Note: Author is writing this article in a personal capacity, not as a DoS INL representative.
Police officers have long been aware of the need to conduct financial investigations in their cases to “follow the money,” especially in narcotics, corruption, and organized crime cases. However, until recently, there has been a mistaken belief that international financial investigations were normally not for state and local police, but instead should be left to the prosecution, who would need to investigate using the cumbersome and formal Mutual Legal Assistance Treaty (MLAT) litigation procedures in cooperation with the U.S. Department of Justice’s Office of International Affairs. To the extent this was ever true, it is no longer the case in today’s world, where transnational organized crime is often a factor in even “local” cases.
Some of the key investigative tools available to local police officers to conduct international financial investigations include police-to-police, administrative, OSINT open-source intelligence (OSINT), social media intelligence (SOCMINT), and other readily available sources.
Types of International Financial Investigations
Preliminarily, police should keep in mind what type of finances they are trying to locate internationally and why they are trying to locate them. In any criminal case, such information is sought both to prove the crime and, just as importantly, to collect information that can be used to provisionally freeze and seize criminal assets once the case is underway with an eye toward permanent confiscation at the end of the proceedings.
There are basically six types of finances of relevance to the police investigator. First, there are the proceeds of crime or criminal profits. Second, there are the funds and property used to commit the crime, i.e., the instrumentalities of crime. Third, there are secondary funds that can be traced back to the original primary criminally acquired funds. (For example, secondary funds might be a foreign-registered yacht or real property bought with the original criminal proceeds.) Fourth, there are corresponding value funds, where the original stolen funds can neither be found nor traced to other secondary funds, but the criminal has some other property that can be seized, hidden in a foreign bank account. Fifth, there are intermingled funds containing both criminally acquired and legitimate property. Sixth, there are funds that can be confiscated from a third party, where he or she is not an innocent purchaser.
In seeking such funds internationally, what techniques should a police investigator use to guide an international financial investigation? First, it is often useful to focus on a net worth investigation, where the police try to prove that a defendant has income for which there is no legal explanation, by comparing their assets at the beginning of the suspect time period to establish a baseline, and then calculating the increase in the defendant’s net worth over the suspect period by examining both the individual’s U.S. and international assets. Another technique is to conduct an expenditure investigation, where the police track all the U.S. and international cash expenditures of a defendant, including cash deposits, items or services purchases, and bills paid for both the defendant and those linked to the defendant, and then contrast that with all legitimate sources of cash. Though an exhaustive list is beyond the scope of this article, other typical forms of suspect international financial conduct include the use of suspicious consulting contracts that funnel proceeds to associates of suspects via overseas corporations “employing” them. In addition, the use of shell companies, with little or no actual assets or businesses, is also a suspicious sign, especially when the companies are formed in overseas banking centers.
The Role of HSI and FinCEN in International Financial Investigations by Police
Many local and state police officials have experience working in their cases with traditional federal law enforcement agencies such as the Federal Bureau of Investigations (FBI) and the Drug Enforcement Administration (DEA). However, since the post-9/11 reorganization of federal law enforcement, Homeland Security Investigations (HSI) has had the lead on cross-border financial transactions and is now part of the largest federal law enforcement agency. What can HSI do for local police? First off, they have embedded officers in financial transaction firms such as Western Union and the like. For example, the author received operational financial intelligence the same day the info was requested from HSI in a case involving the head of an international heroin cartel.
HSI has 225 separate offices and suboffices across the United States and is therefore easily available to virtually all U.S. police departments. They also have a network of HSI Attaché offices across the globe that their U.S. offices can tap into to assist local law enforcement. HSI also leads a financial crimes interagency organization called the El Dorado Task Force, which is based in Manhattan, New York, and Miami, Florida, and partners with dozens of local police forces.1 HSI should be considered the first stop in many international financial investigations. Even if they cannot directly help the investigating agency, they may be able to facilitate a contact with a foreign police contact. This is important because experience has shown that it is always more effective to have an introduction made on one’s behalf to a foreign police contact, rather than making a cold call, whenever possible.
Another option for local and state police is to work with the U.S. Treasury’s FinCEN (Financial Crimes Enforcement Network). FinCEN serves as the U.S. financial intelligence unit and has access to the Egmont Group procedures, where financial intelligence units across the globe share operational financial intelligence. In particular, FinCEN “carries out its mission by receiving and maintaining financial transactions data; analyzing and disseminating that data for law enforcement purposes.”2 They have a wealth of available data for local law enforcement institutions to support international financial investigations.
Use of OSINT and SOCMINT
Beyond HSI and FinCEN, another approach is to use OSINT from the internet and other sources to conduct an informal international financial investigation. OSINT includes readily available online public data such as public records databases; government reports, documents, and websites; mass media; and maps and commercial imagery. Specifically, police conducting their own international financial investigation can explore suspect company websites, including their investor relations section, which can be used to get copies of their latest annual reports or audited financial reports.
The U.S. Securities & Exchange Commission’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) tool is also very useful. All publicly traded companies, foreign and domestic, are required to file their registration statements, periodic reports, and other forms electronically through this EDGAR database, which is free to access. Other relevant online commercial databases include Maltego, Hunchly, and Tweetbeaver.
The use of SOCMINT is also a very useful tool.3 Even otherwise sophisticated criminals can be extremely sloppy in their social media postings on platforms such as Facebook and Instagram. As an example of the use of SOCMINT, a corruption case was opened against a foreign official based on his wearing of dozens of different very expensive watches on his social media posts, which he would not be able to afford on his declared income.4
The best source of evidence in an international financial investigation often comes from the overseas banking centers themselves. Often, all it takes is picking up the phone or sending an email to easily gain cooperation from law enforcement partners in such jurisdictions. In larger cases, and where a department has the funds to support it, it also makes sense to physically travel to such jurisdictions to work face-to-face with local police.
Examples of Cooperation with Specific Jurisdictions
Delaware
Somewhere around 8 percent of global financial assets are concealed in various offshore accounts.5 Delaware-based shell companies are often used in such transactions. To be fair, there are many legitimate reasons for an international financial transaction to involve Delaware. More than 1.4 million businesses are currently domiciled in Delaware, and over half of all U.S. publicly traded companies are based in Delaware. Delaware has low taxes, strict corporate secrecy laws, and a special Court of Chancery that offers quick and efficient adjudication of commercial disputes.
However, Delaware is also well-known as the home of shell companies used in a broad range of international criminal financial activity. The good news is that Delaware is a small, friendly jurisdiction with a history of cooperating with law enforcement from other states. For example, Delaware corporate information can easily be accessed online. Many yachts and other seacraft used by criminals or obtained using criminal proceeds are also registered in Delaware. Information on such vessels can be obtained through the Delaware Division of Fish & Wildlife.
British Virgin Islands and Cayman Islands
Beyond Delaware, international financial investigations undertaken by local U.S. police often involve the British Virgin Islands (BVI) and the Cayman Islands. Usually, these involve shell companies registered in the BVI and bank accounts and other financial vehicles based in the Cayman Islands. In the BVI, there are almost 500,000 registered companies, even though there are only 30,000 people living there. It has been the author’s experience that direct informal cooperation with the BVI and the Caymans is a far more effective, and certainly faster, method of gaining cooperation than attempting to gain information through formal MLAT requests.
Cooperation with the BVI is covered in detail in the British Virgin Islands: Handbook on International Cooperation and Information Exchange – A Guide for Regulators and Judicial and Law Enforcement Officials, which can be accessed online.6 Informal police-to-police cooperation can be made directly with the Financial Crime Unit of the Royal Virgin Islands Police Force. On an administrative and regulatory level, requests for assistance can also be made via their Financial Services Commission (FSC).
State and local tax authorities can also request assistance via the BVI Financial Secretary and the Director of the International Tax Authority Using the U.S. FinCEN, requests for financial information can be made directly to the BVI Financial Investigation Agency.
In addition to the BVI, the Cayman Islands is also a well-known international financial center and, like the BVI, is a small Caribbean territory. The Cayman Islands consists of three small islands, with a total population of only 66,000. Notwithstanding its small size, it is also a major financial services center with many banks and every major audit firm, including the “Big Four” firms. These financial institutions provide advisory, administrative, risk management, auditing, and consulting services to a broad range of global clients. The Caymans also has a reputation as a center for financial misconduct as well, with their well-established legitimate banking, funds, and insurance industries sometimes being misused by those seeking to launder their criminal assets or avoid taxes.
Requests for assistance in international financial investigations can be made in a variety of ways. As in the BVI, they have prepared a helpful guidebook: Cayman Islands Government Handbook on International Cooperation and Information Exchange, which was published in 2017 by their Anti-Money Laundering Steering Group, and can be accessed online.7
Police-to-police cooperation can be made with their Royal Cayman Islands Police Service (RCIPS), especially their Financial Crimes Investigation Unit (FCIP). The FCIP also operates a Proactive Task Force for International Money Laundering and Terrorist Financing that is specifically designed to work with foreign jurisdictions, including local and state officials from the United States. Administrative coordination can also be made by local U.S. regulatory authorities, including banking officials, with the Cayman Islands Monetary Authority (CIMA). Using FinCEN, requests can also be made to their Financial Reporting Authority (FRA), which serves as their FIU.
Delaware, BVI, and the Caymans are only three examples. There are many other domestic and overseas banking centers that may be relevant to local and state police in international financial investigations, but the same types of procedures discussed above equally apply to other overseas jurisdictions. A simple internet search can usually identify who are potential local partners in such jurisdictions. Every year, new techniques and new overseas banking centers are employed to hide the proceeds of crime from international financial investigations. These three locations are therefore only examples, and will no doubt be replaced by new banking and corporate centers in the future.
Conclusion
International financial investigations can and should be conducted by state and local police. Local prosecutors, overworked and carrying a heavy caseload, will often balk at conducting such financial investigations themselves if the police do not at least start the process for them prior to presenting the criminal case. Accordingly, by using a mix of OSINT, SOCMINT, corporate, and other open-source procedures, along with police-to-police and administrative cooperation with other jurisdictions, local and state police can ensure their cases are in the best shape possible prior to engaging with the prosecutors.
Notes:
1U.S. Immigration and Customs Enforcement, “El Dorado Task Force,” updated January 12, 2021.
2Financial Crimes Enforcement Network, “What We Do.”
3Todoriu Constantin-Sorin, “Social Media Intelligence,” Per Concordiam: The Journal of European Security and Defense Issues 9, no. 4 (2019).
4See, e.g., Pavin Chachavalpongpun, “The Latest Thai Corruption Scandal Is Causing Problems for the Ruling Junta,” Opinion, Washington Post, January 23, 2018.
5Gabriel Zucman, The Hidden Wealth of Nations: The Scourge of Tax Havens (Chicago, IL: University of Chicago Press, 2015).
6British Virgin Islands, Handbook on International Co-operation and Information Exchange: A Guide for Regulators and Judicial and Law Enforcement Officials (The British Virgin Islands Financial Services Commission, revised 2013).
7Cayman Islands Government, Office of Director of Public Prosecutions, Handbook on International Cooperation & Information Exchange (The Anti-Money Laundering Steering Group, 2017).
Please cite as
Erik Larson, “International Financial Investigations: Police-to-Police Cooperation & Open-Source Investigations,” Police Chief Online, June 2, 2021.
