Data analysis and research for trade transparency system

Data Analysis and Research for Trade Transparency System.

Overview Edit.

ICE maintains the Data Analysis and Research for Trade Transparency System ( DARTTS ), which generates leads for and otherwise supports ICE investigations of trade-based money laundering, contraband smuggling, trade fraud, and other import-export crimes. DARTTS analyzes trade and financial data to identify statistically anomalous transactions that may warrant investigation. These anomalies are then independently confirmed and further investigated by experienced ICE investigators.

DARTTS is owned and operated by the ICE Trade Transparency Unit (TTU). Trade transparency is the concept of examining U. S. and foreign trade data to identify anomalies in patterns of trade. Such anomalies can indicate trade-based money laundering or other import-export crimes that ICE is responsible for investigating, such as contraband smuggling, trafficking of counterfeit goods, misclassification of goods, and the over - or under-valuation of goods to hide the proceeds of illegal activities. As part of the investigative process, ICE investigators and analysts must understand the relationships among importers, exporters, and the financing for a set of trade transactions, to determine which transactions are suspicious and warrant investigation. DARTTS is designed specifically to make this investigative process more efficient by automating the analysis and identification of anomalies for the investigator.

DARTTS allows ICE to perform research and analysis that is not available in any other system because of the data it contains and the level of detail at which the data can be analyzed. DARTTS does not seek to predict future behavior or “profile” individuals or entities (i. e., identify individuals or entities that meet a certain pattern of behavior that has been pre-determined to be suspect). Instead, it identifies trade and financial transactions that are statistically anomalous based on user-specified queries. Investigators follow up on the anomalous transactions to determine if they are in fact suspicious and warrant further investigation. Investigators gather additional facts, verify the accuracy of the DARTTS data, and use their judgment and experience in making that determination. Not all anomalies lead to formal investigations.

DARTTS is currently used by ICE Special Agents and Criminal Research Specialists who work on TTU investigations at ICE Headquarters or in the ICE field and foreign attaché offices, as well as properly cleared support personnel. In April 2010, ICE initiated the transition of DARTTS to the ICE enterprise network, making DARTTS available to a greater number of ICE agents in the field, subject to appropriate access controls. ICE is continuing to deploy the enterprise version throughout ICE.

Technology and methodology Edit.

DARTTS uses trade data collected by CBP, other federal agencies and foreign governments, and financial data collected by CBP and FinCEN. DARTTS data is primarily related to international commercial trade and financial transactions. ICE does not collect information directly from individuals or entities for inclusion in DARTTS. Instead, ICE receives data from sources via CD-ROM, external storage devices, or electronic data transfer and loads the data into DARTTS. DARTTS uses COTS software to analyze raw trade and financial data to identify anomalies and other suspicious transactions. The software application is designed for experienced investigators. It enables the analysis of structured and unstructured data. It also allows non-technical users with investigative experience to analyze large quantities of data and rapidly identify problem areas. The program makes it easier for investigators to apply their specific knowledge and expertise to complex sets of data.

DARTTS performs three main types of analysis. It conducts international trade discrepancy analysis by comparing U. S. and foreign import and export data to identify anomalies and discrepancies that warrant further investigation for potential fraud or other illegal activity. It performs unit price analysis by analyzing trade pricing data to identify over - or under-pricing of goods, which may be an indicator of trade-based money laundering. DARTTS also performs financial data analysis by analyzing financial reporting data (the import and export of currency, deposits of currency in financial institutions, reports of suspicious financial activities, and the identities of parties to these transactions) to identify patterns of activity that may indicate money laundering schemes.

DARTTS routinely receives bulk financial and trade information collected by other agencies and foreign governments, hereafter referred to as “raw data.” The agencies that provide DARTTS with trade data collect any PII directly from individuals or enterprises completing import-export electronic or paper forms. The agencies that provide DARTTS with financial data receive PII from individuals and institutions, such as banks, that are required to complete certain financial reporting forms. The PII in the raw data is necessary to link related transactions together. It is also necessary to identify the persons or entities that should be investigated further.

ICE investigators with experience conducting financial, money laundering, and trade fraud investigations use the completed analysis to identify possible criminal activity and provide support to field investigators. TTU investigators at ICE Headquarters refer the results of DARTTS analyses to ICE field offices as part of an investigative referral package to initiate or support a criminal investigation. ICE investigators in the domestic field offices can also independently generate leads and subsequent investigations using DARTTS analysis. In addition, ICE investigators in attaché offices at U. S. embassies abroad have access to DARTTS on standalone terminals. These investigators use DARTTS to conduct analyses in support of financial, money laundering, and trade fraud investigations, and to respond to inquiries from partner-country TTUs with whom ICE shares anonymized U. S. trade data.

Data sources Edit.

All of the raw data in DARTTS is provided by other U. S. agencies and foreign governments, and is divided into three broad categories: U. S. trade data, foreign trade data, and U. S. financial data. The U. S. trade data in DARTTS is (1) import data in the form of an extract from the ACS, which CBP collects from individuals and entities importing merchandise into the United States who complete CBP Form 7501 (Entry Summary) or provide electronic manifest information via ACS, (2) export data that CBP and the U. S. Department of Commerce collect from individuals and entities exporting commodities from the U. S. using Commerce Department Form 7525-V (Shipper’s Export Declaration) or through AES, and (3) publicly available aggregated U. S. export data (i. e., data that does not include PII) purchased by ICE from the U. S. Department of Commerce.

In the DARTTS enterprise version, ICE plans to incorporate a new data module with bill of lading data, which is data provided by carriers to confirm the receipt and transportation of on-boarded cargo to a specified destination. This information includes consignee name and address, shipper name and address, container number, carrier, and bill of lading. It is collected by CBP via the AMS, and is provided to ICE through CD-ROM, external storage devices, or electronic data transfers for uploading into DARTTS. ICE updated the DARTTS PIA to include the new bill of lading module.

The foreign import and export data in DARTTS is provided to ICE by partner countries pursuant to a Customs Mutual Assistance Agreement (CMAA) or other similar agreement. Certain countries provide trade data that has been stripped of PII. Other countries provide complete trade data, which includes any individuals' names and other identifying information that may be contained in the trade records.

U. S. Department of State.

Diplomacy in Action.

Trade Transparency Units.

However, as entities in the formal financial sector are brought under the purview of anti-money laundering laws and regulations and illicit funds move further underground, we come to more fully understand the threats posed by financial flows outside the recognized formal financial sectors. Alternative remittance systems are able to bypass, in whole or part, regulations designed to make money laundering and financial crimes more transparent. Although there are a variety of alternative remittance systems, they all have one thing in common; they are dependent to various degrees on the misuse of international trade to transfer value.

Trade-based systems act as a kind of parallel method of transferring money and value around the world. The 2003 and 2004 editions of the INCSR have profiled the use and growing recognition of "trade-based" money laundering. Systems such as hawala, the black market peso exchange, and the use of commodities such as gold and diamonds are not captured by current financial reporting requirements. These systems pose tremendous challenges for law enforcement around the world. Moreover, many of these alternative remittance systems are indigenous and ethnic-based, making them even more difficult for U. S. investigators to understand, penetrate, and target. As the United States and other countries worldwide tighten financial regulation and reporting for the formal and even informal financial sectors, the use of trade-based money laundering and alternative remittance systems will assuredly grow. As in the past, when the United States advanced global financial transparency, today it is likewise essential that we work to establish an international mechanism capable of detecting trading anomalies that could point to fraudulent value transfer, money laundering, terrorist financing, and other financial crimes.

Customs and law enforcement experience has shown the best way to analyze and investigate suspect trade-based activity is to have systems in place that can monitor specific imports and exports to and from given countries. In fact, the former U. S. Customs Service (now the Bureau of Immigration and Customs Enforcement (ICE), in the Department of Homeland Security) pioneered this approach through its creation of a computer system that uses U. S. trade data, examines suspect anomalies, and identifies likely targets of investigation.

However, using U. S. data alone has its limitations. To maximize effectiveness, analysts need to compare corresponding trade data from other countries. If country X exports goods to country Y, in theory country X's export records regarding price, quantity, and general description should match (with some recognized variables) the corresponding import records of country Y. However, the analysis becomes increasingly complex if the trade goods are transshipped from country X to Y via Z. An additional challenge occurs for U. S. law enforcement when suspect trade does not enter into the commerce of the United States.

There is a growing worldwide recognition of entrenched patterns of trade fraud. For example, the Kimberley Process was created—in part—due to findings that conflict diamonds from non-diamond producing West African countries were being exported into Belgium. U. S. Customs has used this same technique of examining trade anomalies to combat the Colombia black market peso exchange, to examine suspect gold shipments from non-gold producing countries in the Caribbean, and to examine transshipped textiles from the Middle East. In these instances, Customs was able to match U. S. trade data with cooperating countries' trade data and look for suspicious indicators. In the case of Colombia, the examination of the trade data revealed the link between the drug cartels and the country's largest insurgency—the FARC.

Every country around the world collects the desired trade data. All countries have customs services and all countries impose tariffs and duties for revenue purposes. In fact, lesser-developed countries are dependent on customs duties to generate revenue. Although there are some differences in the way trade data is gathered and warehoused, disparate customs services worldwide are adopting uniform norms and standards. There is presently enough commonality among systems that specific and targeted trade transactions can be compared and examined for indications of customs fraud and other crimes using software pioneered by the former U. S. Customs and further refined by Department of Homeland Security's Bureau of Immigration and Customs Enforcement (DHS/ICE).

Borrowing from the successful Financial Intelligence Unit (FIU) model that examines suspect financial transactions, over the last two years the United States has studied the feasibility of establishing a prototype Trade Transparency Unit (TTU) that will collect and analyze suspect trade data and then disseminate findings for appropriate enforcement action. The objective is a new investigative tool to combat previously entrenched trade-based alternative remittance systems and customs fraud that eventually could result in a worldwide TTU network somewhat analogous to the Egmont Group of Financial Intelligence Units.

ICE, in cooperation with the U. S. Departments of State and Treasury, has begun a Trade Transparency Unit initiative. This initiative is designed to protect the integrity and security of the U. S. economy by targeting and eliminating systemic vulnerabilities in commercial trade and the financial and transportation sectors susceptible to exploitation by criminal and terrorist organizations. Under the auspices of trade transparency, ICE will form partnerships with participating foreign governments to establish a network of TTUs. The United States and foreign governments will create dedicated enforcement units to detect discrepancies or anomalies in international trade data, which may be indicative of trade-based money laundering or other criminal activities. TTUs will support investigations and prosecutions related to trade-based money laundering, the illegal movement of criminal proceeds across international borders, alternative remittance systems, terrorist financing, and other financial and trade crimes.

To assist the proposed TTUs, ICE has developed an analytical database called "Data Analysis and Research for Trade Transparency" (DARTT), which is designed to detect and track money laundering, contraband smuggling and trade fraud. DARTT is an outgrowth of earlier analytical systems, which the former U. S. Customs Service and ICE had successfully used to detect trade-based money laundering and fraud. DARTT will allow investigators to identify discrepancies in trade and financial transactions, facilitating the dissemination of investigative referrals to field entities.

Under Plan Colombia, ICE formed the first TTU with the Government of Colombia. In furtherance of this trade transparency initiative, ICE is actively working with the Colombian TTU on several Black Market Peso Exchange (BMPE) investigations and has already demonstrated the links between the BMPE and the FARC. ICE has taken specific steps to improve the organizational infrastructure of DIAN, the Colombian customs and tax authority. These steps include a Mutual Assistance Agreement, which provides the framework for ICE and DIAN to share trade information. ICE has several initiatives incorporated into Plan Colombia targeting BMPE schemes. Dedicated funds have been allocated to temporarily assign agents and analysts in Colombia to assist DIAN in analyzing BMPE data to develop leads for ICE field offices. Additionally, computers and equipment have been purchased for DIAN to track imports/exports data. There are promising indications that the pioneering work of TTU development will begin to show specific results in 2005. Several countries have approached ICE to participate in the Trade Transparency Unit initiative. These countries include Brazil, Paraguay, Argentina, Panama, India and the Philippines. Additionally, the concept of Trade Transparency Units has been presented to several Eastern and Central European countries. The regionalization of TTUs will ultimately provide for the open exchange of trade data among participating countries and will play an increasingly important role in the global effort to thwart money laundering, international organized crime and terrorism.

Dartts data analysis and research for trade.

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Trade Transparency Unit.

Trade-based money laundering (TBML) is the process of disguising criminal proceeds through trade to legitimize their illicit origins. TBML, rather than being a single activity, refers to a variety of schemes used together to disguise criminal proceeds, which can involve moving illicit goods, falsifying trade documents, and misrepresenting trade-related financial transactions with the purpose of integrating criminal proceeds.

Criminal and terrorist organizations frequently exploit global trade systems to move value around the world by employing complex and sometimes confusing schemes associated with legitimate trade transactions. It is estimated that annual trade-based money laundering exceeds billions of dollars and is growing each year.

ICE established the Trade Transparency Unit to identify global TBML trends and conduct ongoing analysis of trade data provided through partnerships with other countries' trade transparency units. One of the most effective ways to identify instances and patterns of TBML is through the exchange and subsequent analysis of trade data for anomalies that would only be apparent by examining both sides of a trade transaction.

The unit is formed when ICE and any of the United States trading partners agree to exchange trade data for the purpose of identifying comparison and analysis. Using state-of-the-art software and proven investigative techniques, the unit can easily identify previously unknown transactions.

To help analyze the data, the ICE has developed a specialized computer system called the Data Analysis & Research for Trade Transparency System. Containing both domestic and foreign trade data, the system allows users to see both sides of a trade transaction, making it transparent to both countries. This investigative tool has been proven to be effective in identifying international trade anomalies and financial irregularities indicative of TBML, customs fraud, contraband smuggling, and even tax evasion.

ICE initiated the Trade Transparency Unit concept in Washington, D. C., in 2004 and subsequently established foreign Trade Transparency Unit partnerships with several countries.

Additionally, the ICE Trade Transparency Unit also works with inter-agency partners and international organizations such as the Financial Action Task Force to bring awareness to this global issue.

As the network of trade transparency units grows, so will the open exchange of trade data between all participating countries. This will play an increasingly important role in thwarting money laundering and transnational crime, including international organized crime and terrorism.

Red flag indicators of trade-based money laundering include:

Payments to vendor made in cash by unrelated third parties, Payments to vendor made via wire transfers from unrelated third parties, Payments to vendor made via checks, bank drafts or postal money orders from unrelated third parties, False reporting, such as commodity misclassification, commodity over-valuation or under-valuation, Carousel transactions (the repeated importation and exportation of the same high-value commodity), Commodities being traded do not match the business involved, Unusual shipping routes or transshipment points, Packaging inconsistent with commodity or shipping method, and Double-invoicing.