Gone are the days when crooked politicians took their bribes in suitcases full of cash and drug cartels buried fortunes on farmlands. Hostile kleptocrats and criminal networks are now digitally entrenched in the U.S. financial system. Take the example of Kremlin-connected billionaire Suleiman Kerimov, whom the United States sanctioned for playing a “key role in advancing Russia’s malign activities.” To secretly fund a top donor to the British Conservative Party, he used Deutsche Bank’s New York branch to route $8 million to London through a shell company in the British Virgin Islands. And when the alleged narcoterrorists who rule Venezuela want to bribe judges, buy machine guns, or flood the United States with cocaine, their dirty money flows through South Florida banks and real estate.
Authoritarians who see themselves as waging war against the United States but unable to compete economically or militarily have taken to weaponizing the corruption that is endemic to their political systems, choosing the realm of finance and investment as their geopolitical battlefield of choice. But that strategy also has an Achilles’ heel, because it means the proceeds of kleptocracy and corruption are sitting within reach of U.S. financial authorities. Moreover, the United States already has the basic tools to conduct reconnaissance on an adversary’s financial position, including a private sector that reports suspicious financial activity to law enforcement. But to truly activate these defenses against financial attacks, Congress should significantly hike the budget of a potentially mighty but severely underfunded and understaffed bureau operating on outdated technology in a Virginia office building affectionately known as the “toilet bowl.”
The Financial Crimes Enforcement Network (FinCEN) is the bureau of the U.S. Treasury Department responsible for detecting and preventing flows of money earned from crime. A generation ago, that entailed analytic support for criminal investigations. But over time, FinCEN outsourced most of that work by letting law enforcement directly access FinCEN’s database of information that banks are required to file by the U.S. Bank Secrecy Act, such as suspicious activity reports. Today, FinCEN focuses mostly on maintaining its database and setting reporting requirements. As part of that role, FinCEN was recently charged with building a national registry of corporate ownership, just one of 50 provisions of the recent National Defense Authorization Act that FinCEN must now implement. Whereas the Treasury Department’s other defenses like sanctions and investment screening are important but fundamentally reactive—trying to keep up with well-resourced oligarchs and other proxies employed by adversarial governments—FinCEN recruits financial institutions to build regulatory compliance systems that proactively help detect dirty money.
Gone are the days when crooked politicians took their bribes in suitcases full of cash and drug cartels buried fortunes on farmlands. Hostile kleptocrats and criminal networks are now digitally entrenched in the U.S. financial system. Take the example of Kremlin-connected billionaire Suleiman Kerimov, whom the United States sanctioned for playing a “key role in advancing Russia’s malign activities.” To secretly fund a top donor to the British Conservative Party, he used Deutsche Bank’s New York branch to route $8 million to London through a shell company in the British Virgin Islands. And when the alleged narcoterrorists who rule Venezuela want to bribe judges, buy machine guns, or flood the United States with cocaine, their dirty money flows through South Florida banks and real estate.
Authoritarians who see themselves as waging war against the United States but unable to compete economically or militarily have taken to weaponizing the corruption that is endemic to their political systems, choosing the realm of finance and investment as their geopolitical battlefield of choice. But that strategy also has an Achilles’ heel, because it means the proceeds of kleptocracy and corruption are sitting within reach of U.S. financial authorities. Moreover, the United States already has the basic tools to conduct reconnaissance on an adversary’s financial position, including a private sector that reports suspicious financial activity to law enforcement. But to truly activate these defenses against financial attacks, Congress should significantly hike the budget of a potentially mighty but severely underfunded and understaffed bureau operating on outdated technology in a Virginia office building affectionately known as the “toilet bowl.”
The Financial Crimes Enforcement Network (FinCEN) is the bureau of the U.S. Treasury Department responsible for detecting and preventing flows of money earned from crime. A generation ago, that entailed analytic support for criminal investigations. But over time, FinCEN outsourced most of that work by letting law enforcement directly access FinCEN’s database of information that banks are required to file by the U.S. Bank Secrecy Act, such as suspicious activity reports. Today, FinCEN focuses mostly on maintaining its database and setting reporting requirements. As part of that role, FinCEN was recently charged with building a national registry of corporate ownership, just one of 50 provisions of the recent National Defense Authorization Act that FinCEN must now implement. Whereas the Treasury Department’s other defenses like sanctions and investment screening are important but fundamentally reactive—trying to keep up with well-resourced oligarchs and other proxies employed by adversarial governments—FinCEN recruits financial institutions to build regulatory compliance systems that proactively help detect dirty money.
Over the past three years, FinCEN has suffered three major data security breaches, each involving an employee illegally sharing suspicious activity reports. The most recent and extensive leak became public last September and was called the FinCEN Files. It revealed how Western banks had warned FinCEN as they moved millions of dollars on behalf of disreputable characters. Besides Kerimov, they included a Dubai launderer of Taliban cash, a California business running a Ponzi scheme, and a former Kazakh mayor exiled for corruption.
The top implication of the FinCEN Files is that the U.S. government is probably overlooking a lot of suspicious activity sitting within the bureau’s vaults. The bad activity was uncovered by 400 journalists laboriously sifting through some 2,100 suspicious activity reports. Compare that to FinCEN itself, which receives more than 2 million such reports annually—but only has about 300 employees. That staffing level is not much higher than what FinCEN had in the 1990s, when it was established as the world’s first financial intelligence unit, and slightly less than at other national financial intelligence units like those of Canada or Australia. With only 300 people responsible for the keeping the world’s largest financial system clean, it is unsurprising that less than 1 percent of global illicit financial flows are seized and frozen.
FinCEN cannot be just any national financial intelligence unit. More than half of international payments take place in U.S. dollars, while U.S. companies provide the world’s largest share of offshore financial services—moving, hiding, and stashing money from abroad. Moreover, no nation has been targeted more than the United States by authoritarian regimes such as Russia and China funneling covert money into elections, similar to the example of Kerimov bankrolling the Conservatives from Moscow.
Nor can FinCEN be just any bureaucracy. The U.S. government must reimagine FinCEN as an essential one-stop shop to support law enforcement with sophisticated financial intelligence and formidable analytic capabilities. FinCEN should deploy automated data analytics to facilitate mapping all manner of information sources—not limited to suspicious activity reports—and spot criminal activity in progress. They also need a deep bench of well-paid and highly accountable talent, as well as organizational structures able to train U.S. criminal investigators on anti-money laundering tradecraft and surge legions of world-class analysts toward emerging cases and risk concentrations. Instead, FinCEN has been held back by a stagnant budget, limited innovation, and antiquated computer systems. Whereas FinCEN’s last IT modernization effort a decade ago—enabling electronic filing of suspicious activity reports and making them available through an online portal—cost less than $22 million, the U.S. Defense Department is spending $10 billion on its Joint Enterprise Defense Infrastructure cloud contract alone.
Congress’s response to the FinCEN Files was to increase the bureau’s budget by $10 million, raising it to $136 million. That’s a drop in the bucket—and nowhere near enough for a vital line of defense for U.S. national security, not to mention against purely domestic criminal activity.
Thus, it is a welcome development that lawmakers across both parties, with backgrounds in national security and financial services, are looking to boost FinCEN’s capabilities and funding in the current budget cycle. U.S. Reps. Abigail Spanberger, Ann Wagner, Tom Malinowski, and Anthony Gonzalez are circulating a letter to their colleagues urging Congress to significantly increase funding for FinCEN for fiscal year 2022, which the signatories see as “a clear opportunity to cost-effectively combat the illicit financial transactions that underlie a broad range of threats to U.S. national security.”
Luckily, there is a good precedent of Congress overhauling a part of the Treasury Department that has suddenly become a front line of national defense: the reform of an investment screening office called the Committee on Foreign Investment in the United States. The law enacted in 2018 after a yearlong process has quadrupled the caseload of foreign acquisitions that the Treasury Department scrutinizes, including complicated deals in highly advanced sectors. This reform has required expanding funding sevenfold.
Boosting FinCEN’s funding in that range should come with substantially greater responsibilities, expectations, and accountability. That calls for a major congressional review and bottom-up executive planning, building on ideas developed by former officials and civil society. That’s a longer process that should begin now and be ready for inclusion in next year’s budget cycle.
For now, however, the United States’ adversaries are not relenting in their financial aggression. U.S. lawmakers should not wait until next year to start investing heavily in FinCEN’s budget. In the ongoing budget negotiations for fiscal year 2022, Congress should make it simple and follow then-Rep. Charlie Wilson’s famous order about funding the CIA’s operations in Afghanistan: “Double it.”
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