Informal Value Transfer Systems

In March 2003, FinCEN issued Advisory 33,3 which provided a general overview of informal value transfer systems (IVTS) and indicators of such activity. As part of the Advisory, FinCEN provided instructions to financial institutions regarding the filing of IVTS-related SARs. The guidance instructed depository institutions to check the ?Other? box in Part III, Line 35(s) on Form TD F 90-22.47 and note the abbreviation ?IVTS? in the space following the box in instances where the financial institution had reason to believe the activity to be IVTS-related. Some financial institutions have followed that guidance and, in doing so, have provided valuable and more easily retrievable information to FinCEN and law enforcement regarding IVTS trends and patterns. Depository institutions should continue to follow the guidance in Advisory 33 for reporting IVTS-related suspicious transactions. Filers of Form TD F 90-22.56 (Suspicious Activity Report by Money Services Business), FinCEN Form 101 (Suspicious Activity Report by the Securities and Futures Industries), and FinCEN Form 102 (Suspicious Activity Report by Casinos and Card Clubs) should also follow these instructions when completing those forms.

Parallel to the release of Advisory 33, FinCEN completed an analysis of a sampling of SARs referencing IVTS or IVTS-like operations. Four predominate themes identified from those SARs are:

Unlicensed and/or unregistered money transmitters;
Hawala or other types of IVTS;
Black Market Peso Exchange (BMPE); and,
Evasion of the International Emergency Economic Powers Act (IEEPA).

Examples of the types of activities reported by institutions related to these themes may be found in the remainder of this section.

Illegal Money Transmitter Businesses

Forty-five SARs (or 56.3 %) filed regarding unregistered and/or unlicensed money transmitter businesses identified a variety of techniques commonly used by IVTS operators to facilitate the transfer of funds on behalf of their customers. Many unlicensed/unregistered money transmitters were identified by the filing institution as IVTS because of the mechanisms used to conduct transactions that ultimately ended up going through a depository institution account such as aggregation of monetary instruments or cash from multiple sources.

Most IVTS operations are considered money services businesses (MSBs) by virtue of the funds/value transfer services they provide to their customers. Financial institutions often identify IVTS operations when exercising effective due diligence on customers who claim to be money remitters yet fail to provide adequate proof that the business is registered with the Department of the Treasury or appropriately licensed in respective states where such licenses are required. The type of account activity exhibited by such entities also provides significant insight into the identification of illegal and informal MSBs that may be providing IVTS services. The SARs analyzed for this study provided a number of such indicators:

Use of personal accounts to facilitate the negotiation of cash and thirdparty checks followed by outgoing wire transfers;
Account activity inconsistent with the type of account held by a customer and/or volume of activity anticipated by the filing institution (according to the expected levels conveyed to the institution by the account holder);
Account holder occupation inconsistent with the type and volume of financial activity affecting an account; e.g. unemployed, housewife, etc.;
Large volume deposits of cash, checks, and other types of monetary instruments immediately followed by wire transactions abroad;
Structured cash transactions through the use of multiple transactors at multiple branches of the financial institution where the suspect account is maintained;
Account holders using their personal accounts to act as possible agents of wire remitter businesses;
Personal accounts used as ?layering? points involving wire transfers sent into those accounts from unregistered and/or unlicensed MSBs and then transferred abroad;
Cash intensive businesses (for example, restaurants) providing transfer services to groups of people by accepting cash to facilitate payments to customers? family members residing in a foreign country; Businesses conducting structured cash deposits and drawing checks from their account to purchase bulk phone cards and/or stored value cards for possible resale;
Similarly, a subject engaged in the suspected operation of an unlicensed MSB conducting numerous outgoing wire transmissions out of his personal account, in addition to drawing checks from his account to pay for phone cards;
Use of possible shell companies and multiple accounts to facilitate the structuring of cash, deposit of money orders, and the negotiation of thirdparty checks, followed by wire transfers from the accounts to high risk countries;
Deposits of cash into accounts and subsequent outgoing overseas wire transfers by unregistered and/or unlicensed MSBs conducted on behalf of expatriate workers wishing to send money back home to their families; an account is typically maintained to service customers in one state or locale, while the actual account holder (or an agent) conducts the remittance transactions from another state. In one reported instance, foreign cruise line employees transferred cash to an unlicensed MSB via an intermediary who carried the cash from the ship and deposited it into the unlicensed MSB account at a nearby bank branch on shore. The account holder was actually located several states away and transferred the funds to an associate in a foreign country for further dispersal to relatives of the cruise line employees, also residing in the foreign country.
Multiple wire transfers sent from unregistered and/or unlicensed MSBs to benefit a single beneficiary located in a foreign country; and
Unlicensed and/or unregistered MSBs sending large volumes of wire transfers to a single personal account within the United States; transactors in multiple states conduct cash deposits into the same personal account.

Excerpted from SAR Activity Review Issue 6, page 6