Financial Intelligence Units (FIUs), the U.S. Financial Crimes Enforcement Network, and FIU Operational Independence

Financial Intelligence Units (FIUs), the U.S. Financial Crimes Enforcement Network, and FIU Operational Independence

September 8, 2023
Financial Intelligence Units (FIUs), the U.S. Financial Crimes
Enforcement Network, and FIU Operational Independence
As Congress considers anti-money laundering and
FIU Best Practices
countering the financing of terrorism (AML/CFT) policy
FATF maintains a set of 40 recommendations on best
options, one factor may include their effect on Financial
practices for protecting the global financial system against
Intelligence Unit (FIU) “operational independence.” An
money laundering and related illicit financial activity.
FIU is a model of a government entity that receives,
FATF recommendation 29 focuses specifically on best
analyzes, and disseminates (as appropriate) highly sensitive
practices for FIUs. With respect to FIU operational
financial information pertaining to potential money
independence, FATF recommends that FIUs possess the
laundering, terrorist financing, sanctions evasion, and other
illicit financial activity. The FIU model features greater
• autonomous authority and capacity to analyze, request,
operational independence from political leaders in an effort
and/or disseminate specific information, including the
to ensure that its work is driven by unbiased expertise and
independent right to forward or disseminate information
judgment rather than the direct or indirect influence of
to relevant domestic and international counterparts;
stakeholders whose activities the entity oversees. The
•
Financial Action Task Force (FATF), an intergovernmental
ability to access adequate financial, human, and
organization co-founded by the United States that promotes
technical resources that ensures an FIU’s independence
international AML/CFT standards, recommends that FIUs
and autonomy, as well as to conduct its mandate
maintain “operational independence” (i.e., the ability to
effectively with professional, skilled staff capable of
operate free from “undue influence or interference” in
maintaining high standards of confidentiality and
carrying out their responsibilities).
integrity; and
FIUs: Origins and Global Status
• ability to obtain and deploy such resources on an
individual or routine basis “free from any undue
The earliest FIUs were established in the 1990s, shortly after
political, government or industry influence or
the FATF was established in 1989 to combat the laundering of
il icit drug proceeds. Most countries have since established
interference, which might compromise its operational
FIUs, as it is an AML/CFT best practice endorsed by FATF.
independence.”
About 170 countries’ FIUs belong to the Egmont Group, an
Although some foreign FIUs are stand-alone entities, many
international network of FIUs. (The United States was also a
founding Egmont Group member.) Egmont Group membership
are housed within certain departments or agencies (e.g.,
is contingent on a commitment to uphold AML/CFT best
ministries of finance or justice, central banks, financial
practices for the exchange of financial information, including in
regulators or supervisory agencies, or customs or law
particular FIU operational independence and autonomy.
enforcement authorities)—similar to FinCEN’s location
within the Department of the Treasury. According to FATF,
Role of Congress
when an FIU is located within an existing agency, the FIU’s
The Financial Crimes Enforcement Network (FinCEN)
core functions must remain “distinct.”
serves as an FIU for the United States. FinCEN was first
FIU Assessments
established in 1990 pursuant to an order by the Secretary of
Based on FATF-recommended AML/CFT standards, many
the Treasury. In 2001, Congress statutorily established
jurisdictions—including FATF members and countries
FinCEN as a bureau of the U.S. Department of the Treasury
belonging to FATF-style regional bodies—participate in
(31 U.S.C. §310). Congress authorizes FinCEN’s activities
periodic peer reviews, known as “mutual evaluations,” of
by enacting legislation pertaining to its AML/CFT mandate
their AML/CFT legal and policy frameworks. Most
and its role as an administrator of the Bank Secrecy Act.
countries appear to satisfy, at least in part, FATF’s criteria
Congress also shapes FinCEN’s policies and activities
for compliance with FATF recommendation 29.
when it funds the agency through annual financial services
and general government appropriations acts. Committees
As of August 2023, 158 jurisdictions have participated in
periodically hold oversight hearings on topics related to
the most recent round of mutual evaluations based on the
FinCEN’s operations, rulemakings, and related policy
FATF recommendations. Of these, none were rated “non-
issues. Through these activities, Congress may play a role
compliant” on recommendation 29. This includes the
in increasing or decreasing FinCEN’s operational
United States, which was rated “compliant” (the best rating)
independence, potentially affecting FinCEN’s
in its 2016 mutual evaluation report. In total, 74
accountability, effectiveness, and international reputation.
jurisdictions (46.8%) were rated “compliant” on
recommendation 29, 69 (43.7%) were rated “largely
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Financial Intelligence Units (FIUs), the U.S. Financial Crimes Enforcement Network, and FIU Operational Independence
compliant,” and 15 jurisdictions (9.5%) were rated
reported transactions is strictly prohibited (31 U.S.C.
“partially compliant.”
§5318(g)). Some instances of unlawful SAR disclosures
have been federally prosecuted. Such cases have involved
Challenges to Operational Independence government or bank officials who variously leak SARs to
A 2018 Egmont Group white paper identified “common
the media or accept bribes for information on which
jurisdictional shortcomings related to FIU operational
suspicious transactions are reported. In 2020, more than
independence and autonomy.” According to the white
2,100 SARs were reportedly leaked to the media in an
paper, FIU shortcomings may stem from external pressures
exposé known as the “FinCEN Files.”
affecting operational decisions regarding an FIU’s analysis
and dissemination of financial intelligence, as well as
Opportunities for Congress
administrative decisions regarding how an FIU is
Congressional engagement on FinCEN matters, including
organized, resourced, and staffed.
ongoing AML/CFT policy concerns, may have implications
for FinCEN’s operational independence. With respect to
The Egmont Group paper identified several key issues,
FinCEN, such policy considerations may manifest in the
including (1) undue influence in the appointment and
context of ongoing congressional interest in AML/CFT
dismissal of FIU leadership; (2) impediments to accessing
policy developments surrounding:
budgetary resources, particularly when an FIU is housed
within another agency; and (3) resource decisions that
• Legislation. Some bills in the 118th Congress would
require approval from a higher rank within the larger
variously authorize or direct FinCEN to address a wide
organization. Potential indicators of diminishing FIU
variety of financial crime concerns, including through
operational independence may manifest in the form of
requirements to report to Congress. Recent bills have
politically influenced appointments, delays in the
also sought to require the FinCEN director to be
appointment of FIU leadership, FIU reorganizations leading
appointed by the President and confirmed by the Senate
to a weakening of FIU powers, and high staff turnover,
(see H.R. 4036 and S. 2628 in the 118th Congress and
including significant loss of experienced staff, according to
H.R. 7623 in the 117th Congress).
the Egmont Group paper.
• Hearings. Pursuant to the Anti-Money Laundering Act
Failure to establish and sustain FIU operational
of 2020 (AMLA; Division F of P.L. 116-283), the
independence may result in confidentiality breaches or
FinCEN director is required to be available to testify
tampering with sensitive financial information for political
before Congress on an annual basis through 2026.
purposes or on behalf of criminal interests, misuse of FIU
FinCEN’s acting director testified most recently in April
authorities to target civil society actors or political
2023. (In July 2023, Treasury appointed a permanent
opponents, or diminished overall effectiveness of a
FinCEN director, the first since April 2021.)
country’s AML/CFT regime. In certain cases, if operational
independence cannot be assured, the Egmont Group has
• Appropriations. The Biden Administration requested
suspended or expelled an FIU from its membership,
$228.91 million for FinCEN in FY2024, up from the
prohibiting that FIU from participating in Egmont Group
requested $210.33 million for FY2023. Both the House
activities, including the exchange of sensitive financial
and Senate Appropriations Committees recommended
information. For example, the Egmont Group expelled
funding FinCEN below the FY2024 request level. (In
Afghanistan’s FIU in June 2022.
H.R. 4664, the House committee recommended $166
million, and in S. 2309, the Senate committee
FinCEN: The U.S. FIU
recommended $190.19 million—the same level
FATF assessed in 2016 that the United States’ approach to
appropriated for FY2023.)
FIUs, in its current form, is “compliant” with its AML/CFT
recommendations, including with respect to FIU
• Access to SARs. In the AMLA and through other
operational independence. Treasury Order 180-01 outlines
oversight activities, Congress has sought to balance
FinCEN’s purpose and specifies the FinCEN director’s
efforts to facilitate sharing financial intelligence
responsibilities. Among other provisions, the order states
information while ensuring that statutory protections
that the FinCEN director has “full authority, powers, and
remain to safeguard unlawful disclosure of SARs. For
duties to administer the affairs and to perform the functions
example, Section 6212 of the AMLA authorized a pilot
of FinCEN, including, without limitation, all management
program in which U.S. financial institutions may share
and administrative authorities similarly granted to Bureau
SARs with their foreign branches, subsidiaries, and
Heads.” The FinCEN director, a career Senior Executive
affiliates. The timing and potential limitations of
Service position, is appointed by the Secretary of the
congressional access to SARs is also an area of interest.
Treasury pursuant to Title 31, Section 310, of the U.S.
Federal regulations authorize the Secretary of the
Code.
Treasury to provide SAR data to Congress (31 C.F.R.
1010.950).
Protection of sensitive financial information is a key
operational function of FIUs. Suspicious activity reports
Rena S. Miller, Specialist in Financial Economics
(SARs) received by FinCEN are treated as confidential
Liana W. Rosen, Specialist in International Crime and
information, and SAR disclosures by financial institutions
Narcotics
and government officials to those who may be involved in
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Financial Intelligence Units (FIUs), the U.S. Financial Crimes Enforcement Network, and FIU Operational Independence

IF12488

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