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Anti-Money Laundering Toolkit

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The Establishment of an FIU

The establishment of an FIU is required to receive and analyze covered and suspicious transaction reports, to inquire into transactions that attract its attention with respect to possible money laundering, to cooperate with foreign FIUs who may ask for assistance, and to provide financial intelligence to the police and other authorized prosecuting authorities for formal investigations when money laundering or the financing of terrorism suspected.

From the perspective of a developing nation the expense involved in the establishment of an FIU and the whole AML/CFT regime is very great. A number of nations have expressed at international meetings that if the large developed nations were able to contain their criminals and stop the transfer of illicit money from their countries, then there would be no problems for the developing nations to deal with in these area, as the money to be laundered does not originate in the developing nations. They often see it as being very difficult to comply with the international requirements and to maintain them as they lack both the financial and manpower capacity.

Understanding the function of an FIU

One definition¹ of a financial intelligence unit is "a central, national agency responsible for receiving (and, as permitted, requesting), analyzing and disseminating to the competent authorities, disclosures of financial information; (i) concerning suspected proceeds of crime, or (ii) required by national legislation or regulation, in order to counter money laundering". This definition is a limited definition.

A financial intelligence unit is a specialist unit that will generally carry out the following functions:

• Specialist analysis of financial reports
• Detection of money laundering and the financing of terrorism
• Exchange of information between financial institutions and law enforcement bodies, as well as between jurisdictions
• Education of the staff financial institutions with respect to money laundering and compliance with national legislation
• Monitoring of the financial institutions' compliance with national AML/CFT laws

The FIU is not a prosecuting or law enforcement agency. It provides a conduit for information to flow to law enforcement agencies, after analysis by it. It provides a highly specialized service and requires staff who are specialists in the fields of financial analysis and fraud. Both lawyers and forensic accountants are ideal for these posts. Such people are difficult to find in most of the DMCs. The head of an FIU must be able to appreciate the entirety of the "larger picture". It is vital for such people to attend international meetings so that networking can be developed.

In some jurisdictions where there is a vulnerability to fraud and corruption, the FIU will also provide advice to both government agencies, Ministers, and to the private sector about the typologies of frauds that may be attempted within the jurisdiction. Legislation to this effect is generally justified on the basis that there may be need to assist in the protection of the economy from such attacks. This can be important where there is a general lack of capacity in law enforcement agencies.

Problems confronted by an FIU

1. Many FIUs in developing countries lack the capacity to analyze the information provided to them.
2. Part of the work of FIU staff is to become aware of corruption involving political leaders and others. Strategies must be developed to ensure that these issues are dealt with properly and that the staff are protected from physical attack.
3. The impact of an FIU on the protection of a country's economy can be important, not just on the basis of its reputation, but also on the basis of the attacks that can be made by the money launderers and by fraudsters. Problems exist where the political leaders have been persuaded to support fraudulent activities due to a lack of experience in the financial area. This is the case in many DMCs.

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