Counterterrorism Blog

The Treasury Department's Financial Crimes Enforcement Network (FinCEN) appears to have responded to a published report of a potential gap in the pursuit of critical information needed for terrorist financing investigations. On June 13, Moneylaundering.Com reported that FinCEN has never forwarded special information requests, authorized under Section 314(a) of the Patriot Act, to money services businesses (MSBs) to assist in money laundering or terrorist financing investigations. Under the Act, institutions which receive "314(a) requests" are required to search records for information, determine if they had recent activity with the subject, and respond to FinCEN.

The 314(a) program was one of the investigatory innovations included in the Patriot Act while I was a counsel on the House Financial Services Committee. Financial institutions wanted to assist law enforcement on new cases and saw Section 314 as a means of providing specific information in response to a specific request. But implementation was not complete until February 2003, when an email process enabled law enforcement to send requests in batch to thousands of institutions. On March 1, 2005, FinCEN ceased using e-mail and instead posted 314(a) requests on a secure website. That system was secure enough to survive a cyber hack into FinCEN's entire e-mail list, reported first on this site in 2005.

Experts disagree on the impact of FinCEN's decision to not send 314(a) requests to MSBs. Several experts told Moneylaundering.com that the lack of requests leaves a "huge hole" in the AML-CFT regime. But a former deputy director at FinCEN said that FinCEN "purposely" left out MSBs because they "really don't have customers. We felt it would be too overwhelming for MSBs to comply or for FinCEN to even track it. For FinCEN to add MSBs, they would have to reconfigure everything and I don't think anyone is ready to take that on." I wrote on January 22 about several MSB cases as proof of the difficulty in stopping terrorists' funds flows, and we reported on the initial issuance of Patriot Act regulations on MSBs back in 2005. The first "U.S. Money Laundering Threat Assessment," issued in 2006, reported, "FBI field offices consistently identified MSBs (money service businesses) as the third-most utilized money laundering method that they encounter..." Patrice Motz, who was Chief of the Money Services Business Section at FinCEN in 2001-2002 and is now a consultant, told me, "My experience both in government and industry suggests that the government investigators could benefit greatly from directing Section 314a Requests to the larger MSBs, especially in those areas involved in money movement, including money transmitters and stored value issuers and sellers." (EDIT:) Another veteran analyst, Brett Wolf, disagrees: "It's this customer anonymity that makes MSBs a money laundering threat and also prevents them from meaningfully responding to 314(a) requests. Therefore, asking them to conduct 314(a) searches would be a pointless and costly waste of time and resources."

The Treasury Department's Financial Crimes Enforcement Network (FinCEN) has apparently responded to the new story by issuing a new data sheet on the 314(a) requests and clarifying the criteria for sending them. Included in the fact sheet rae updated statistics on the results:

Terrorism/Terrorist Financing - 275 cases
Money Laundering - 562 cases
Convictions - 47

By comparison, as of September 2005, 314(a) requests had resulted in "157 cases involving terrorism or terrorist financing and 272 cases involving money laundering," and 10 convictions.

This issue represents another of a series which deserve review under a broad assessment of the successes and failures of the changes enacted under Title III of the Patriot Act, as I discussed in detail on May 7.