MONEY LAUNDERING THREAT ASSESSMENT WORKING GROUP Department of the Treasury Office of Terrorism and Financial Intelligence (TFI) • Office of Terrorist Financing & Financial Crime (TFFC) • Financial Crimes Enforcement Network (FinCEN) • Office of Intelligence and Analysis (OIA) • Office of Foreign Assets Control (OFAC) • Executive Office for Asset Forfeiture (TEOAF) Internal Revenue Service (IRS) • Criminal Investigation (CI) • Small Business/Self Employed Division (SB/SE) Department of Justice Federal Bureau of Investigation (FBI) Drug Enforcement Administration (DEA) Criminal Division • Asset Forfeiture Money Laundering Section (AFMLS) National Drug Intelligence Center (NDIC) Organized Crime Drug Enforcement Task Force (OCDETF) Department of Homeland Security Immigration and Customs Enforcement (ICE) Customs and Border Protection (CBP) Board of Governors of the Federal Reserve System United States Postal Service (USPS) United States Postal Inspection Service (USPIS) U. S. Money Laundering Threat Assessment December 2005 TABLE OF CONTENTS MONEY LAUNDERING THREAT ASSESSMENT Introduction ........................................................................................................................................i Banking ................................................................................................................................................ 1 Money Services Businesses ....................................................................................................... 7 Money Transmitters............................................................................................................ 11 Check Cashers ...................................................................................................................... 14 Currency Exchangers ......................................................................................................... 15 Money Orders ........................................................................................................................ 17 Stored Value Cards ............................................................................................................. 20 Online Payment Systems ........................................................................................................... 25 Informal Value Transfer Systems .......................................................................................... 29 Bulk Cash Smuggling ................................................................................................................... 33 Trade-Based Money Laundering ........................................................................................... 41 Insurance Companies .................................................................................................................. 45 Shell Companies And Trusts .................................................................................................... 47 Casinos ................................................................................................................................................ 51 Appendices (A) NDIC Analysis ................................................................................................................. 57 (B) FinCEN Analysis ............................................................................................................. 59 (C) Bank Secrecy Act Reports .......................................................................................... 69 (D) Status of BSA Regulations for Financial Institutions ...................................... 71 INTRODUCTION in both systemic and applied anti-money laundering INTRODUCTION (AML) efforts. Most encouraging are interagency ini- tiatives and task forces that, when properly coordinated, bring the talents, expertise, and resources of multiple he 2005 Money Laundering Threat Assessment agencies to bear on a problem to great effect. With so (MLTA) is the first government-wide analysis of T many agencies looking at distinct but related aspects of money laundering in the United States. The report is this issue, it is critical that information be shared freely the product of an interagency working group composed and studied jointly. Highlighted below are some notable of experts from the spectrum of U.S. Government agen- examples of recent U.S. agency advances in organiza- cies, bureaus, and offices that study and combat money tion, analysis, and execution in the fight against money laundering. The purpose of the MLTA is to help policy laundering: makers, regulators, and the law enforcement community better understand the landscape of money laundering in U.S. Immigration and Customs Enforcement (ICE), has the United States and to support strategic planning ef- introduced many new initiatives aimed at analyzing and forts to combat money laundering. combating the movement of illicit funds by bulk cash smuggling, trade-based money laundering, courier hubs, The working group synthesized law enforcement sta- money services businesses (MSBs), charities, and alter- tistics and observations, regulatory data (such as Bank native remittance systems. These initiatives include: Secrecy Act filings), private sector studies, and public information to assess the vulnerabilities that allow crim- • Operation Cornerstone, founded in 2003 – a private inals to launder money through particular money laun- industry partnership and aggressive outreach dering methods or conduits. program; The MLTA offers a detailed analysis of thirteen money • A Trade Transparency Unit (TTU) aimed at laundering methods, ranging from well-established tech- identifying anomalies related to cross-border trade niques for integrating dirty money into the financial sys- indicative of money laundering; tem to modern innovations that exploit global payment networks as well as the Internet. Each chapter focuses • A multi-agency approach (in partnership with on a specific money laundering method and provides a Internal Revenue Service – Criminal Investigation brief overview of the methodology, an assessment of (IRS-CI), FinCEN, and the Federal Bureau of vulnerabilities – including geographic or other noted Investigation (FBI)) to target unlicensed MSBs; concentrations – and the regulatory/public policy back- and drop. • A Foreign Political Corruption Task Force in While not exhaustive, the assessment consolidates a tre- Miami to address foreign public corruption and mendous amount of information and insight contributed related money laundering. by the various participating agencies as to the major methods of money laundering that they confront. The With respect to bulk cash smuggling in particular, ICE overall picture is both sobering and promising. The is: volume of dirty money circulating through the United States is undeniably vast and criminals are enjoying • Working with Customs and Border Protection (CBP) new advantages with globalization and the advent of to share training and expertise with the Mexican new financial services such as stored value cards and government as to how to execute successful bulk online payment systems. At the same time, there has cash smuggling interdiction operations; been considerable progress. The approach of U.S. law enforcement and regulatory agencies has undergone a • Providing training in bulk cash smuggling sea change over the past decade, such that money laun- interdiction to 28 developing countries in the dering is now treated as an independent and primary fo- Middle East, South America, Africa, and Asia, in cus across all relevant agencies. With this change in concert with CBP and the State Department; and approach and focus have come marked improvements I N T R O D U C T I O N i INTRODUCTION • Conducting training in bulk cash smuggling within various inter-agency task forces and centers. interdiction, funded by the Executive Office for IRS-CI also has 41 active Suspicious Activity Report Organized Crime Drug Enforcement Task Forces Review Teams (SAR-RT) reviewing and analyzing (OCDETF), in seven major cities throughout the SAR data for case development and support throughout United States, attended by federal, state and local the country. Recently-acquired “data mining” software law enforcement. is improving the ability of IRS-CI’s investigators and analysts to make connections and identify patterns in the The FBI is working to develop advanced technologies SAR data. to exploit Suspicious Activity Reports (SARs) and other Bank Secrecy Act (BSA) data from FinCEN by using On the civil side, the IRS established a new organization computer software to visualize financial patterns, link within its Small Business/Self-employed (SB/SE) Divi- distinct criminal activities, and display the activity in sion, the Office of Fraud/BSA, which has end-to-end link analysis charts. The FBI is also implementing a accountability for BSA oversight of certain non-bank next-generation electronic file management system that financial institutions. There are over 300 examiners will help manage investigative, administrative, and in- and managers who are fully trained and dedicated full- telligence needs while also improving ways to encour- time to the BSA program. The IRS has also completed age information sharing with other agencies. a model Federal/State Memorandum of Understanding which provides both IRS and the participating state the The Administrator of the Drug Enforcement Administra- opportunity to leverage resources for BSA examina- tion (DEA) issued a directive in 2003 restoring