Table of Contents || About the Financial Crimes Enforcement Network

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Financial Crimes Enforcement Network Strategic Goals

n Fiscal Year 2005, we published an adjusted strategic plan that reflects our role as a regulatory agency, our responsibilities for combating terrorist financing, and our long-range vision for providing law enforcement and regulatory

agencies with better access to the Bank Secrecy Act data while supporting these agencies with more complex and sophisticated analyses. The plan, which covers Fiscal Years 2006 through 2008, is available at www.fincen.gov.

The Strategic Plan outlines five goals:

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Goal 1: Protect the financial system through effective administration of the Bank Secrecy Act.

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Goal 2: Combat terrorism, money laundering, and other financial crime through analysis of Bank Secrecy Act data and other relevant information.

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Goal 3: Intensify international anti-money laundering collaboration through the global network of financial intelligence units.

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Goal 4: Facilitate regulatory compliance, data management, and information through E-government.

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Goal 5: Develop a more nimble and responsive management structure.

This report lists major Financial Crimes Enforcement Network accomplishments for each of these goals in Fiscal Year 2005 and priorities for Fiscal Year 2006.

Bank Secrecy Compliance Activity

Major Accomplishments in Fiscal Year 2005
This year, we made marked progress toward assuring the effectiveness and uniformity of Bank Secrecy Act compliance activity in all covered industry sectors. Specifically, we:

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Signed a memorandum of understanding with the Internal Revenue Service to routinely exchange information about Bank Secrecy Act examination activities, including the identification of financial institutions with significant Bank Secrecy Act compliance deficiencies. We now have such agreements with six Federal banking regulators.

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Negotiated 35 information exchange agreements with state and territorial (Puerto Rico) supervisory agencies that

examine for compliance with the Bank Secrecy Act or similar state regulations.

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Developed and published an interagency Bank Secrecy Act/Anti- Money Laundering Examination Manual in collaboration with the five Federal banking agencies. The manual is designed to ensure the consistent application of the Bank Secrecy Act at all banking organizations, including commercial banks, savings associations, and credit unions. In conjunction with the manual rollout, we participated in eight outreach sessions, three industry conference calls, and a national video conference for examiners and industry around the country.

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Developed and delivered, through the Federal Financial Institutions Examination Council, nine training sessions for examiners from a variety of federal and state banking agencies.

The Federal Financial Institutions Examination Council (FFIEC) today released the Bank Secrecy Act/Anti- Money Laundering Examination Manual (FFIEC BSA/AML Examination Manual). The manual's release marks an important step forward in the effort to ensure the consistent application of the BSAto all banking organizations including commercial banks, savings associations, and credit unions.

The FFIEC BSA/AML Examination Manual was developed by the Board of Governors of the Federal Reserve System (Board), Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), and Office of Thrift Supervision (OTS) (collectively referred to as the federal banking agencies) in collaboration with the Financial Crimes Enforcement Network (FinCEN), the delegated administrator of the BSA. In addition, through the Conference of State Bank Supervisors, the state banking agencies played a consultative role. The Office of Foreign Assets Control (OFAC) collaborated on the development of core overview and examination procedures addressing compliance with regulations enforced by OFAC.

The FFIEC BSA/AML Examination Manual emphasizes a banking organization’s responsibility to establish and implement risk-based policies, procedures, and processes to comply with the BSAand safeguard its operations from money laundering and terrorist financing.

Regulatory Coverage and Guidance

We extended Bank Secrecy Act anti-money laundering program requirements to dealers in precious metals, stones, or jewels to protect this potentially vulnerable industry from abuse by terrorist financiers and perpetrators of financial crime. Further, we issued substantive guidance for industries already covered, including:

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An interpretive advisory requiring money services businesses to perform appropriate due diligence with respect to their foreign agents and counter parties.

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Guidance, an advisory, and a joint statement with Federal banking agencies about the provision of banking services to money services businesses. These steps were taken after fact-finding meetings indicated that some banks were closing or declining to open accounts for money services businesses because of perceived risks.

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Guidance, developed jointly with the federal banking agencies, for financial institutions on exercising reasonable judgment when complying with Bank Secrecy Act obligations in interactions with victims of Hurricane Katrina.

Section 311

To safeguard the financial system at home from criminal threats abroad, we proposed special measures authorized by section 311 of the USA PATRIOT Act against three

financial institutions designated as being of "primary money laundering concern" by the Secretary of the Treasury. The institutions are Multibanka and VEF Banka, both located in Latvia, and Banco Delta Asia, located in the Macau Special Administrative Region of China. If made final, the rules will prohibit U.S. financial institutions from establishing, maintaining, administering, or managing any correspondent account in the United States for or on behalf of these banks.

We also conducted in-depth analyses, including interagency consultation, to produce the Administrative Records required for section 311 special measures. In all section 311 activities, we worked closely with our sister organizations within the Treasury Department's Office of Terrorism and Financial Intelligence.

Enforcement

In situations involving egregious violations of the Bank Secrecy Act, we took joint enforcement actions with appropriate regulators. Specifically, we jointly assessed civil money penalties against Arab Bank and AmSouth Bank for systematic violations of the Bank Secrecy Act, including failure to comply with the anti-money laundering program and suspicious activity reporting requirements. We also imposed a civil money penalty against Gulf Corporation for violation of Bank Secrecy Act currency transaction and suspicious activity reporting requirements. We believe that such actions not only resolve compliance issues in the institutions affected but also encourage other institutions to comply with the law.

Organizational Development

Internally, we strengthened our capacity to assure consistent application of the Bank Secrecy Act. With funds authorized last year by Congress, we hired 18 employees for the Office of Compliance, established in Fiscal Year 2004 to assure that examinations for compliance with the Bank Secrecy Act and related requirements are uniform and effective. We also developed a system for securely managing the data and cases resulting from the information-sharing agreements with Federal banking regulators and state supervisory agencies, and developed initial reports on financial industry compliance based on the information provided. To improve our ability to respond to industry requests for guidance and assistance in complying with regulatory requirements, we created and began staffing a regulatory resource center to centralize the function of providing responses.

Currency Transaction Report Exemptions

As the year ended, we were working with Congress on a proposal to streamline Currency Transaction Report exemptions for qualified customers. Our aim is to ease reporting burdens on financial institutions covered by the Bank Secrecy Act while continuing to assure that requirements meet the needs of law enforcement agencies.

Priorities for Fiscal Year 2006

Strengthen Regulatory Regime We will continue to strengthen the Bank Secrecy Act regulatory regime by releasing a number of significant regulations in Fiscal Year 2006. These include:

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Regulations implementing section 312 of the USA PATRIOT Act, which requires that due diligence be performed on correspondent and private banking accounts.

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Final rules and related guidance requiring certain insurance companies to establish anti-money laundering programs and report suspicious activity.

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Regulations requiring investment advisers, commodity trading advisors, commodity pool operators, and unregistered investment companies to establish anti-money laundering programs.

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Rules requiring that mutual funds report suspicious activity.

In addition, we will develop a regulatory framework for stored-value products/ services that reflects ongoing changes in that industry and review our regulatory regime for money services businesses.

Provide Guidance to Covered Industries

To provide covered industries enhanced information about complying with Bank Secrecy Act requirements, we will establish a seminar program on regulatory matters and continue to develop and issue needed guidance. We will also continue to develop a regulatory resource center to integrate web- and telephone-based communications, ensure better consistency and accuracy of responses, improve response times, and improve overall customer service.

Promote Uniform and Effective Application of Law

Promoting consistent application of the Bank Secrecy Act is an ongoing priority. Toward this aim, we plan to develop information exchange agreements with the Securities and Exchange Commission, the Commodity Futures Trading Commission,

and additional state supervisory agencies and to use the resulting information to promote uniform application of the law. In situations where financial institutions fail to comply with the Act, we will continue to work closely with the supervisory authorities to take appropriate action.

Cooperation with Industry and Law Enforcement

We will continue to work with the financial industry on ways to reduce the number of Currency Transaction Reports filed on legitimate financial transactions that are of little or no value to law enforcement. We will also seek to develop innovative ways to exchange critical and sensitive law- enforcement information with the financial industry as a means of strengthening a government-private partnership to prevent and detect terrorist financing and other financial crime.

Bank Secrecy Act Emphasis on Risk Management

"The Bank Secrecy Act regulatory regime is all about risk management" it is about identifying and mitigating risk. Under the Bank Secrecy Act, financial institutions are required to identify and mitigate the risk that their business will be abused by criminals and terrorists. Risks can be jurisdictional, product-related, service-related, or client related. Regardless of where those risks arise, financial institutions covered by our regulations must take reasonable steps to mitigate them. Compliance is risk-based, meaning that financial institutions must devote more compliance resources to the areas of its business that pose the greatest risk. Moreover, as is true for all industries we regulate, we do not expect businesses of different sizes and circumstances to have the same types of anti-money laundering programs."

--William J. Fox, Jewelers Vigilance Committee Industry Seminar,
August 1, 2005

New Analytical Paradigm

"We are changing the way we analyze information at the Financial Crimes Enforcement Network. We are moving away from the notion of FinCEN as a library, with FinCEN analysts acting as librarians assisting customers with efforts to retrieve and understand Bank Secrecy Act data. Our new analytical paradigm requires higher-level research and analysis utilizing all sources of information to understand and explain the cutting-edge problems relating to money laundering and illicit finance, including terrorist financing. Our goal is nothing short of being as good as, if not better than, any other analytic unit focused on financial issues in the world."
--William J. Fox, before the U. S. House of Representatives Committee on Financial Services,
Subcommittee on Oversight and Investigations, May 26, 2005

Customer Feedback on Funds Transfer Guide

"Thank you VERY much for the new Funds Transfer Guide. Excellent job. I know that this will be a very handy reference guide to our analysts and investigators. In fact, I provided one to a TFOS [Terrorist Financing Operations Section] analyst... and she was thrilled... I've requested that it be posted... on the FBI Intranet."
--FBI Liaison to the Financial Crimes Enforcement Network

"I write to commend you and your staff on the recent publication of the Reference Series: Funds Transfers…. We believe that the Financial Crimes Enforcement Network's success in publishing this first-rate manual will lead to higher quality investigations throughout the United States Law enforcement community."
--Special Investigator, U.S. Federal Reserve

"This looks like a great source of info for the agent in the field who's working complex fraud or money laundering cases and needs to query banks for transaction information to further their investigation. This reference will be helpful to investigators who aren't totally aware of the funds flow process or the information sources and documentation available through the banking industry."
--U.S. Secret Service Analyst

Training

We strengthened our ability to perform complex analyses of all-source data by providing our analysts with more than 10,500 hours of high-level analytical skills training. The training included courses at the Central Intelligence Agency’s Sherman Kent School, the Defense Intelligence Agency’s Joint Military Intelligence Training Center, and the Foreign Service Institute.

Complex Analysis for Law Enforcement

Priorities for Fiscal Year 2006
We will continue to enhance the value of our support to law enforcement agencies by increasing the amount of complex, actionable analyses targeted at high-priority money laundering and terrorist financing investigations and reducing the amount of basic Bank Secrecy Act research that the agencies could more efficiently perform themselves. We will also develop financial intelligence referrals for use by the U.S. Department of Justice U.S. Attorney’s Office in identifying high-impact investigative cases.

Policy-level Analyses

We will publish in-depth analytical products covering patterns and trends in financial crimes and regulatory and/or industry vulnerabilities that will serve as the basis for policy decisions and strategic action to reduce the threat of financial crime. A project of this type already in progress is an analysis of mortgage loan fraud based on Suspicious Activity Report filings.

Collaboration

We will take full advantage of sources of and resources for financial intelligence by completing collaborative analytic efforts with other organizations. We will work on joint projects with analysts from other financial intelligence units, from at least one large Federal law enforcement agency, and from the intelligence community.

Technical Reference Guide

We will publish at least one technical reference guide for law enforcement officials describing a financial transaction system.

Egmont Group Plenary

Major Accomplishments in Fiscal Year 2005
In Fiscal Year 2005, the Financial Crimes Enforcement Network hosted the 13th Plenary of the Egmont Group, an international network of financial intelligence units. (See page 47.)

The Plenary was a major international event that marked the Egmont Group’s 10th anniversary. The meeting was attended by nearly 300 delegates from more than 90 financial intelligence units from countries and jurisdictions around the world, as well as by representatives from international organizations. At the Plenary, seven new financial intelligence units were granted membership, bringing the total to 101.

Collaboration with Other Financial Intelligence Units

We collaborated and communicated with many other financial intelligence units and governments in Fiscal Year 2005 in efforts to strengthen anti-terrorist financing and anti-money laundering programs and policies world wide. For example, we:

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Conducted personnel exchanges with the financial intelligence units in Russia, Mexico, and Liechtenstein. The exchanges were designed to improve channels for communicating operational information in support of anti- money laundering and terrorist financing investigations.

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Ended a 4-year moratorium on the exchange of financial intelligence with Paraguay, where the existence of more than one financial intelligence unit violated Egmont Group standards. To address this issue, we traveled to Paraguay with representatives from the Treasury Department’s Office of Technical Assistance. Following resolution, we signed a Memorandum of Understanding with Paraguay to reinstate information sharing.

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Participated with other U.S. Department of the Treasury officials in bilateral talks with Brazil, Chile, Guatemala, Mexico, Jordan, France, and Austria to discuss efforts to counter terrorist financing and money laundering.

Assessments

With other U.S. agencies, international groups, or financial intelligence units, we conducted assessments of the financial intelligence units in the Philippines, Peru, and Qatar, and of the anti-money laundering and terrorist financing regimes in Afghanistan, Nigeria, and Tanzania. We also traveled with Treasury's Office of the Comptroller of the Currency to examine bank compliance issues in Romania's banking, regulatory, and law enforcement sectors.

We used our expertise in the international financial arena to write 110 country assessments on financial crimes and money laundering for the International Narcotics Control and Strategy Report published by the U.S. Department of State.

Financial Intelligence Unit Development

To help our counterparts strengthen their capacities, we coordinated and/or secured outside funding to train analysts from 17 different financial intelligence units in South

and Central America, the Caribbean, and the Caucasus. Partners in these efforts included the U.S. Departments of Justice and State, other Egmont members, the Organization of American States, and the International Monetary Fund/World Bank. We also linked nine additional financial intelligence units to the Egmont Secure Web, which allows secure global information exchanges related to financial crimes investigations in Egmont member countries.

Through our foreign visitors program, we hosted or briefed government, financial sector, or law enforcement agency representatives from 58 countries. We provided these visitors with information on new money laundering trends and patterns, the Bank Secrecy Act, details of the USA PATRIOT Act, information technology systems and databases, international information exchange processes, and the regulatory role of the Financial Crimes Enforcement Network.

Egmont Group Leadership

Priorities for Fiscal Year 2006 To strengthen the global network of financial intelligence units, we will continue to chair the Egmont Group's Egmont Committee and to provide staff support for the organization’s five working groups. We will sponsor a number of financial intelligence units in the Middle East and Asia for admission to the Egmont Group and will conduct onsite acceptance assessments of at least five potential new members as part of the admission process.

Country Assessments

We will devote increased resources to the production of written reports assessing the anti-money laundering and terrorist- financing policies and programs in countries with significant financial centers

or other characteristics that make them especially important in the international effort against financial crime. We expect these reports to provide important financial intelligence for other Federal agencies and for international organizations that set policy and standards for combating financial crime.

Support for the Financial Action Task Force

We will coordinate research for and publication of a Financial Action Task Force Typologies Report on "Money Laundering and Terrorist Financing Trends and Indicators." The Financial Action Task Force is an inter-governmental body created in 1989 to develop and promote national and international policies to combat money laundering and terrorist financing.

Global Threat of Terrorist Financing and Money laundering

"There is now near-unanimous recognition among nations that terrorist financing and money laundering pose threats that cannot be ignored and there is widespread agreement upon a shared set of standards to combat these dangers. We will not accept the protest that ideological differences or bureaucratic obstacles excuse nations from the obligation to comply with global standards. As we were all brutally reminded by the attacks in London last week, we are facing a global threat with global implications. All civilized nations must meet their basic responsibilities to prevent the financing and support of terrorism."

--Stuart Levey, Under Secretary,
Office of Terrorism and Financial Intelligence, U.S. Department of the Treasury,
before the U.S. Senate Committee on Banking, Housing, and Urban Affairs,
July 13, 2005

Support for Users of Bank Secrecy Act Data

We more effectively assisted the law enforcement and regulatory agencies that access Bank Secrecy Act through our Gateway program, which provides data access via a secure internet connection. For example, we developed and implemented an on-line training program that eliminated the need for live training classes and allowed redirection of internal resources. This system improved management of content, and provides re-certification testing to ensure that our users are updated on program changes.

We also authorized, trained, audited, and provided customer assistance to 3,344 Gateway users, almost 1,200 more than in Fiscal Year 2004. The number of users trained rose from 1,007 to 1,343, and the number of inspections more than doubled, increasing from 313 to 679.

314 Information-Sharing Program

In Fiscal Year 2005, we strengthened both policies and technology for the information- sharing program authorized by section 314 of the USA PATRIOT Act for Federal

law enforcement agencies and financial institutions. This program is designed to support investigations with a significant money laundering or terrorist financing component. Specifically, we:

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Developed and deployed a secure, web-based system for transmitting information requests from Federal law enforcement agencies to financial institutions, and for transmitting the institutions' responses. Previously, information requests and responses were transmitted via a slower system of e-mail and faxes.

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Streamlined the section 314 program policy and strengthened the acceptance criteria for incoming requests. These changes have improved the quality of these requests, further ensured that investigative agencies have exhausted other means of information, and reduced the burden on financial institutions that conduct the requested searches.

Treasury Designates Mexican Money laundering Cell; Financial Crimes Enforcement Network Provided Supporting Data

On January 12, 2005, the U.S. Department of the Treasury identified 15 companies and 24 individuals associated with a money laundering cell of the Arellano Felix Organization (AFO), a violent drug trafficking ring operating out of Mexico.

"Over a three year period, this cell laundered more than $120 million in illicit proceeds from the sale of narcotics," said Robert Werner, Director of the Treasury’s Office of Foreign Assets Control (OFAC). "By freezing these individuals and companies out of the U.S. financial system, we are dealing a significant blow to the fiscal underbelly fueling the notorious drug trade of the Arellano Felix Organization."

OFAC added the names of these 39 entities to its list of persons designated pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act). AFO, which was named as a drug kingpin by President Bush on June 1, 2004, is based in Tijuana, a large city in the Mexican state of Baja California, which borders the United States.

This money laundering cell was developed by Ivonne Soto Vega, also known as “La Pantera” (the Panther), and Jose Manuel Ruelas Martinez. The cell is involved in a money laundering scheme centered on the use of casas de cambio, or currency exchange houses. These front companies launder U.S. currency illicitly earned through narcotics sales in the United States and bulk smuggled into Mexico.

The Financial Crimes Enforcement Network played several roles in the support and development of the investigation. Members of the Ruelas Martinez family, their associates, and their businesses and currency houses were the subject of a USA PATRIOT Act Section 314(a) information request that FinCEN broadcast to financial institutions in 2003 on behalf of a Federal law enforcement agency. The request resulted in the identification of numerous previously unknown bank accounts in the United States.

Members of the Ruelas Martinez organization and their associated businesses were also the subjects of a proactive targeting report prepared by FinCEN. In addition, the Ruelas Martinez investigation was the first case developed as part of a pilot program to concurrently conduct financial, law enforcement, and commercial database analysis of the subjects of Section 314(a) requests to provide the requesting law enforcement agencies with the most comprehensive analytical product available. An agent from the investigating agency said that the identification and analysis of numerous Bank Secrecy Act documents, in conjunction with accounts identified through the 314(a) request "helped expand the investigation by identifying new leads and accounts."
--Compiled from Treasury Department Press Release, January 12, 2005, and reports by
Financial Crimes Enforcement Network staff

BSA Direct

Priorities for Fiscal Year 2006 We will continue to closely manage the final development stages and rollout of BSA Direct. We will transition customers to this new system and integrate additional system components. Following full deployment, we will survey users to establish a baseline measure of user satisfaction with the system.

E-filing

We will continue to increase the percentage of Bank Secrecy Act reports that are electronically filed by providing outreach and technical assistance to the largest filers. Suspicious Activity Report Data Quality To improve the quality of Suspicious Activity Report data, we will identify the critical fields that are most often left blank. This analysis

will serve as the foundation for developing strategies to reduce data omissions and ensure that the data reported is of maximum benefit to law enforcement agencies.

Cross-Border Wire Transfer Feasibility Study We will conduct a feasibility study for a system to collect data on cross-border wire transfers, as mandated by the Intelligence Reform and Terrorism Prevention Act of 2004. Such a system would eliminate an important gap in the financial transactions data now available to law enforcement and intelligence agencies.

Infrastructure

We will upgrade our corporate case and document management capabilities and enhance the overall security and safety of FinCEN's network infrastructure.

Organizational Realignment

Major Accomplishments in
Fiscal Year 2005
In Fiscal Year 2005, we completed a major organizational restructuring initiated the previous year to realign functional units with our strategic priorities. Among other actions, we:

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Filled 10 senior management positions previously held by persons serving in an acting capacity.

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Set up the Office of Public Affairs, which reports to the Deputy Director, to more effectively communicate our programs and objectives to the public and the media.

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Established the Office of Intelligence Support to provide analytic services for the intelligence community. This office works closely with Treasury's Office of Intelligence and Analysis and other agencies engaged in anti- terrorist investigations and activity.

Strategic Plan

Following the introduction of our new strategic plan in February 2005, we established systems for monitoring and communicating progress toward achieving the plan. We also developed organizational performance measures linked to the strategic plan and implemented a system for quarterly reporting of progress toward these measures.

Treasury Department Collaboration

We increased collaboration within Treasury's Office of Terrorism and Financial Intelligence through joint projects with the Office of Foreign Assets Control and the Office of Intelligence and Analysis. Cooperative activities included personnel details, sharing of information concerning terrorism-related requests for research, and joint travel to bolster anti-money laundering and counter- terrorism regimes in several countries.

Staff Hiring, Training, and Performance Management

We used our increased budget to hire 64 new employees, strengthening our total force from 253 to 291 employees. To help both new and experienced staff develop their expertise, we provided over 270 training opportunities for our employees, including technical or job skills training for 214 employees and management skills training for 100 percent of our managers.

We also implemented a bureau-wide, multi-tier performance management system for employees and drafted a comprehensive awards policy to reward excellent performance.

Financial Management

To steward the growing financial resources with which we have been entrusted, we ensured that management control systems provided reasonable assurance of compliance with the Federal Managers Financial Integrity Act. No material weaknesses were open in Fiscal Year 2005. We also completed our first balance sheet audit and received an unqualified audit opinion from the independent auditors.

Employee Programs

We promoted diversity awareness and wellness among employees by presenting four special emphasis programs addressing gender, ethnic, and health issues in the workplace. We also presented five additional community-building and employee recognition programs, including Diversity Day; Bring Your Child to Work Day; an appreciation luncheon for employee volunteers involved in special emphasis programs; the Director's Awards Program; and a Holiday Celebration.

Security

In line with our increased responsibilities in the area of terrorist financing, we took steps to move from a "Public Trust" to a "National Security" security posture by developing a personnel security policy that sets minimum risk and sensitivity designations for positions throughout our organization.

Human Capital

Priorities for Fiscal Year 2006
Recognizing that we cannot achieve our mission without a diverse, high-performing workforce, we will take steps to expand and enrich our human assets. To align our workforce with current and future mission needs, we will develop:

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A Human Capital Strategic Plan.

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A corporate recruitment plan that will help us continue to attract diverse, highly-skilled new employees.

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A succession planning strategy that includes programs for building needed skills, mentoring, and regular in-house professional development.

We will also assess competency gaps for mission-critical occupations, streamline hiring through approved hiring flexibilities, and design a training strategy for managers in support of succession planning.