Detecting Corruption: Follow the Money
In a recent annual report on Suspicious Activity Reports, SAR Activity Review, which focused on Foreign Corruption, Copy (Here), FinCEN demonstrated its growing role in foreign corruption enforcement. This is no surprise.
FinCEN is the Treasury Department’s lead agency in fighting money laundering. FinCen has an elaborate domestic and international network who are well positioned to follow the money. It collects data from financial institutions around the world.
It is obvious but sometimes ignored that corruption always involves the moving of illegal proceeds in the global financial system. Politically Exposed Persons (PEPs) are identified as potential risks for using their influence for personal gain.
Financial institutions help to identify PEPs, and the surrounding risks and transactions which may involve corruption. International coordination and cooperation builds on this data through the work of a well-established network of financial investigators which can track down illicit proceeds and help in subsequent efforts to recover stolen assets.
FinCen’s primary tools are three basic requirements of financial institutions:
— Requiring financial institutions to identify and apply enhanced due diligence to private banking accounts held by or for the benefit of PEPs;
— Providing guidance to U.S. financial institutions to risks with respect to suspicious activity reporting (SAR) requirements relating to potential corrupt activity; and,
— Promoting transparency of U.S. legal entities in the financial system.
FinCEN has worked with law enforcement and regulatory partners to enhance their identification efforts and reporting requirements for SARs and possible connections to foreign corruption.
The number of SAR filings related to foreign corruption have steadily increased over the last two years — with a notable increase after February 2010. In 2009, the total number of SRA filings specifically related to foreign corruption was 48, and the number increased to 78 in 2010, a significant rise of just over 50 percent.
FinCEN is another government tool which is playing a greater role in launching FCPA investigations. FinCEN does the smart thing — it follows the money.