By Jamie Rowsell
Criminals know banks will catch blatantly suspicious activity. Most transaction-monitoring software will alert flagrant customer activity. Today’s criminals are avoiding this by making the unusual appear normal. How are they doing this? By breaking their activities down into smaller, normal-looking pieces and spreading them across multiple institutions.
Here is an example of how criminals might try to exploit the siloed nature of organizations, including community banks. An individual deposits $4,000 at Bank A. Next, she walks a few blocks over and deposits $4,500 at Bank B. Finally, she drives to a neighboring town and deposits $3,750 at Bank C. None of these banks can see that this individual, perhaps a member of a drug trafficking ring, is using them to launder illicit funds—ultimately moving the money to a terrorist cell in an international location. If the criminal completed all of these transactions at one bank, his or her activity would quickly be flagged as suspicious. Because so many financial institutions can only see what is happening within their own four walls, a broader picture of criminal activity is missed.
This is what makes Section 314(b) of the USA PATRIOT Act such a valuable tool for community banks. Section 314(b) allows financial institutions, registered with the Financial Crimes Enforcement Network, to voluntarily share information with one another under a “safe harbor” from civil liability.
With constantly increasing workloads, fraud and anti-money laundering officers at community banks need every advantage available. Working together via Section 314(b) collaboration, these banks can open a wealth of previously unavailable information and close a gap criminals are exploiting. The quality of anti-money laundering investigations is improved, both in terms of time spent and ability to uncover potentially suspicious activity.
Without access to the full picture, criminal activity can fester undiscovered and an investigator’s time is often wasted on decision-making filled with uncertainty. In the fight against money laundering and a range of fraudulent activity tied to these criminal offenses, 314(b) collaboration is a powerful tool in a community bank’s arsenal.
Jamie Rowsell (email@example.com) is a market researcher at Verafin Inc. in St. John’s, Newfoundland, an ICBA Preferred Service Provider of fraud detection software.