Budget may hurt states' financial crime fight

By Brett Wolf

ST. LOUIS, March 14 (Complinet) - A looming cut to the federal financial-crime agency's budget could cripple state and local investigations that depend on transactions monitored via the anti-money laundering Bank Secrecy Act, worried authorities said.

In a surprise move, the Treasury Department's Financial Crimes Enforcement Network (FinCEN) has decided to save nearly $1.4 million by doing away with positions that facilitate state and local law enforcers' access to the coveted data, often used in fighting drug trafficking, fraud and terrorism finance.

"For very, very small savings, we're looking at having a very major negative impact on investigations," Cameron Holmes, the senior litigation counsel for the Arizona Attorney General's Office, told Complinet. "It is far, far, far out of proportion to the savings."

BSA data includes reports that financial institutions such as banks, broker-dealers and money services businesses have filed on transactions deemed suspicious, or those involving large amounts of cash. Millions of such reports are filed with the Treasury Department each year and are stored electronically in FinCEN databases.

Financial investigators and others rely on these documents to help them track suspicious money flows. In recent years, investigators with federal, state and local law enforcement agencies have been able to access Bank Secrecy Act data instantly online at their workstations. FinCEN is poised, however, to abolish direct access for state and local authorities, and force them to access the data via a gatekeeper, to try to save money.

The Obama administration's fiscal 2012 budget request for the Treasury Department seeks direct appropriation of $84 million for FinCEN, a reduction of roughly 25 percent from the $111 million appropriation for fiscal 2010.

The cut's impact is meant to be blunted by transferring $30 million from Treasury's forfeiture fund and $3 million from elsewhere, but the total allocation of $117 million would be too little to prevent FinCEN from slashing certain programs.

FinCEN spokesman Steve Hudak told Complinet that as a result of deficit concerns, all federal agencies have been asked to "prioritize their capabilities." The cuts would take effect from October. Hudak said BSA data users at the federal level would be unaffected.

The most controversial of the planned cuts would eliminate nine full-time FinCEN jobs. The employees on the chopping block train state and local law enforcers who access BSA data online via FinCEN's so-called Project Gateway system and audit their usage. Without these specialists, FinCEN could not oversee the law enforcers' access and ensure that the highly sensitive data is used appropriately, Hudak said.

The Obama administration budget document said the cut "will limit direct access to BSA data to only state coordinators." The coordinators are typically state-police agencies that serve as points of contact for FinCEN.

"The state coordinators and FinCEN analysts would then be asked to provide access to the BSA by fulfilling query requests from those customers that previously had direct access," the budget document states.


FinCEN has frequently touted Project Gateway over the years because of its efficiency in distributing BSA data to state and local users. The center's web site says: "Gateway's cutting-edge technology gives each state electronic access directly to financial information, which they use with great success."

Now, however, with FinCEN prepared to abolish such access, some state and local law enforcement officials complain that the decision will cripple their work.

Holmes' chief concern was that if investigators are forced to access BSA data through their state coordinators, it could take days or even weeks of "back and forth, back and forth" communication to refine a document search. In contrast, a trained investigator could do the job in half an hour with direct access, he said.

"The state coordinator will be playing 'pin the tail on the donkey' trying to find what the investigator really wants," he said. "There is a very high likelihood that many of these investigations are not going to happen out of frustration."

Holmes was also concerned that even if the state coordinators were eager to help, they would lack the staff to handle the massive numbers of likely inquiries. According to FinCEN, in 2010, state and local law enforcement and regulatory agencies made roughly 173,000 queries to FinCEN's BSA database.

"Of these requests, approximately 53 percent were made through state coordinators. As the budget request states, we expect that state and local needs can be met by channeling requests through state coordinators, or by direct request to FinCEN," Hudak told Complinet.

Holmes also said he feared that information gleaned from the BSA data would be "garbled" as it was passed around, and that investigators would no longer know that parallel investigations targeting the same people or entities were underway in other jurisdictions. "I still find it very, very difficult to believe that this could happen. This should never happen," he said.