Money laundering is the act of funneling money from an illegal venture through legitimate businesses in order to obscure the original source of the money. Money laundering was made illegal in the United States in 1986.
Classical money laundering involves three stages: placement, layering, and integration. Placement is getting cash into the system. This usually involves a friendly banker who doesn't fill out reporting forms. Layering is a chain of transactions (these are often interbank transactions) at least one of which needs to be invisible in order to effectively break the monetary trail. Integration is getting the "clean" money back to the original owner. This may take many forms, including offshore "loans" which are never repaid.
Section 5313 of the Banking Secrecy Act (BSA) requires a Currency Transaction Report (CTR) of cash deposits or transactions of $3,000 and above, which is IRS Form 4789, and a Currency Transaction Report by Casinos (CTRC), which is IRS Form 8362. Section 5316 of BSA also requires a Currency or Monetary Instrument Report (CMIR) for transport of $10,000 or more of currency in or out of the U.S. This is Customs Form 4790. Section 5314(a) of BSA requires reporting of foreign bank or financial accounts whose value exceeds $10,000 at any time during the preceding year. This is called a Foreign Bank Account Report (FBAR) and is Treasury form TDR 90-22-1. Section 60501 of the IRS Code requires the reporting of business transactions involving more than $10,000 cash. These are reported on IRS Form 8300. Some of these dollar amounts have been revised downward by subsequent laws and regulations.
These and other forms are entered into the Treasury Financial Date Base (TFDB) and become available on-line in the Treasury Enforcement Communications System, TECS II. The TFDB data are processed through the FinCEN Artificial Intelligence (AI) System, which is trained to identify suspicious transaction patterns.
FinCEN's AI system has been joined by thousands of bio-intelligence (BI) systems also programmed to detect suspicious activity. In 1992 Treasury (now operating through FinCEN) was given authority to issue regulations on "suspicious transactions" reporting (Title 31, USC Sec. 5318(g)). Under this regulation, a local bank (a BI system) is required to report any suspicious behavior in relation to deposits.
The integration of human, communications, and electronic intelligence (HUMINT, COMINT, and ELINT) in FinCEN-type environments required the construction of a common data base standard so that information could easily be transferred between different agencies and different applications. The standard that was decided on was originally implemented at the US Justice Department (DOJ) in a software system for federal prosecutors to keep track of the vast amounts of data involved in a legal case. This was the PROMIS system partly developed and enhanced through a contract between the DOJ and a Washington D.C. based firm called Inslaw.
This data standard, embodied in the PROMIS software, was implemented at the DOJ, the NSA, the CIA, and the NSC. PROMIS was also sold to the Federal Emergency Management Agency (FEMA) to keep track of individuals (in a data base called MAINCORE) who were to be rounded up and incarcerated in the event of certain types of "national emergencies". It is also at the heart of FinCEN's data collation efforts.
- Money Laundering in the Intelligence Community by Orlin Grabbe