Shutting Down the Laudromat: An Interview with an AML Superhero

LETTER FROM THE PRESIDENT

James D. Ratley, CFE
ACFE President

Successful criminals often have a common problem. After they steal the cash, they can’t spend it. They must first wash it.

They search for discreet laundromats. But financial institutions — spurred by federal laws, loss of reputation and a heightened sense of ethics — are cracking down on crooks who want to make their cash squeaky clean.

Jennifer Shasky Calvery has been fighting money laundering and other crimes for years — first at the U.S. federal government and now as the Global Head of Financial Crime Threat Mitigation at HSBC Bank. Before joining HSBC in 2016, she was director of the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) for four years after a 15-year career at the U.S. Department of Justice. She’ll be receiving the ACFE Cressey Award at the 28th Annual ACFE Global Fraud Conference.

“While I was at the Treasury Department, FinCEN analysts made major strides to enhance deployment of advanced analytics tools to make sense of the ocean-sized data they had at their disposal from SAR [Suspicious Activity Report] filings and other sources of information,” Calvery says in the cover article of the May/June issue of Fraud Magazine. “These tools were essential to FinCEN’s ability to mine data and spot trends, and I knew that I would also need to leverage these tools at an international bank like HSBC.”

Calvery believes that fraud fighters should seize the opportunity to strengthen money laundering information sharing between the public and private sectors.

However, she says that banks are constrained by what they can share with industry peers and to governments. And banks and governments are restricted in what they can exchange cross-border. Regardless, Calvery can act as a mediator among the players because of her anti-money laundering credentials.

“In my role ... at HSBC, I’m focused on deploying innovative solutions that increase the effectiveness and efficiency of our ability to detect, deter and combat financial crime,” says Calvery. “In jurisdictions around the world, governments are adopting ‘sandbox approaches,’ allowing industry latitude to be creative in finding internal solutions to address risks in a way that encourages innovation while providing appropriate safeguards.”

More power to Jennifer Shasky Calvery. I’m looking forward to hearing her keynote at the 28th Annual ACFE Global Fraud Conference, June 18-23 in Nashville. See you there!

Taking AML to the Next Level

SPECIAL TO THE WEB

Bob Tie, CFE, CFP
Fraud Magazine contributing editor

Liberty Reserve, S.A., a Costa Rica-based Internet money transfer system, served a million customers around the world and in the U.S. Not any more. On May 28, FinCEN director Jennifer Shasky Calvery and Preet Bharara, U.S. Attorney for the Southern District of New York, initiated tough administrative and prosecutorial measures against Liberty, which they said employed its widely used digital currency to launder criminals’ illicit profits on an unprecedented scale.

This case and others like it exemplify a major challenge facing fraud fighters today: Innovative fraudsters in lax jurisdictions — unless prevented — can run Internet-based fraud schemes, which can undermine even the world’s most carefully regulated financial systems.

Shasky Calvery therefore issued a Notice of Finding that Liberty Reserve, operating outside the U.S. as a financial institution (FI), was “of primary money laundering [ML] concern.” At the same time, Bharara indicted seven Liberty principals and employees for processing 55 million allegedly illegal transactions to launder $6 billion in suspected proceeds of crimes including credit card fraud, identity theft, investment fraud, computer hacking, child pornography and narcotics trafficking.

FinCEN’s issuance barred Liberty from the U.S. financial system and alerted the international community to the risks the firm presented. The Department of Justice’s (DOJ) indictment charged each Liberty official with conspiracy to commit money laundering, which carries a maximum prison term of 20 years, and with other charges that could draw terms adding up to 10 more years.

Further, the DOJ, in concert with the U.S. Secret Service, IRS Criminal Investigation, Immigration and Customs Enforcement, Homeland Security Investigations and law enforcement agencies from 17 other countries, arrested five Liberty officials and seized the firm’s Internet domain (formerly www.libertyreserve.com), terminating its operations. They also shuttered the sites of several currency exchangers that had electronically funneled depositors’ allegedly illicit funds to Liberty for transfer to accounts that disguised their true origin.

TRADITION OF PARTNERSHIP

FinCEN’s mission, as a bureau of the Department of the Treasury, is to safeguard the U.S. financial system from ML and other abuses and to collect, analyze and disseminate financial intelligence, while helping to coordinate anti-money laundering (AML) and counterterrorism financing (CTF) activities for maximum effectiveness.

FinCEN has been coordinating its efforts with the DOJ plus domestic and foreign law enforcement for years. The financial services industry — FinCEN’s eyes and ears in the marketplace — has long reported possible ML and terrorist financing. And FinCEN has always worked closely with U.S. and international financial regulators to increase the effectiveness and practicality of domestic and global AML compliance and enforcement regimes.

So is the status quo good enough? Not if AML teams hope to do more than merely react to the latest schemes, which as the Liberty Reserve case shows, can involve a staggering number of global participants whose various criminal activities finance the spread of organized crime.

Read the rest of the Special to the Web article on Fraud-Magazine.com.