Following on from a study of terrorism-related suspicious activity reports (SARs), the Financial Crimes Enforcement Network (FinCEN) and the Federal Reserve Board recently proposed an adjustment to the mandatory reporting of low-value international wire transfers. Presently, banks and other regulated businesses in the United States must report and store records of all transactions, both domestic and international, with a value in excess of $3,000. The proposal requests a change that will compel firms to report all international wire transfers with a value in excess of $250.
This is not a figure plucked out of the air: It is based upon analysis that indicates some terrorists operating outside of the United States are being funded through donations with sums considerably lower than $3,000. Thus, the proposal seeks to present challenges and obstacles to those seeking to fund terrorist activity using U.S. dollars and assist agents engaged in the investigation of terrorist activities.
The proposal will present challenges to and demand the additional application of resources from banks. FinCEN has estimated such resources/costs add up to 32 extra man-hours each year for each firm. Systems will need to be reconfigured to enable automated reporting, but this will need to be monitored and audited. There will be additional storage costs for both FinCEN and impacted firms.
The benefits may well be worth it; after all, what price do you put on a life saved from a terrorist attack? Access to such data, including historic data, will undoubtedly support investigations as well as help to identify and arrest connected parties, thereby frustrating and preventing further terrorist attacks. Ultimately, we all want to ensure optimum intelligence is extracted from and reported to the respective authorities, and the proposal seeks to do just that.
However, just as airport staff cannot and do not physically search every case and bag, banks and firms cannot deeply scrutinize every transaction. After all, they are applying a risk-based approach. All of which provokes the question: Do we actually need less, not more, reports? In the event we cannot see the trees for the trees, let alone the wood for the trees, why are we seeking to plant more trees?
I support the proposal, but I would like to see some new thinking around crime-related SARs—or, dare I say, an acknowledgment that most low-level-crime-related SARs are not acted upon. This being the case, and there simultaneously being inadequate public sector resources assessing these SARs, a proposal for de minimis reporting would be welcomed. Of course, this should not apply to any suspicion of terrorism or terrorist financing, but if we are to collectively improve, we need identify areas where we can improve AML efficiencies and effectiveness.
As I type this, I hear some of you say, ‘What if we miss vital intelligence within a low-value transaction?’ I accept this may happen, but we cannot be all things to all transactions at all times. This is not risk-based. Back at the airport, customs officials cannot and do not stop every passenger, and in doing so they accept the risk that drugs and other contraband will be smuggled into our respective countries.
The proposal demands more of us, and equally it will require more from the public sector, but neither the public nor the private sector have unlimited resources. So, what if we keep demanding more and doing more without identifying areas where we can and should do less? If we keep more records, we risk potentially diluting the intelligence within these records, and notwithstanding the advent of artificial intelligence, we make it more difficult to retrieve and react to these records.
I encourage all AML and compliance professionals to give some thought to redundant processes or those processes that produce reduced value. With a COVID-19 vaccine on the horizon, we can look forward to returning to our offices and working practices we are accustomed to, but there will be reduced resources and increased demands. The FinCEN/Fed proposal falls under the latter.