19th Parliamentary Intelligence-Security Forum – Illicit finance, financial integrity software solutions, biological warfare

Dr. Simonka made remarks about money laundering and the role of FIUs.

Money Laundering

• The perpetrators of money laundering legitimize the proceeds of crime – concealing or disguising the criminal nature of funds
  • Illicit financial flows/activities occur in the forms of transactions such as:
    • Cross-border                      funds             transfer         via                    transit accounts
    • Real estate purchase o Transactions on virtual currency o Trade-based                     money           laundering    related transactions
    • Gambling activities
  • Representatives of the private sector have the knowledge, experience, and expertise to detect the unusual, illicit, suspicious activity of perpetuators – obliged entity

After that, he gave a brief overview of the functions of the Financial Intelligence Units (FIUs). FIUs are entities that aid in the fight against money laundering through suspicious reported emitted by the private sector, specifically banks and financial institutions.

Core Functions of an FIU

• Receive information from private entities (obliged entities)
  • Analyze information
  • Disseminating information
  • International information exchange with other FIUs

Essentially, FIUs transform financial information/intelligence (emitted by private sector) into criminal intelligence.

Egmont Group is an international body of FIUs. This organization is a web of FIUs at an international scale that support each other with information sharing to combat money laundering.

Egmont Group

• International body – FIUs are members
  • Provides a global platform for international exchange
  • Setting up standards with which the FIUs must comply
  • Supports the groups of the FIUs through its project and its capacity-building training centre (ECOFEL)

If an obliged entity suspects that funds from the proceeds come from illegal sources, it should be required, by law, to report promptly the suspicions to the FIU

Reporting obligation of obliged entities

• Subjective – the obliged entity decides on making a report
  • Low level of suspicion
  • Inclusive – the reporting obligation covers the predicate offenses
  • Reporting obligation is basically determined by red flag indicators, typologies, and profile
  • Obliged entities follow the international and national indicators
  • FIU feedback improve the reporting practices of obliged entities

FIUs share information at a global scale. He then explained how it is shared.

International Information Sharing

• Routinely carried out by FIUs
  • Exchanging financial information between LEAs and judicial authorities (MLA at an international level
  • Exchanging financial information is not the monopoly of the FIU. In other words, they share more than just financial information

After talking about how FIUs share information, he began with remarks related to how the increasing peed of transactions make it more challenging to detect illicit activity. 

The Speed of Transactions

• Need of customers increased – credit institutions serve the customer
  • Cross border transactions became very fast
  • This feature becomes very apparent in the cross-border transfer of fraud-related funds
  • Difficult to identify illicit financial flows on time during the monitoring activity of the credit institutions and other obliged entities
  • Fast cross-border transactions should be counterbalanced with effective monitoring activity

Afterwards, he concluded by saying that FIUs play a key role in in the fight against money laundering, TF, and proceeds-generating crimes. He also said that exchanging information through LEA’s and judicial authorities (MLA) at international levels should be enhanced. Also, the role of advanced IT solutions and the need for PPP mechanisms has significantly increased in the AML/CFT domain. He later suggested the strengthening of the supervisory bodies of non-financial obliged entities and the cooperation between these supervisory bodies and the FIU.