial Action Task Force (FATF) is one of the key organizations that addresses the global problem of money laundering. Formed by the G-7 Economic Summit in 1989, the FATF is comprised of 26 countries, the European Commission and the Gulf Cooperation Council. It is dedicated to promoting the development of effective anti-money laundering controls and enhanced cooperation in counter-money laundering efforts among its membership and around the world.

The cornerstone of the Task Force's work is the promotion of 40 Recommendations designed to provide countries with a blueprint for the establishment and implementation of anti-money laundering laws and programs. On July 1, 1995, then Treasury Under Secretary for Enforcement Ronald K. Noble assumed the presidency of the FATF which rotates annually. FinCEN is serving as the lead agency for coordinating the U.S. role within the FATF. [See also FATF Typologies Exercise: http://jya.com/fatf8.htm] 

Under Mr. Noble's leadership, the FATF is focusing on a thorough review or stocktaking of the 40 Recommendations to ensure their continued applicability in light of constantly changing money laundering methods and the emergence of new technologies and services within the financial services sector. Some of the key proposed modifications to the Recommendations are: to encourage members to extend the offense of money laundering beyond drug related crime to include all serious crime; to encourage mandatory suspicious transaction reporting; and to urge the establishment of effective Know Your Customer programs within the financial services community.

Recognizing the importance of a cooperative relationship with the financial services community in the fight against money laundering, Mr. Noble has held two Financial Services Forums in order to obtain the views of the international financial community regarding the 40 Recommendations and the work of the FATF in general.

As part of the FATF's external relations program, it has encouraged the development of sister organizations such as the Caribbean Financial Action Task Force (CFATF) and the Asian Secretariat proposing an Asian Steering Group be formed for the latter. The FATF has also agreed to hold regional seminars in South Africa and Istanbul (for the Caucasus countries, Russia and Ukraine). Further, the FATF provides a forum for the exchange of information and intelligence on prevailing typologies and trends in money laundering.

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FIU's

The FATF efforts, in part, have resulted in the establishment of Financial Intelligence Units (FIUs) in various countries around the world to protect the banking community, to detect criminal abuse of its financial system and to ensure adherence to its laws against financial crime. FinCEN is one model of an FIU and others exist in such countries as Great Britain, France, Belgium, the Netherlands, Argentina and Australia. As world policy efforts intensify in addressing international crime, the Treasury, State and Justice Departments are assisting with the establishment of FIUs in countries such as Poland, Panama and Ecuador.

Perhaps one of the most significant qualities of the FIUs is that many operate separately from the Justice Ministries in their respective countries. The FIUs have independent and unique relationships with banks, central banks and law enforcement. These relationships allow FIUs to foster the partnerships that are essential to combating money laundering and financial crime. They bridge the private and governmental sectors in an effort to force attention to this problem outside of the narrow bureaucratic thinking of the past.

The rapid evolution of FIUs throughout the world has led to the creation of an organization of nations that have implemented FIUs, known collectively as the Egmont Group. The Group held its initial meeting, co-hosted by the United States and Belgium, in Brussels at the Palais d'Egmont in June 1995. A consensus was reached at that time that improved interaction and communication among FIUs would serve a broad range of common goals in the areas of sharing information, coordinating training and addressing legal issues unique to the FIU phenomenon. A subsequent meeting was held in Paris in November 1995; another meeting, held in April 1996 in San Francisco, hosted by FinCEN and chaired jointly by FinCEN and the Cellule de Traitement des Informations Financieres (CTIF) of Belgium.

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Summit of the Americas

In December 1994, President Clinton hosted the Summit of the Americas in Miami, attended by the Heads of State of 34 nations in the Western Hemisphere. As a result of this conference, the leaders of this hemisphere's democratic nations directed their governments to work on a cooperative plan to counter the growing economic and legal problems of money laundering.

In December 1995, Treasury Secretary Robert E. Rubin chaired a conference in Buenos Aires, Argentina that was attended by Ministers from the 34 Summit of the Americas participating nations. This conference fulfilled the directive set in Miami to promote the effective prevention, detection and investigation of money laundering. The heads of delegation in attendance represented the leaders of Interior, Justice, and Finance Ministries as well as the heads of central banks.

After two days of discussions, the conference produced an agreement that will make it more difficult for international organized crime, including drug traffickers, to profit from their criminal activities. Among other things, the agreement formalizes the member nations' consensus to:

• criminalize the laundering of the proceeds from drug trafficking and other serious crimes;

• promote other laws that allow for the seizure and forfeiture of such proceeds;

• take actions to promote an effective working relationship between financial regulatory authorities and the institutions that they over-see;

• enhance the tools available to law enforcement authorities as they investigate money laundering.

These actions will support initiatives taken by the Organization of American States and CFATF which consists of Caribbean countries and other nations in that region as well as Central America.

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APEC

The Asia Pacific Economic Council (APEC) is a forum designed to facilitate trade and economic development in the region. Countries such as China, Singapore, Hong Kong, Japan, Canada and the U.S. are members of APEC.

At the APEC Finance Ministers meeting in Bali, Indonesia in April 1995, a Joint Ministerial statement noted for the first time the importance of money laundering as a factor that must be considered when looking at regional macroeconomic issues. Specifically, when considering capital flows between APEC nations, governments will take into account that some of this money may come from illegal activity.

In addition, the FATF nations hope that APEC will support the creation of an Asian Financial Action Task Force (AFATF). APEC's endorsement of this organization will build awareness of financial crime issues and would potentially sway new nations to join AFATF. It is imperative to have the cooperation of as many nations as possible in a region in order to thwart money laundering.

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Interpol

Interpol is an international organization established to facilitate information sharing and coordination among nations in worldwide criminal investigative matters. At the 64th session of Interpol's General Assembly held in October 1995, a resolution was unanimously adopted establishing the first major anti-money laundering declaration in the organization's history. This resolution consolidates the ten previous actions of Interpol since 1960 and calls for major legislative reforms by the 170 Interpol member nations.

The adoption of this major money laundering resolution by the member countries illustrates Interpol's commitment to thwarting international financial crimes and their desire to strengthen international cooperation. The resolution recommends that Interpol member countries consider adopting national legislation that would:

• provide for the criminal prosecution of persons who knowingly participate in the laundering of proceeds derived from serious criminal activity;

• allow for the seizure of property, with sufficient legal investigative authority for law enforcement officials to identify, trace and freeze assets derived from illicit activities;

• allow for reporting of unusual or suspect currency or other transactions by banks and other financial institutions, to appropriate officials who would have authority to conduct further investigative inquiries;

• require financial institutions to maintain, at least for five years after the conclusion of the transaction, all necessary records on transactions, both domestic and international, in order to enable member countries to properly investigate money laundering, and to enhance international cooperation by enabling member countries to respond to requests from authorities in other countries for such records;

• allow for the expeditious extradition of individuals charged with money laundering offenses.

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