FinCEN: Big Brother After All?
Steven Bercu
Computer Professionals for Social Responsibility
Washington, DC Office
December 1991
On April 25, 1990, without fanfare and with virtually no
media
attention, Secretary of the Treasury Nicholas Brady signed an
Executive
Order1 breathing official life into one of the greatest potential
threats to civil
liberties in this nationÕs history. That order established the
Financial Crimes
Enforcement Network (ÒFinCENÓ), an ambitious office dedicated to
fighting
drug trafficking and other financial crime.
From the beginning, FinCEN was conceived as a technology-
intensive
operation that would bring sophisticated techniques of data
collection and
analysis to bear against shrewd international criminals who had
grown adept
at masking their illegal activities beneath elusive electronic
transactions. The
effort would involve not only the combined efforts of criminal
justice experts
from an alphabet-soup of federal agencies, but state, local, and
foreign crime-
fighters, strategically positioned members of the private sector,
and, especially,
a dazzling variety of public and private data bases. Here we will
look briefly at
the scale and scope of this new institution, its mission, its
methods, the
benefits it holds out, the risks it creates, the questions it
raises, and what it
might mean for the future.
FinCENÕs Mission
An alarming aspect of FinCENÕs inception is that, in the same
literature that describes in glowing terms its future
effectiveness against
various criminal activities, its mission is always spoken of in a
vague and
open-ended manner. Currently, FinCENÕs primary mission is to
assist in the
War on Drugs by detecting narcotics traffickers in the act of
money
laundering.2 Loosely, money laundering3 means funnelling cash
transactions through a variety of domestic and foreign financial
and
commercial institutions--banks, businesses, real estate, check-
cashing services,
etc., so that they become difficult to trace or detect, in an
effort to turn ÒdirtyÓ
cash proceeds of illegal activity into Òclean,Ó untraceable
assets.4 ÒFinCEN is a
financial-intelligence complex designed to bring all the
governmentÕs huge
currency, banking and law-enforcement data under one roof and then
run
them through computers to sniff out promising leads in the drug-
money
hunt.Ó5
According to the government, ÒFinCenÕs mission is to provide
a
government-wide, multisource intelligence and analytical network
in
support of the detection, investigation, and prosecution of
domestic and
international money laundering and other financial crimes by
Federal, State,
local, and foreign law enforcement agencies.Ó6 The government
places no
limits on the scope of participation (Ògovernment-wideÓ), the
range of data-
collection possibilities (ÒmultisourceÓ), or the types of illegal
activities that
might in the future be targeted (Òother financial crimesÓ). A
Treasury official
closely linked to FinCEN recently said: ÒMoney factors into every
dirty deed
out there, but a preponderance of the activity pertains to
drugs.Ó7 And the
Director of FinCEN himself has indicated that he is fully aware of
the catch-all
nature of the designation, Òother financial crimesÓ:
In order to fully comprehend the important role FinCEN plays in
law
enforcement, it is first necessary to understand the significance
of financial
crimes and, in particular, the laundering of the illicit proceeds
by virtually all
the criminal element.
With the possible exception of crimes of passion and certain
terrorist-related
activity, all criminal acts are committed for one reason--profit.8
Thus, even though FinCEN was established under the
PresidentÕs
National Drug Control Strategy, it has been making every effort to
define a
larger mission for itself. In character, perhaps, with all
intelligence conduits,
FinCEN has already demonstrated an insatiable craving for
information
irrespective of the immediate task at hand. Recently, Brian Bruh,
the FinCEN
Director, expressed frustration at FinCENÕs inability to take
dominion over
one of the most secretive and personal of government data bases,
one
containing information on most adult Americans: the individual IRS
files:
ÒWeÕd love to get our hands on it, but itÕs too difficult to open
the door
because of the guarantees to individuals that tax files are
confidential.Ó9
FinCEN, according to Mr. Bruh, has found jurisdiction, ex
nihilo, in an
octopus-like range of law-enforcement areas, many of which have
been
traditionally entrusted to other agencies:
Although current conditions within the United States and around
the world
demand that a greater emphasis be placed upon narcotics-related
matters,
FinCEN also routinely develops intelligence relating to all forms
of criminal
activity: in particular, such white collar crime as fraud
perpetrated against
financial institutions, commercial crimes, and tax evasion.10
Again, there is no commitment to an outer boundary for FinCenÕs
potential
activities; the definition is open-ended.11 While many policy
concerns may
favor the aggregation and linkage of law-enforcement-intelligence
efforts, it is
troubling that such a broad effort should have gotten underway in
a shroud
of silence, free of media attention or public comment, tucked away
as a
subdepartment within a quiet federal agency. While other
intelligence
agencies may have their shortcomings, they are at least subject to
some degree
of public accountability and to a well established process of
congressional
oversight. Where are the checks and stops on FinCENÕs sub rosa
manipulations of financial data?
FinCENÕs Methods
At the heart of FinCEN is a powerful Òexpert system,Ó a form
of
artificial intelligence that uses a set of rules to emulate the
thought processes
of human experts who are particularly skilled at solving a given,
non-
quantifiable sort of problem. In the case of FinCEN, presumably,
the human
experts at the base of the program specialized in probing
financial fraud and
spotting suspicious movements of funds. FinCENÕs expert system,
known as
the Customs Artificial Intelligence System (CAIS), which contains
over 2,000
rules,12 begins its analysis by focusing on two data bases: ÒThese
are generated
by IRS Form 4789, which reports domestic currency transactions of
more than
$10,000, and CustomsÕ Form 4790, which reports on the
international
transportation of money entering the United States.Ó13 With money
laundering perceived as a major law-enforcement challenge, we now
have a
system where Òwhen more than $10,000 is deposited or withdrawn
from a
bank, taken into or out of the country, paid in cash for goods or
even won at a
casino table, the IRS, Customs and now FinCEN want to know about
it.Ó14
Of course, the lionÕs share of these transactions is
legitimate,15 and
there are over 700,000 such transactions each month.16 FinCEN
must do
what would require an army of auditors if left to humans: piece
through
these transactions in order to flag those that appear suspicious.
This has been
likened to searching for a needle in a haystack, only harder,
because here the
needle does not want to be found.17 In order to zero in on truly
suspicious
transactions, FinCEN compares the transactions flagged by CAIS
with
personal and financial information drawn from government, private,
and
foreign data bases. The aim is to create a data ÒprofileÓ of
individuals
transporting large sums of money, then to match these individual
profiles
against the typical patterns of money launderers. FinCEN might,
for example,
invoke a Customs data base called the Treasury Enforcement and
Control
System (ÒTECS IIÓ):
TECS II links related information and provides a picture of a
suspected drug
trafficker. ÒIf a subject of interest owns a boat or whatever,
all of that
information would be tied in,Ó [according to the director of law-
enforcement
systems at Customs,] ÒWe improved ways to share that information.
By using
subrecords, users can look at information from Customs, DEA,Ó and
other
agencies.18
This large scale, cross-agency use of personal and financial
information
raises questions consent, transparency, minimization, and abuse.
It is hard to
see how most individuals could even be aware of FinCENÕs linkage
of data
bases and profiling, let alone find ways to object to non-
consensual use of data
about them, to correct errors, to demand that CAISÕ
ÒinterrogationsÓ and
FinCENÕs electronic ÒsearchesÓ be held to some constitutional
standard, or to
insist that the flow of their personal information along
successive links of a
chain of inquisitive public and private investigative, regulatory,
prosecutorial, or financial institutions be appropriately limited.
Where does
one go to lodge objections? Does one knock on the door of the
Ònondescript,
low, white office building in a Washington suburbÓ19 that houses
FinCEN?
The various press releases from FinCEN and the Treasury are
reticent on
these points.
Rod MacDonald, a Customs official responsible for TECS II,
FinCENÕs
close cousin, claims that Òseveral safeguards have been built into
the system
to protect the public at large from a breach of privacy.Ó With
the amount of
matching and swapping of information involved in the TECSII/FinCEN
operations, it would be interesting to know what these safeguards
are, but
MacDonald Òdeclined to elaborate on the safeguards because of the
sensitive
nature of such information.Ó20 MacDonaldÕs comment underscores
the
asymmetry of these data bases: they are entitled to know about
you, but you
are not entitled to know about them.
Expert systems work by posing large numbers of questions as
they
move along an analytical tree toward conclusions or weighted
outcomes.
Unless there is a rich background field of information to provide
answers, the
expert system will fail; it cannot succeed if its queries are not
answered.
Given this technological premise of inquisitiveness, the use of
such systems
by government agencies for detection, surveillance, profiling, and
eventual
prosecution raises disturbing civil liberties implications.21 And
CAIS, the
present 2000-rule system, is apparently destined to be replaced by
a more
powerful system, being developed behind shrouds of secrecy under a
three-
year, $2.4 million contract at Los Alamos National Laboratory,
using
supercomputers and state-or-the-art algorithms and artificial
intelligence
methods.22
If this new analytical engine, as can be expected, builds
more
sophisticated models and profiles through greater inquisitiveness,
then the
clear implication is an increased thirst for pools of information
to answer the
systemÕs queries.23 The main way to incorporate large amounts of
new
information of different sorts is to build bridges to yet more
data bases. In the
next section, we will examine present and potential sources of
information
for FinCEN.
FinCEN is above all, as we will see in the next section, a
tool for the
centralization of information from disparate sources; its raison
dÕetre is to
match one fact to another: say, a check cashed at a border outpost
in the
California desert,24 together with a European crime file. An
important
normative question to ask is: Outside the context of the War on
Drugs, in
what other ways might FinCENÕs accumulation of skill in
centralizing
information--in matching, combining, comparing, and linking facts
in order
to reveal hidden activities, to tell certain kinds of stories--be
deployed? In
what ways, for example, could such sorting analysis be turned
against law-
abiding citizens? What if the private sector got hold of
technologies and
techniques like those being nurtured at FinCEN? Almost certainly,
there are
profit incentives to abuse such powerful techniques to create
unheralded
invasions of civil liberties.
FinCENÕs Sources
Because FinCENÕs operations are data-intensive and are
premised on
inferential links between many different sorts of data, we will
examine the
potential sources of that data in an effort to see what social
role FinCEN
might come to play in our society. Many data bases have already
been
mentioned by FinCEN as useful adjuncts to its operations.
FinCENÕs most
important data base is called the Financial Data Base:
The data in the Financial Data Base [are] gleaned from reports
that are
required to be filed pursuant to the Bank Secrecy Act and include
the Currency
Transaction Report (CTR), Report of International Transportation
of Currency or
Monetary Instruments (CMIR); Currency Transaction Report by
Casinos (CTRC);
and Reports of Foreign Bank and Financial Accounts (FBAR). In
addition,
FinCEN accesses data from the Reports of Cash Payments Over
$10,000
Received in a Trade or Business, which is required to be filed by
the Internal
Revenue Code.25
But this cash-transaction information is only the point of
departure. Director
Bruh paints in broad strokes the picture of the many data bases
FinCEN will
ultimately encompass:
FinCEN has [negotiated] or is in the process of negotiating access
and
dissemination authority for various Federal law enforcement data
bases
maintained by the Federal sector which contain information useful
in financial
investigations. FinCEN also procures access to a variety of
commercially
maintained data banks which are valuable in locating individuals,
determining asset ownership and establishing links between
entities.26
Director Bruh, in this statement, has effectively not ruled out a
single data
base as being beyond FinCENÕs purview. The contemplated use of
commercial data bases could potentially involve just about any
sort of
personal information imaginable,27 from magazine subscription
lists to
organization membership lists to telephone records to supermarket-
purchase
data.
And the vacuum-like ingestion of data banks will not be
constrained by
national borders. In October 1990, FinCEN signed an information-
sharing
agreement with Interpol: ÒThe pact would give FinCEN...access to
InterpolÕs
worldwide data....FinCEN will have access to the Interpol Case
Tracking
System by electronic and manual means.Ó28
FinCEN also, from the beginning, intended to secure access to
information that would be quite personal in nature. While
individual bank
records and tax forms were off limits, there remained commercial
databases
containing an enormous variety of personal information.
Corporation and
real estate records from states and localities would provide
further welcome
detail. In addition, FinCENÕs data base includes Òdrivers license
information
and other sources, including credit bureau data.Ó And,
demonstrating its
characteristically voracious appetite for facts, FinCEN Òis
studying ways of
expanding that base.Ó29
The operative question is: what are the boundaries,
guidelines, and
rules for this use of information? Who dictates them? Who is
watching? As
stated, FinCEN has no discernible, and certainly no
Êpublic,Êguidelines or
policies for appropriately minimizing and restricting its
information diet.
This despite the fact that its bailiwick includes some of the most
sensitive
varieties of personal information. However laudable FinCenÕs
current goal of
detecting narcotics traffickers and depriving them of the fruits
of their crimes,
one cannot ignore the troubling precedents that FinCENÕs
pathbreaking
linkage and analysis of data is sure to create. In the same
document that
summoned FinCEN into existence, the Bush Administration announced
a
new ÒIntelligence AgendaÓ for fighting the War on Drugs. This
agenda
included massive interagency sharing30 of information collected
for any
number of purposes, on order to Òconsolidate and coordinate all
relevant
intelligence gathered by law-enforcement agenciesÓ:31
This could mean the linking of certain CIA files with files from
the national
Security Agency; the Treasury DepartmentÕs FINCEN [sic]
system;...the El Paso
Intelligence Center drug archives; the Bureau of Alcohol, Tobacco,
and
Firearms; the IRS; the State Department; the Immigration and
Naturalization
Service; and [the FBIÕs] Drug Information System and other FBI
files.32
Even before FinCEN began operations, it was described as Òthe
first central
repository of information for agencies trying to crack down on an
estimated
$100 billion in illegal drug profits.Ó33 More recently, a FinCEN
assistant
director characterized the Office as basically, Òa centralized
location for
information.Ó34 During its startup phase, officials involved with
FinCEN
planning made statements that, while envisioning unprecedented
government centralization of information, showed little
sensitivity to the
privacy or information rights of citizens:
[FinCEN] will be enhanced by potentially 100 other data bases. We
might gain
access to computerized land records and real estate records, for
example....We
already have in excess of 35 data systems....WeÕve been talking to
the FDIC,
the Comptroller of the Currency, the Federal Reserve, and weÕre
studying their
systems. In many cases, we want to get people from those agencies
assigned to
us, to help us in the dissemination of the information.35
This raises the question of staffing. FinCEN now has a staff
of over 200
Òfinancial gumshoes.Ó36 Beyond the data bases overtly associated
with
FinCEN, the staffing of the Office gives other clues as to what
information
resources are to be enlisted in FinCENÕs wide-ranging analytical
projects.37
Less than a year after its inception, FinCENÕs director reported
that:
FinCEN is currently staffed by criminal investigators from BATF
(Bureau of
Alcohol, Tobacco, and Firearms), Customs, DEA, FBI, IRS, Postal
Inspection
Service, and Secret Service.... FinCEN is establishing a working
relationship
with state, foreign and local law enforcement agencies as well.38
Around the time that it was launched, FinCEN was reported to have
links to
the Defense Intelligence Agency and the Central Intelligence
Agency, and the
French government was said to be creating a FinCEN counterpart.39
In short, it is evident that FinCEN seeks relationships with
any major
power base with access to large amounts of records and information
on
individuals, businesses, and organizations. As agencies put their
heads
together to commingle information collected for discrete,
unrelated purposes,
there is no telling what sorts of activities, patterns, and
transactions they will
find it convenient or expedient to trace. It is frequently
observed that, once a
technology exists, there is a temptation to use it (this has been
offered to
explain everything from war to snowmobiling). Once FinCENÕs
massive
combinatory potential is in place, and the bugs are worked out,
what might
the government be interested to keep track of? An important
corollary to this
inquiry is to ask how FinCEN might serve a tyrannical successor
regime,
should it seize power in this country, as a means of control.
There is little
question that this anti-drug tool could also serve as a potent
instrument of
repression.
FinCEN Uses
FinCEN has cropped up in the news as a sidelight to a number
of
prominent international episodes and scandals in the short period
since its
inception. We have seen the great variety of information sources
available to
FinCEN. The high-profile uses to which it has been put suggest a
corresponding variety of potential applications.
FinCEN has apparently been extensively used against the
Medellin
Cartel,40 the Columbian cocaine ring. The financial sleuths
busily watch for
new wrinkles in Medellin activities.
One emerging scheme [according to FinCEN director Bruh]
works this way: Columbian drug suppliers set up partnerships
with businessmen who have operations in the United States.
They take their drug cash to a businessmanÕs U.S. office, where it
is commingled with legitimate earnings. In exchange, the
businessman pays them pesos back in Columbia.41
FinCEN was also used extensively in analyzing bank records seized
in the
U.S. invasion of Panama. Analysts were able to trace Ò$1 billion
from U.S.
drug sales to 683 cartel accounts in 37 Panamanian banks. They
[hoped next]
to match names in the Panamanian accounts with numbered electronic
money transfers that have been monitored by the National Security
Agency
since the mid-1980s.Ó42 This application demonstrates the power
of
interagency data-sharing and the enormous potential to target
individuals.
During the Gulf War, FinCEN, though far less visible, was
apparently
as potent a weapon against Iraqi forces as a Tomahawk missile or a
stealth
bomber: ÒFinCEN...was reported to have been instrumental in
uncovering
Iraqi assets in America that were later seized or frozen during
the Persian
Gulf crisis.Ó FinCEN used its Òthree major data basesÓ to
accomplish this:
Òfinancial information and intelligence;... commercial data, such
as corporate
and property ownership records from state sources;Ó and Òlaw
enforcement
case files and intelligence from the various federal agencies.Ó
By using these
materials, ÒIn a very rapid time, FinCEN was able to identify
assets that
allowed [the Office of Foreign Assets Control] to freeze 11 bank
accounts and
assets in California, Georgia and New York, corporate assets and a
$3.5
million real estate parcel. The properties belonged to people
suspected of
being fronts for Saddam Hussein or who are suspected of having
traded with
Iraq in violation of the law.Ó43 It is worth contemplating the
sorts of
information FinCEN analysts might have to mull over in order to
make
these sorts of deductions in Òvery rapid time.Ó
Currently, FinCEN is being used heavily by the government as
part of
the investigation of BCCI.44 Though there have been suggestions
that federal
authorities were in fact aware of BCCIÕs lawless activities for
some time before
the public exposure, one is left to ask whether FinCEN, for all
its avowed
sophistication, in fact failed to detect illicit movements of
funds on a massive,
highly orchestrated level. Doubts are cast especially in light of
BCCIÕs
reputation for Òlaundering...funds for drug lords and other
criminals.Ó45
If in fact FinCEN did miss the boat on BCCI, perhaps its bark
is greater
than its bite. Many technologies promise the world but in
practice deliver far
less. But as we will see in the next section, even if FinCEN in
its current
incarnation is not as effective as both its boosters and
detractors might have
us believe, that is not a reason to treat it lightly. First, the
techniques of
FinCEN can be refined, revised, and improved over time. And
second, even
if not particularly efficient or effective in practice, an
institution that is
known to centralize and analyze information can make a powerful
psychological impression on those aware of its existence.
FinCEN Threats
We have noted many ways in which FinCEN promises to traffic
in
information of a highly sensitive and personal nature: financial
records,
criminal records, property records, credit reports, state and
local filing records,
driversÕ license records, and amorphous Òcommercial databases.Ó
Not only
do many of these types of record systems contain inaccurate or
incomplete
information, vulnerable to distortion or misinterpretation, but
they are ripe
for countless forms of abuse: temptations to use the technology
for improper
purposes; intrusive shortcuts that bypass procedural, due process
protections;
unauthorized access by those who can profit from FinCENÕs data or
use it to
wreak havoc; political surveillance; unwholesome links to and
fostering of
private intelligence agencies; and unregulated, invisible
expansion of
government power through means that circumvent public comment and
political accountability.46
In addition to reaching into the wallets, briefcases, and
homes of
citizens to look at their personal records, FinCEN has potential
to reach and
scrutinize a great variety of small-scale, ordinary businesses and
activities that
touch the lives of millions of people, and that have done nothing
to provoke
a reasonable suspicion of wrongdoing:
Laundering methods are changing to keep ahead of the authorities.
With
banks now off-limits for many big laundering operations [due
primarily to the
IRS and Customs filing requirements discussed above], cash washers
are
increasingly turning to a host of virtually unregulated financial
institutions--
like check-cashing houses all over the country and money exchanges
known as
casas de cambio that have spread like poison ivy along the Mexican
border.
More and more, launderers are a so covering the trail of their
drug-tainted cash
by turning it into purchased of cars, boats, jewelry or art.47
These unregulated financial institutions are in fact the ÒbanksÓ
of necessity
for countless Americans who lack the financial stability to be
granted
privileges at more reputable banks. In many poorer neighborhoods,
main-
line banks do not even bother to set up branches. Will FinCEN
possibly
become a mechanism to deprive people of rights and privacy on the
basis of
their lack of solvency?
Another question is that of the differential impact of a
surveillance
tool like FinCEN on businesses particularly oriented toward cash.
One thinks
of car dealers, newsstands, or companies doing business in third-
world
countries where banking infrastructures are not well developed and
the
economies revolve around cash. What are the fallouts from
singling out
such activities or potentially catching them within the dragnet of
a suspicious
expert system? Will newsstands be deterred from stocking
political or sexual
materials under present or future political puritans or
ideologues? Will car
dealers be deterred from striking bargains with Òshady
charactersÓ? Will a
burden be placed on legitimate and desirable international trade?
Will small
businesses without sophisticated economic practices be
disproportionately
scrutinized and persecuted. If the answers to these and other
questions are
Òno,Ó then where do the controls and restraints come from? Not,
surely,
from FinCEN itself, which has demonstrated no qualms over the
ethical
ambiguity of its practices and has no formal public policies
regarding
minimization of data collection, assurance of personal privacy, or
guarantees
against governmental over-reaching.
Is FinCEN Legal?
FinCEN might not be legal. A number of federal statutes
govern the
handling of various kinds of information by government, and it is
difficult to
say whether FinCEN, which operates very quietly, is complying by
them all.
It would be valuable for someone to canvass these statutes and
figure out
exactly which should apply to FinCEN and what meaningful obstacles
they
present to the growth and accession of power for FinCEN. Relevant
statutes
at least include the Computer Matching Act, the Right to Financial
Privacy
Act, the Privacy Act, the Bank Secrecy Act, the Freedom of
Information Act,
the Electronic Funds Transfer Act, and the Fair Credit Reporting
Act.
Three months after its birth, FinCEN applied for exemption
from the
strictures imposed by several of these lwws.48 Among other
requests,
FinCEN sought to be relieved from notice requirements compelling
it to tell
the public what is in its data bases, sought to bar the public
from access to its
data bases, sought to deny individuals the right to know whether
the system
contains records containing information about them, sought to deny
individuals the right to amend incorrect about themselves
contained in a
FinCEN database, sought permission to collect information beyond
what is
Òrelevant and necessary to accomplish a FinCen purpose,Ó sought
relief from
a requirement that agencies notify individuals when making a
record on that
individual available for other uses, and sought waiver of a
requirement that
federal records be held to certain standards of accuracy.
The various provisions in federal law that require agencies
to provide
notice to individuals when creating or sharing files about them
reflect the
principle that the public has the basic right to know what the
government
knows about them, and who is being to told. Exemption from these
notice
provisions will effectively allow FinCEN to operate at a level of
hidden-ness
and invisibility largely incompatible with current law:
The bill would let local, state, federal, and international law-
enforcement
agencies provide information on suspected drug dealers to
[FinCEN], without
providing notification of the transfer of such information to
individuals....The
bill contains several amendments to the Right to Financial Privacy
Act, which
exempts financial institutions from requirements that they notify
customers
that information has been passed on to a federal agency. This
information, in
turn, then could be passed on to FinCEN....Agencies can Ôtransfer
to FinCEN and
other agencies customer account information subject to the Right
to Financial
Privacy Act without having to provide notice of such transfer.49
FinCEN thus continues aggressively to press at the confines
of its
mission, to secure new pipelines of information, and to lobby for
a carte
blanche to conduct its activities outside public scrutiny. Why
does our society
now have a FinCEN and do we need one? To a startling extent, such
questions currently appear to have little role in the political
process. We may
have a long way to go before a FinCEN can work as well as a tyrant
might
want it to. But we have just as far if not farther to go before
we can make
meaningful social assessments of such technologies and
institutions, weigh
their costs and benefits, and find sensible ways to control them.
As one
observer noted in reference to the FBIÕs use of financial data
bases, ÒLong after
the public appetite for social control recedes, the infrastructure
of social
control will be in place, up and running.Ó50
1 Department of the Treasury Order No. 105-08.
2 FinCEN was created as part of President BushÕs National Drug
Control Strategy.
ÒBrian M. Bruh Appointed Director of Treasury DepartmentÕs
Financial Crimes
Enforcement Network,Ó Treasury Department press release, March 20,
1990.
3 See generally Ingo Walter, The Secret Money Market: Inside the
Dark World of Tax
Evasion, Financial Fraud, Insider Trading, Money Laundering, and
Capital Flight, (New
York: Harper Business) 1985, and especially chap. 6, ÒDemand for
Secret Money:
Money Laundering and Undercover Activities.Ó
4 A more colorful description of the process appeared several
years ago in Time:
The multibillion-dollar flow of black money, the profits from
criminal enterprise,
moves through the worldÕs financial institutions as part of a
vastly larger quantity
of gray money, as bankers call it. This dubious, laundered
cash amounts to an
estimated $1 trillion or more each year. Often legitimately
earned, this money has
an endless variety of sources: an Argentine businessman who
dodges currency-
control laws to get hiss savings out of the country; a
multinational corporation that
seeks to ÒminimizeÓ its tax burden by dumping its profits in
tax-free havens; a
South African investor who wants to avoid economic sanctions;
an East German
Communist leader who stashed a personal nest egg in Swiss bank
accounts; or even
t he CIA and KGB when they need to finance espionage or covert
activities overseas.
Jonathan Beaty and Richard Hornik, ÒA Torrent of Dirty Dollars;
Money Laundering
Is A Runaway Global Industry That Serves Customers Ranging from
Cocaine Cartels
to Tax-Dodging Corporations,Ó Time, Dec., 18, 1989, p. 50.
According to another source, in 1990, ÒThe Clearing House
Interbank Payment System,
or CHIPS, the main processing center for [electronic fund]
transfers...handled some 37
million transactions worth $222 trillion.Ó Gordon Witkin,
ÒWashing the Dirtiest
Money,Ó U.S. News, Vol. 3, No. 9, Aug. 26, 1991, p. 38.
5 Gordon Witkin, ÒWashing the Dirtiest Money,Ó U.S. News, Vol. 3,
No. 9, Aug. 26,
1991, p. 38.
6 ÒPrivacy Act of 1974; Notice of Proposed Rule Exempting a
System of Records from
Certain Requirements,Ó Federal Register, Vol. 55, No. 142,
Tuesday, July 24, 1990.
7 Earl Combs, senior intelligence research specialist at
Treasury, quoted in Jennifer
Richardson and Bob Brewin, ÒHigh-Tech Drug Wars,Ó Federal Computer
Week, April
23, 1990, p. 24. (Hereafter, Richardson & Brewin).
8 Fact Sheet, FinCEN Director, February 1991, emphasis added, p.
1.
9 Quoted in Bob Brewin and Jennifer Richardson, ÒDrug Bill Would
Ease Fed Access to
Records,Ó Federal Computer Week, Vol. 4, No. 20, May 21, 1990, p.
37.
10 Fact Sheet, p. 3.
11 Shortly after FinCEN commenced operations, Director Bruh stated
that 50% to 70%
of the OfficeÕs resources would be directed against the narcotics
trade. The remainder of
resources Òwould be targeted against other crimes involving a
financial component
including illegal weapons sales and technology transfer
violations.Ó ÒTreasuryÕs
Financial Crimes Office Begins Operations, Director Says,Ó BNAÕs
Banking Report, May
28, 1990, Vol. 54, No. 21, p. 904.
12 David W. Robb, ÒComputer Center Tracks Criminals by Their
Finances,Ó Government
Computer News, April 30, 1990, p. 66.
13 Richardson & Brewin, p. 24.
14 Robb, p. 66.
15 According to Treasury analyst Earl Combs, ÒAn overwhelming
percentage of the
transactions are not derogatory.... Most are legitimate.Ó
Richardson & Brewin, p. 24.
16 Robb, p. 66.
17Ò A-Bomb Birthplace Helps Target Cash; Needles in Haystack DonÕt
Want To Be
Found,Ó Money Laundering Alert,, September, 1990, Vol. 1, No. 12,
p. 3.
18 Richardson & Brewin, p. 24.
19 Witkin, p. 38. The Washington suburb is Arlington, Virginia.
Darryl K. Taft,
ÒFinCEN Enlists IBM Server To Fight War on Drugs; Treasury
DepartmentÕs Financial
Crimes Enforcement Network.Ó Government Computer News, May 13,
1991.
20 Richardson & Brewin, p. 24.
21 Before FinCEN got off the ground, its acting director, Daniel
J. Ripa, opined
enthusiastically, ÒWe will search the data base using any
combination you can think of,
any pattern you can think of.Ó Quoted in the American Banker,
Nov. 9, 1989.
22 ÒA-Bomb Birthplace Helps Target Cash.Ó The article also
indicates that, contrary to
popular perception, Los Alamos only devotes half of its work to
arms control, nuclear
weaponry, and related issues. It devotes considerable work to
counterterrorism and
counternarcotics efforts.
23 This implication is bolstered by the Los Alamos spokesman who
stated that Òthe
challenge of the [FinCEN] project is to improve the capability of
federal agencies to
Ôrecognize targetsÕ in the face of mountains of financial data
which they gather from a
multitude of sourcesÓ in order to detect the movement of illegal
money Òcontained in the
trillions of dollars that move by wire transfer in and out of the
U.S. on a weekly basis.Ó
Ibid., emphasis added. Almost a trillion dollars is transferred
by international wire
transfers every day. ÒBanks Feel Pressure To Halt Money
Laundering,Ó Reuters,
Financial Report, Domestic Money, Money Report, May 2, 1990, BC
cycle.
24 Ò[A] potential laundering spot that has caught FinCENÕs eye is
the hundreds of casas de
cambio that dot Southern California and the border with Mexico.
Set up to exchange
dollars for pesos and vice versa and transmit money abroad, the
casas handle enormous
amounts of cash with far less regulation than banks.Ó Los Angeles
Times, June 26,
1991.
25 Fact Sheet, p. 2.
26 Ibid.
27 One type of record to which FinCEN apparently will not have
access is individual bank
accounts. ÒBanks Feel Pressure To Halt Money Laundering,Ó
Reuters, Financial Report,
Domestic Money, Money Report, May 2, 1990, BC cycle.
28 ÒLatin Nations Approve System To Track Drug Money,Ó Money
Laundering Alert,
May, 1991, p. 7.
29 Money Laundering Alert, June 1990.
30 Ironically, among those most worried about the implications of
such sharing are the
DEA and FBI themselves, not because of ethical implications, but
because of concerns on
the parts of ÒDEA and FBI field agents that confidential informant
data is protected
adequately in any interagency computer system.Ó Richardson &
Newin, p. 22.
31 White House National Drug Control Strategy, 1990, p. 83.
32 Katz, p. 52. This author also reports that, by the mid-1980s,
Òthere were
3,530,000,000 files on individuals housed in federal government
computers alone,Ó or
about fifteen per person. P. 51.
33 The American Banker, Nov. 9, 1989.
34 Ronald F. Rice, assistant director for Office of Systems
Integration, FinCEN, quoted in
Darryl K. Taft, ÒFinCEN enlists IBM Server to Fight War on Drugs;
Treasury
DepartmentÕs Financial Crimes Enforcement Network.Ó Government
Computer News,
May 13, 1991.
35 Ibid.
36 Witkin, p. 38.
37 In this context, it is interesting to note that FinCEN director
Brian Bruh has an
extensive civil service background in the IRS, the Department of
Defense, and the
General Services Administration. ÒBrian M. Bruh Appointed
Director of FinCEN,Ó
Treasury Department Press Release, March 20, 1990.
38 Fact Sheet, p. 2.
39 ÒBrian Bruh Named Director of TreasuryÕs FINCEN,Ó Money
Laundering Alert, April,
1990.
40 Bill Atkinson, ÒTreasury Rolls Out High-Tech Drug Unit,Ó
American Banker, May
21, 1990, p. 6.
41 Los Angeles Times, June 26, 1991.
42 Ned Zeman and Lucy Howard, ÒA Trove,Ó Newsweek, July 2, 1990,
p. 4.
43 ÒFinCENÕs Financial Missiles Strike Iraq, Saddam,Ó Money
Laundering Alert, April
1991, Vol. 2, No.7, p. 3.
44 Witkin.
45 Ibid.
46 See generally Diana R. Gordon, ÒTestimony on Proposed NCIC
Economic Crime Index,Ó
Subcomm. on Civil and Constitutional Rights, U.S. House of
Representatives, Comm. on
the Judiciary, April 24, 1985.
47 Witkin.
48 ÒPrivacy Act of 1974; Notice of Proposed Rule Exempting a
System of Records from
Certain Requirements,Ó Federal Register, Vol. 55, No. 142,
Tuesday, July 24, 1990, p.
30005.
49 Bob Brewin and Jennifer Richardson, ÒDrug Bill Would Ease Fed
Access to Records,Ó
Federal Computer Week, Vol. 4, No. 20, May 21, 1990, p. 37.
50 Donald R. Katz, ÒWe Know All About You,Ó Esquire, July 1990, p.
52.
