We will never have enough law enforcement professionals, particularly those skilled in complex money laundering and financial crimes investigations.  Technology has to be our force multiplier.

Unfortunately, while the federal government is slowly beginning to incorporate some advanced analytical capabilities, it lags far behind in its deployment of commercially available and viable technologies.   Compared with the high levels associated with human resource staffing, technology does not cost that much.  So for Step 6 in my series of steps of what is necessary to meet the the challenges of financial crimes, I believe we must start moving aggressively to incorporate advanced analytics at the federal, state, and local law enforcement levels.

Over the last few years, there have been tremendous advances in the amount of data collected and available for analysis. 

Just a few examples include financial, trade, transport, and travel data. Communications and social networking are growing exponentially. Industry calls these record sets of information, "big data."  I will not discuss the collection of classified data. Concurrently, there have been major advances in data mining and advanced analytical capabilities that can help organizations derive the “intelligence” from vast data sets.  Data warehousing and retrieval are enhanced by cutting edge technologies that search,  mine, analyze, link, and detect anomalies, suspicious behaviors, and related or interconnected activities and people.  Fraud frameworks can be deployed to help concerned government agencies and departments detect suspicious activity using scoring engines that can both rate, with high degrees of statistical accuracy, behaviors that warrant further investigation while generating alerts when something of importance changes.  Predictive analytics use elements involved in a successful case or investigation and overlays these elements on  other data sets to detect previously unknown behaviors or activities, enhancing and expanding an investigator’s knowledge and efforts while more  effectively deploying resources. Social network analytics helps investigators detect and prevent criminal activity by going beyond individual transactions to analyze all related activities in various mediums and networks uncovering previously unknown relationships.  Visual analytics is a high-performance, in-memory solution for exploring massive amounts of data very quickly. It enables users to spot patterns, identify opportunities for further analysis and convey visual results via Web reports or the iPad.  Moreover, it is now possible to engineer "red flag indicators" in financial reports - both within the government and in commercial enterprises that file the information - that will identify likely suspect methodologies such a hawala or trade-based  money laundering.  

I’m not a technical person.  But I do know that the above examples are great tools that are available NOW.

Years ago, when I was a criminal investigator for U.S. Customs/Treasury assigned to the American Embassy in Rome I worked a long-term complex international money laundering case.  The investigation had ties to the Middle East, Europe, and the United States.  It involved the misuse of the international gold trade to launder staggering amounts of drug money.  I spent two years of my life working the case.  I developed an incredible amount of intelligence, recruited numerous sources in multiple countries, coordinated investigations with international police forces, learned a great deal about trade-based money laundering, etc. and finally had enough information to present the case for prosecution to the U.S. Department of Justice in Washington, D.C.   They liked the case but declined prosecution. It was extremely difficult to prove the nexus of the predicate offense of trafficking in narcotics to the laundered money and properties in the U.S. and Europe we had identified as the fruits of the criminal activity. 

The end result from management’s perspective was that the case was a tremendous waste of time, money, and resources.  A more practical result from my perspective is that when I was rated for promotion, I had no “stats.”  I had no arrests, convictions, prosecutions, seizures, etc.  These are the bottom line metrics that drive management’s decision making on everything from personnel decisions, investigative priorities, allocation of resources, etc.  I couldn’t compete with my colleagues assigned, for example,  to the southwest border that could get multiple “bag and tag” arrests and multiple “stats” which look good before the promotion boards.

The above exemplifies many of the current problems we face today.  There is an expression in law enforcement management circles; “Big cases equal big problems.”  Although everybody wants big, headline-grabbing, impact, game-changing investigations and prosecutions, most managers feel the headaches aren’t worth it.  They opt instead for smaller, routine, insignificant, cases where they can harvest statistics that make themselves appear productive. In short, they play it safe.  This also contributes to our “stalled” efforts to combat money laundering and contributes to the lack of “imagination” that has proved detrimental in our war against terror finance.  This will be increasingly important in the coming years as we are hard pressed to keep pace with new and evolving money laundering methodologies. 

This management syndrome can and should be changed.  Our priorities and incentives must change as well. Directives need to come from headquarters that encourage “impact cases.”  (See the article I wrote a number of years ago, “Where Have the Impact Cases Gone.”)   Stats should be weighted to reward those who pursue long-term, difficult investigations that, unfortunately, sometimes do not bear fruit but maybe result in excellent information. Congress can get involved by allocating funds towards the development of complex, financial crimes investigations.  And then, they should hold the agencies and departments responsible for delivering (see step two in this series on “accountability”). 

In the rush to react to the events surrounding September 11, politicians from both parties scrambled to create the Department of Homeland Security. Since then, problems at DHS have been widely chronicled, and the behemoth department has not lived up to its initial billing. This has been particularly true in combating international money laundering and its inverse partner terrorist finance. 

When DHS was formed, Treasury’s proud enforcement arm was gutted.  The U.S. Customs Service (created in 1789) and the Secret Service (established in 1865) were transferred to Homeland Security, and the Bureau of Alcohol Tobacco and Firearms was shifted to the Justice Department.

The FBI, within the DOJ, is very good at financial crimes; i.e., catching white collar criminals and bank robbers.  The DEA, also within DOJ, only pursues money laundering relating to narcotics.  DHS is pulled by conflicting priorities.  The current dearth of successful money laundering prosecutions, impact cases, seizures and forfeitures, etc. demonstrate that the current situation is not working.

Yet the Treasury Department by definition focuses on financial matters.  This includes international money laundering and value transfer, which employs trade-based and underground finance networks, and new mobile and cyber payment technologies. These are vitally important issues that have not received the focus they deserve. Moreover, the domestic financial sector views Treasury as its natural government partner, and over the coming years relationships with industry will only grow in importance.

Unfortunately, however, today’s Treasury, minus its enforcement arm, in only able to develop strategies, policies and regulations in the fight against money laundering and terrorist financing. It  lacks the investigative, intelligence, and enforcement resources to implement and enforce those policies. (I am not counting IRS/CID because its priority remains taxes).

I believe the Secret Service and Customs should be brought back to Treasury. Most Secret Service and Homeland Security Investigations agents would jump at the opportunity. If politically unpalatable, the creation of a Global Illicit Financial Team – a type of interagency federal law enforcement task force - should be created as a nimble state-of-the-art financial investigating team operating under the Treasury banner.

Using the resources and authorities that are uniquely Treasury’s -- including the 18 million pieces of intelligence filed each year in its Financial Crimes Enforcement Network, the robust legal tools deployed under the USA PATRIOT Act, criminal sanctions and designations spearheaded by OFAC, domestic and international enforcement and regulatory networks, and financial expertise -- real progress can be made in combating large scale and complex financial crimes. 

A re-attached Treasury enforcement arm would help mitigate some of the failed Washington management syndromes I identified in previous steps such as “group think” and “lack of imagination.”  An enforcement arm would also help right the wrong created when Treasury was castrated for reasons of political expediency after September 11.  Moreover, a new and robust Treasury enforcement capability would pay homage to the legacy and history of a proud Department.  Most importantly, a Treasury enforcement arm would encourage financial enforcement expertise and would re-vitalize our efforts to combat international money laundering and other financial crimes. 

There is a dirty little secret in Washington that directly impacts our “stalled” war on money laundering and terrorist finance.  At the very highest levels, there is a revolving door between high level personnel at the Department of Justice, Department of Treasury, and the private sector.

Since the time of the dismantlement of  the enforcement arm of Treasury and the corresponding creation of the Department of Homeland Security, Department of Justice officials have taken some of the highest positions at Treasury including TFI, FinCEN, and OFAC.  After serving time at Treasury, many then leave for lucrative positions in the private sector.

While some think this is business as usual in Washington, I believe this incestuous relationship has serious consequences.

DOJ officials populating the Treasury management team bring DOJ's  way of thinking, outlook, and methods of doing business with them.  Most are attorneys.  They have a misplaced faith in laws, rules, regulations, sanctions, designations and other legal and procedural maneuvers that have been increasingly employed to combat financial crimes and terror finance.  This is not the space to debate the efficacy of these actions but I will say that in my opinion they have been over emphasized. Simply put, it is sometimes difficult for our legalistic policymakers to understand that much of the rest of the world does not operate by our rule of law.  Our adversaries are adroit at going around legalistic “counter-measures.”

Another consequence of the DOJ influence on Treasury is that it exacerbates the Washington management syndrome of “group think.”   Treasury should bring to the interagency and interdepartmental table its unique skillsets, expertise, and insights.  Today, for the most part, that’s gone. The incestuous DOJ/Treasury relationship breeds the same way of looking at a problem and the same worn “solutions.”

The real kicker is that when some of these same officials leave Treasury they land jobs in the private sector, particularly the financial services industry. Why does this matter?   There are ethics issues.  There are appearance issues. And there are “old boy” network issues.

Earlier this year a major bank received a comparative slap on the wrist settlement for turning a blind eye and laundering billions of dollars of drug money.  There were also other serious crimes.  Yet not one bank official was held accountable. (Meanwhile some low-level drug users face mandatory prison sentences).  The individual that played a large role in negotiating the bank settlement used to work at Justice.  He then worked at Treasury at a very senior level.  One-and-a-half years before the record settlement was announced, the former government official started to work at the subject bank in the office of General Counsel.

This is probably the most egregious example but it is not an isolated incident. As a proud former Treasury employee, I’m embarrassed. 

Unless this kind of behavior is changed, it will continue to be business as usual. Congressional oversight committees, the concerned cabinet secretaries, and departmental chief counsels must get involved.  The next steps in my seven step plan will suggest other steps to reinvigorate our "stalled" efforts to combat money laundering and terror finance.