When money moves

Treasury, IRS use analytical software to spot patterns on the money trail

When a suburban Virginia resident began transferring money to Taliban-controlled Afghanistan immediately after Sept. 11, 2001, federal agents took notice, and began tracking the pattern and destinations of his wire transfers.

Last year, the man, Rahim Bariek, was convicted of receiving and transferring'without a license'about $5 million to Iran, Pakistan and Afghanistan, said IRS-Criminal Investigation officials.

Investigators couldn't have broken this case, or other similar ones, without robust applications that analyze trends and patterns in large amounts of financial data.
The type of data agencies require from banks and other financial institutions under the Bank Secrecy Act hasn't changed, but the volume has increased because Congress has required more industries to provide information.

Investigating agencies, such as the Treasury Department's Financial Crimes Enforcement Network and IRS-CI, use analytic software that can dig deeper and more broadly through the sea of data to discern patterns of money laundering and terror financing.

Like a digital bloodhound, analytic software picks up trails of data left by money launderers and terrorism financiers in their transactions. The financial activities may appear lawful until analysts combine that information with other data.

'The volume of dirty money circulating through the United States is undeniably vast, and criminals are enjoying new advantages with globalization and the advent of new financial services such as stored-value cards and online payment systems,' said a recent Treasury report.

Treasury found in the first governmentwide assessment of the threat of money laundering and terrorism financing that agencies need to collect better data more consistently.

With these tools, that is what FinCEN and IRS-CI are doing.

Visual Analytics Inc. of Pooles- ville, Md., which provides analytic software for FinCEN and IRS-CI, is improving what it can extract from the integration of databases. The applications combine, sort, query and represent data in different ways to reveal patterns of illegal activity.

Beating perfection

'Even if we come up with the perfect rule to expose the perfect pattern, they [money launderers and terrorists] are going to change, and we have to be adaptive enough to recognize that and be able to act on it,' said Visual Analytics CEO Christopher Westphal.

Visual Analytics plans by May to add business intelligence management dashboards to its Digital Information Gateway, so a CIO could see what's happening through a system down to the analyst level and look at specific transactions. This summer, the company plans to add more collaboration, watch lists and fuzzy matching for information sharing in its Visual Links software. Fuzzy matching returns a larger set of results by including the near misses, some of which could turn out to be useful.

Both FinCEN and IRS-CI use Visual Links and Digital Information Gateway. Visual Links is written in Java, so it is designed to run on any platform.

'The Visual Analytics tool connects data sets from the Currency and Banking Retrieval System and other IRS databases, including tax return information, to identify connections that are not otherwise apparent,' said Bridget Marchetta, IRS-CI acting director for financial crimes.

FinCEN collects Bank Secrecy Act and Suspicious Activity Reports data, which the vendor consolidates, cleans to make more consistent and usable, and then merges. FinCEN requires banks, money transmitters, casinos and other industries to report suspicious transactions and cash transactions of over $10,000. Individually or over time, these transactions could indicate money laundering, other financial crimes or terrorist financing.

The Visual Analytics software now lets the agency summarize results, yielding an understanding of what's going on in hundreds of transactions, through insight into when the transaction occurred, and where the money came from and where it is going.

FinCEN had expected to go live soon with BSA Direct, which will allow electronic filing. But last week, officials put a temporary stop-work order on BSA Direct of up to 90 days because it had failed to meet some performance milestones, said FinCEN director Robert Werner in a letter to Richard Shelby (Ala), chairman of the Senate Banking, Housing and Urban Affairs Committee. The pause will let FinCEN assure that there is no gap in capability when it moves to the modernized system. EDS Corp. developed BSA Direct, using the Teradata application suite from NCR Corp.

BSA Direct applies data warehousing technology to structure the data in an integrated and secure online environment for law enforcement and regulatory agencies. The basic functionality does not change from the older system, but the data collection interface is richer and more streamlined, said Jack Cunniff, associate director of the FinCEN Information and Technology Division.

'We are taking advantage of this to begin to improve data quality through data standardization and referencing,' he said.

Financial entities electronically report to FinCEN more than 40 percent of Bank Secrecy Act filings, and that is expected to reach 60 percent by year-end, Cunniff said. The electronic form provides fields that banks and other BSA-covered businesses must fill in, making the data more standardized.

The existing BSA data system is not online and relies on terminal emulation protocol, restricts data queries to a limited set of parameters and provides limited data retrieval only, with no inherent analytical capabilities, Cunniff said.

BSA Direct offers an Easy Query feature that provides a prompted interface that lets users, including law enforcement, query by one or more of the 20 parameters, such as phone number, address and e-mail address. The query returns results in a 'hit list' format that the user can sort, filter, group, section, edit, save, reuse and share. BSA Direct also gives users direct access to every data element on BSA forms.

What is important to FinCEN is the ability to tie in all the disparate sources of data, Westphal said. Visual Analytics also combines specialized sources, such as master death files from the Social Security Administration, with the FinCEN data.

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