How to Beat Fraudsters, Money Launderers, and Bad Actors Like the FBI

Exclusive interview with Dennis Lormel, Former FBI Chief of the Financial Crimes Program. 

It was the morning of September 11, 2001, and Dennis Lormel was at FBI headquarters, where he served as the Chief of the Financial Crimes Program. Like the rest of the nation, he watched in stunned disbelief as the events of that day unfolded. But unlike most, Lormel knew his role in the response would be critical. Drawing from his decades of experience, he immediately began to investigate how terrorists might have exploited the financial system to fund their heinous acts. Within 24 hours, Lormel had drafted a comprehensive investigative plan to trace the money trail, an effort that would soon uncover vital links and set a new standard for financial crime investigations. This interview explores Lormel’s journey from that pivotal day to offering modern strategies for banks to combat financial criminals and money launderers. Lormel, who also serves on the Acceleron Board of Directors, provides a roadmap for detecting and defeating bad actors who exploit the financial system.

A lifetime of fighting financial crime

During his 28-year tenure at the FBI, Lormel supervised financial crime squads, initiated the first financial crimes task force in New York City, and authored proposals for undercover operations, including the longest continuous-running undercover operation in FBI history. His expertise lies in exploiting the vulnerabilities of criminals, including their reliance on the financial system.

"Criminals, terrorists, and money launderers all share common weaknesses — finance is their lifeline. Exploit that, and you’re ahead of the game," Lormel explains.

Lessons from 9/11: following the money

After 9/11, Lormel led the FBI’s financial investigation team. Under his leadership, the FBI centralized efforts to map the flow of funds used in the attacks. Investigators put together detailed profiles of the 19 hijackers, tracking their financial activities to uncover patterns and connections. They traced $328,000 in funding through 18-20 banks that directly supported the attacks. 

He shares how FBI Director Robert Mueller’s decision to centralize multiple investigations became the key to connecting the dots and uncovering the full scope of the terrorist financing network:

This work not only confirmed al-Qaeda’s funding but also identified individuals who could have been involved in a second wave of attacks. This groundbreaking work exposed the vulnerabilities in the financial system and set the standard for leveraging financial intelligence to combat terrorism.

Key lessons from this investigation include:

• Centralized Oversight: A coordinated approach ensures all financial intelligence is funneled through a single point of contact, avoiding duplication and inefficiency.
• Public-Private Partnerships: Collaboration with financial institutions expedited access to crucial records, breaking down barriers while staying within legal frameworks.
• Targeted Monitoring: By overlaying financial data with intelligence on terrorist activities, investigators could pinpoint suspicious transactions more effectively.

Weak points of criminals and money launderers and how to exploit them

According to Lormel, criminals, terrorists, and money launderers share common vulnerabilities that can be exploited by law enforcement and financial institutions. These include:

1. Reliance on the Financial System: Bad actors need banks to move, store, and access funds. This creates a critical point of exposure.
2. Greed: Criminals often make decisions based on profit, overlooking risks. For example, during an undercover operation, the FBI offered to launder money at a rate of five cents on the dollar — significantly lower than the market rate. This greed led criminals to ignore the potential risks.
3. Lack of Transparency: Illicit actors often use false statements or obscure ownership structures to mask their activities. Spotting anomalies or inconsistencies in financial activity can be a key to detection.

Lormel emphasizes that financial institutions are repositories of invaluable intelligence. By monitoring transactions for anomalies, banks and credit unions can identify red flags, such as unusual activity that doesn’t align with a customer’s profile. “The bad guys have to expose themselves to use the financial system,” he says. “That’s their vulnerability.”

How to prevent money laundering in banks and financial institutions

After leaving the FBI, Lormel transitioned into consulting for financial institutions and educating professionals on combating financial crime. Through his work with ACAMS (Association of Certified Anti-Money Laundering Specialists), he conducts anti-money laundering training and practical strategies to outmaneuver bad actors. Additionally, as a member of the Acceleron Board of Directors, he helps guide the company in fostering robust financial crime prevention strategies and innovative solutions for the banking sector.

Here are some of his actionable strategies for community banks and credit unions to mitigate risks and enhance their anti-money laundering (AML) efforts:

1. Understand Your Risk Environment:
   • Conduct thorough risk assessments to identify vulnerabilities specific to your institution.
2. Invest in Transaction Monitoring:
   • Use targeted transaction monitoring to detect anomalies. For example, if a small business claims to be a mom-and-pop shop but exhibits high-value, frequent international wires, this could indicate suspicious activity.
3. Build Trusted Partnerships:
   • Establish relationships with regulators and law enforcement to stay informed about emerging threats and share insights.
   • Collaborate with trusted third parties, such as Acceleron, to enhance technology capabilities for international wires and AML compliance.
4. Simplify Compliance Efforts:
   • Avoid overcomplicating processes. Focus on practical, achievable steps that align with regulatory requirements.
   • Learn from enforcement actions taken against other institutions to refine your own practices.
5. Embrace Technology with Transparency:
   • Leverage advancements like artificial intelligence to streamline detection efforts.
   • Demand transparency from partners and customers to reduce the likelihood of facilitating illicit activities.

The role of community financial institutions: detecting and dismantling criminal networks

Financial institutions play a dual role as both facilitation tools and detection mechanisms. Community banks and credit unions can disrupt money laundering and illicit activities by understanding their customers, monitoring transactions for anomalies, and maintaining transparency. “The more transparent the situation,” Lormel notes, “the less likely you’re dealing with financial crime.”

For smaller institutions with limited resources, partnerships with technology providers offer a cost-effective way to manage risks and stay ahead of bad actors. “You don’t need a large team,” Lormel says. “You just need the right tools and a practical approach.”

These insights underscore the importance of vigilance, partnerships, and practical solutions in combating financial crime. Whether it’s following the money in a post-9/11 investigation or leveraging technology to detect anomalies, the strategies he advocates are as relevant today as ever. 

“At the end of the day, it’s about staying one step ahead of the bad guys,” Lormel says. “By understanding their weaknesses and leveraging our strengths, financial institutions can protect the system and their customers from harm.”

Acceleron builds patented software that allows community banks and credit unions to conduct international payment transactions profitably through a correspondent banking marketplace. Serving over 200 financial institutions and facilitating more than $1 billion in international payments annually, Acceleron helps small banks generate non-interest income and compete more effectively with high-fee big banks. Our solutions integrate seamlessly with top payments platforms, ensuring quick implementation and smooth operation. 

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