Data sharing is the missing link to trapping money launderers

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When money moves

Agencies are beginning to share data they have collected and analyzed about money laundering and terror-financing activities, but they still have far to go, according to a recent Treasury Department report.

For example, the Immigration and Customs Enforcement directorate in the Homeland Security Department is combining its capabilities with IRS-Criminal Investigation, the Treasury Department's Financial Crimes Enforcement Network and the FBI to target unlicensed money service businesses.

These businesses provide financial services for individuals who cannot or do not want to use the formal banking system. They are subject to many of the same regulations as banks but are often able to fly under the federal radar because many are small enterprises. They also hedge on some reporting requirements for suspicious transactions because they have only a fleeting relationship with their customers.

Law enforcement officials said in the report that money service businesses often are used to transfer funds internationally to support terrorist-related activities.

The report was the first governmentwide analysis of money laundering and terrorist financing. Sixteen agencies and bureaus collaborated on the U.S. Money Laundering Threat Assessment, including the Justice and Homeland Security departments, the Board of Governors of the Federal Reserve and the Postal Service.

Despite their progress in working together, agencies still are plagued with systems that do not talk with each other. Over time, agencies have developed tracking systems that are tailored to meet their individual needs, Treasury said.

Law enforcement agencies know that they have to improve how they develop and collect data in order to stem the flow of laundered funds. Criminals and terror financiers exploit weaknesses through a variety of techniques.

'Accurate, comprehensive data is vitally important if we are to assess whether we are collectively gaining ground, keeping pace or falling behind criminal money launderers,' the report said.

Problems include data fields that are collected by some but not all agencies, differences in definitions and duplications in which more than one agency logged in the same seizure or arrest because they participated in a task force.

Currently, it is not possible to estimate with accuracy the total amount of money laundering activity that federal law enforcement captures, the report said.

Criminals launder dirty money by integrating it into the financial system through banks. But they also take advantage of innovations that exploit global payment networks through money transmitters, online payment systems, stored-value cards and informal value transfer systems such as unregulated international financing networks called 'hawalas.'

About the Author

Mary Mosquera is a reporter for Federal Computer Week.

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