Financial Intelligence Units (FIUs)

An Financial Intelligence Unit (FIU) is a central national agency responsible for receiving, analyzing, and transmitting disclosures on suspicious transactions to the competent authorities.
Following international conventions: the Convention for the Suppression of the Financing of Terrorism (1999), the United Nations Convention Against Transnational Organized Crime (2001)
and the United Nations Convention Against Corruption (2003) have recognized the usefulness of FIUs in modern anti-money-laundering systems and encourage the party-states to establish FIUs .

The Model Laws drafted by international organizations put the FIU at the center of the suspicious transaction reporting system and contain useful suggested provisions on the functions and powers of the FIU. These can be adopted by the countries after country’s own characteristics, objectives, and resources through its political and technical decision-making process.

The FATF Interpretive Note to Recommendation 29 determines that countries should ensure that the FIU has regard to the Egmont Group statement of purpose and its Principles for Information Exchange Between Financial Intelligence Units for Money Laundering and Financing of Terrorism Cases (these documents set out important guidance concerning the role and functions of FIUs, and the mechanisms for exchanging information between FIUs).

Institutional Autonomy and Accountability are key for FIUs to inspire trust and work effectively. FIUs are organized around four models:

1. The Judicial Model is established within the judicial branch of government wherein “disclosures” of suspicious financial activity are received by the investigative agencies of a country from its financial sector such that the judiciary powers can be brought into play e.g. seizing funds, freezing accounts, conducting interrogations, detaining people, conducting searches, etc. Commonly found in countries with a continental law tradition, where the public prosecutors are part of the judicial system and have authority over the investigatory bodies, allowing the former to direct and supervise criminal investigations. Judicial and prosecutorial FIUs can work well in countries where banking secrecy laws are so strong that a direct link with the judicial or
prosecutorial authorities is needed to ensure the cooperation of financial institutions. This type of FIU does not exclude the possibility of establishing a police service with special responsibility for financial investigations.

2. The Law Enforcement Model implements anti-money laundering measures alongside already existing law enforcement systems, supporting the efforts of multiple law enforcement or judicial authorities with concurrent or sometimes competing jurisdictional authority to investigate money laundering. This is the easiest way to establish a body with appropriate law-enforcement powers
without having to design from scratch a new entity and a new legal and administrative framework. Operationally, under this arrangement, the FIU will be close to other law-enforcement units, such as a financial crimes unit, and will benefit from their expertise and sources of information. The FIU can be accessed more easily by law-enforcement agencies and can be used in any investigation, thus increasing its usefulness. A law-enforcement-type FIU will normally have the lawenforcement powers of the law-enforcement agency itself (without specific legislative authority being required), including the power to freeze transactions and seize assets (with the same degree of judicial supervision as applies to other law-enforcement powers in the country).

Lawenforcement-type FIUs are usually financed by the police, the ministry of interior, or the prosecution service (for example, Estonia’s RA, Jersey’s FCU, and Hungary’s ORFK)

3. The Administrative Model is a centralized, independent, administrative authority, which receives and processes information from the financial sector and transmits disclosures to judicial or law enforcement authorities for prosecution. It functions as a “buffer” between the financial and the law enforcement communities. Administrative-type FIUs are usually part of the structure, or under the supervision of, an administration or an agency other than the law-enforcement or judicial authorities. They sometimes constitute a separate agency, placed under
the substantive supervision of a ministry or administration (“autonomous” FIUs) or not placed under such supervision (“independent” FIUs). The main rationale for such an arrangement is to establish a “buffer” between the financial sector (and, more generally, entities and professionals subject to reporting obligations) and the law-enforcement authorities in charge of financial crime investigations and prosecutions. The role of the FIU is then to substantiate the suspicion and send the case to the authorities in charge of criminal investigations and prosecutions
only if the suspicion is substantiated.

The actual administrative location of such FIUs varies: the most frequent arrangements are to establish the FIU in the ministry of finance, the central bank, or a regulatory agency. A few have been established as separate structures, independent of any ministry (CTIF/CFI in Belgium, for example).

Authority to Administrative-type FIUs may be narroly tailored. They may or may not be responsible for issuing AML/CFT regulations or for supervising compliance with AML/CFT laws and regulations on the part of reporting institutions.

Most administrative-type FIUs that are part of a ministry of finance have their own budget within the budget of that ministry (for example, Korea’s KoFIU,Monaco’s SICCFIN, Slovenia’s OMLP, and the United States’ FinCEN).

4. The Hybrid Model serves as a disclosure intermediary and a link to both judicial and law enforcement authorities. It combines elements of at least two of the FIU models. This hybrid type of arrangement is an attempt to obtain the advantages of all the elements put together. Some FIUs combine the features of administrative-type and law-enforcement-type FIUs, while others combine the powers of the customs office with those of the police. For some countries, this is the result of joining two agencies that had been involved in combating money laundering into one.Some FIUs are cofinanced by different state authorities or ministries. For example, the MOT in the Netherlands and the MOT in the Netherlands Antilles receive their financing under an arrangement between the Netherlands’ Ministry of Finance and the Ministry of Justice.

Some FIUs are partly or wholly financed by the central bank or the financial sector supervisory agency of the country (for example, Bolivia’s UIF, Italy’s UIC,
Spain’s SEPBLAC, and Venezuela’s UNIF). Some FIUs are placed directly under the government, outside the budget of any other agency, and are financed
as a separate budgetary unit (for example, Colombia’s UIAF, Panama’s UAF, and Romania’s ONPCSB).

The Egmont Group was established in 1995 “to encourage and assist in the exchange of financial intelligence between countries.” It is “an informal organization to provide a forum for FIUs to improve support to their respective national anti-money-laundering programs.” “This support includes expanding and systematizing the exchange of financial intelligence information, improving expertise and capabilities of personnel of such organizations, and fostering better communications among FIUs through application of technology.”

In all countries, the reporting institutions and professionals must absorb their own costs of implementing the AML/CFT laws, including the costs of setting up systems for detecting and reporting suspicious and other transactions. In countries where the FIU’s budget comes from the financial sector supervisory agency, the FIU may be indirectly financed by the contributions,
levies, and fines imposed on the supervised institutions.

FIU Functions: national center for the collection, analysis, and dissemination of information regarding money laundering and the financing of terrorism.

Collection: Receiving Transaction Reports
– Reporting entities and other FIUs provide information to the FIU, which then analyzes this information and passes the results of its analysis along to investigators and prosecutors, as well as other FIUs. In doing so the key considerations are the quantity of information to be provided to the FIU, and its capacity to store and analyze it. Also, the number of cases to be sent to the police for further investigation or to prosecutors for prosecution should be balanced with the capacity of these bodies to deal effectively with those cases. The complexity of the preceding considerations depend on who submits reports to the FIU such as regulated financial institutions, including banks, insurance and securities companies , non regulated financial institutions and non financial instiutions such as real estate and precious metals dealers and professionals such as lawyers and accountants.

Central Banks and Monetary Authorities

Bank of International Settlements (BIS) helps central banks in their pursuit of monetary and financial stability.

Egmont Group of Financial Intelligence Units (FIUs)is an informal network of FIUs established for the stimulation of international co-operationEgmont Group is currently comprised of 139 member FIUs.
Egmont Group