Financial Intelligence
Think about money for a moment.
Everything in our lives is linked in one way or another to money. Money either enhances or inhibits what we can have and what we can do.
If money is so important, why do most of us learn about it only by trial and error? We would never learn to swim or drive that way, so why don’t we take as disciplined an approach to learning about basic money management?
Financial intelligence (FININT) is the gathering of information about the financial affairs of entities of interest, to understand their nature and capabilities, and predict their intentions. Generally the term applies in the context of law enforcement and related activities.
One of the main purposes of FININT is to identify financial transactions that involve tax evasion, money laundering or some other criminal activity, which involves transferring undeclared money or other funds, some of which may be proceeds of crime or tax evasion. However, most financial transactions do not involve tax evasion, money laundering or arise from criminal activity. FININT involves scrutinizing a large volume of transactional data, usually provided by banks as part of regulatory requirements. Transactions made by certain individuals or entities may be studied. Alternatively, data mining or data matching techniques may be employed to identify persons potentially engaged in a particular activity.
Where financial institutions are required to make manual reports of certain financial transactions, obtaining this information is a type of HUMINT (human intelligence), just as the reports of military police in a combat zone is HUMINT. Not all HUMINT comes from espionage. Many industrialized countries have such reporting requirements. It may be possible for the FININT organization to obtain access to raw data at a financial organization. From the collection standpoint, if the data are in computer-readable format, this is a type of SIGINT. From a legal standpoint, this type of collection can be quite complex. For example, the CIA obtained access to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) data streams, but this violated Belgian privacy law.
Reporting requirements do not affect Informal value transfer systems (IVTS), the use of which may simply be customary in a culture, and of amounts that would not require reporting if in a conventional financial institution. IVTS also can be used for criminal purposes of avoiding oversight.
Financial Intelligence Analysis
Examples of financial intelligence analysis could include:
Finance Intelligence and Its Components
In the modern global and competitive business world, it is very important to companies to enjoy financial success. This financial success can be achieved through financial discipline, goal setting and periodic reviews. Companies which have enjoyed financial success are likely to see that trust among employees have increased; profit has improved, and employee turnover has decreased. These three factors contribute a lot to stability in a company which in turn is the cradle for growth.
Finance intelligence is a combination of art as well as science. FININT talks about empowering employees with basic finance knowledge so that they can make a sound business decision. It is a skill set which every senior executive needs to have. Finance intelligence helps employees’ ask the right question(s) for a business decision.
Components
Finance intelligence is a skill set comprising of the following four competencies;
Understanding the Foundation
Organizations need to build on strong foundation for their non-finance manager to understand the concept of finance. The foundation requires basic understanding of income statement, cash flow and balance sheet. Non-finance managers should not be baffled when presented with an array of numbers. The purpose of finance intelligence is to ensure that when non-finance managers are presented numbers, they should be competent enough to make business sense out of them.
Understanding the Art
Finance as well as accounting is considered science and art. Both disciplines try to quantify what cannot always be represented as numbers. This quantification of concept is based upon rules, assumption and principles. Non-finance managers should be able to apply this art/science to scenarios and make financial sense out of them. By doing this, they are prepared for any challenging scenarios.
Understanding the Analysis
Once the basic idea of finance and its utility is formulated, the application part comes from the picture. Numbers presented to non-finance managers can be better understood, right questions can be asked, and further analysis can be done around that. Finance intelligence equips managers to make sense of various ratio analyses, return on investment, etc. The new understanding helps them make informed and calculated decisions.
Understanding the Big Picture
It has been observed that the financial numbers alone do not tell the complete story about what is happening within the organization. A financial result or analysis needs to be understood from top level or broader perspective. A financial result should be analyzed considering the macro environment under which the company is operating. The macro factors which influence financial results are competitive environment, government regulations, changing demographics, evolving technologies, etc.
Finance Intelligence and Beyond
Understanding the finance concepts and finance intelligence competency are first steps in gaining broader financial knowledge. It should prepare managers to look beyond the finance numbers with an analytic eye and make informed decisions.
Everything in our lives is linked in one way or another to money. Money either enhances or inhibits what we can have and what we can do.
Financial intelligence (FININT) is the gathering of information about the financial affairs of entities of interest, to understand their nature and capabilities, and predict their intentions. Generally the term applies in the context of law enforcement and related activities.
One of the main purposes of FININT is to identify financial transactions that involve tax evasion, money laundering or some other criminal activity, which involves transferring undeclared money or other funds, some of which may be proceeds of crime or tax evasion. However, most financial transactions do not involve tax evasion, money laundering or arise from criminal activity. FININT involves scrutinizing a large volume of transactional data, usually provided by banks as part of regulatory requirements. Transactions made by certain individuals or entities may be studied. Alternatively, data mining or data matching techniques may be employed to identify persons potentially engaged in a particular activity.
Where financial institutions are required to make manual reports of certain financial transactions, obtaining this information is a type of HUMINT (human intelligence), just as the reports of military police in a combat zone is HUMINT. Not all HUMINT comes from espionage. Many industrialized countries have such reporting requirements. It may be possible for the FININT organization to obtain access to raw data at a financial organization. From the collection standpoint, if the data are in computer-readable format, this is a type of SIGINT. From a legal standpoint, this type of collection can be quite complex. For example, the CIA obtained access to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) data streams, but this violated Belgian privacy law.
Reporting requirements do not affect Informal value transfer systems (IVTS), the use of which may simply be customary in a culture, and of amounts that would not require reporting if in a conventional financial institution. IVTS also can be used for criminal purposes of avoiding oversight.
Financial Intelligence Analysis
Examples of financial intelligence analysis could include:
- Identifying high-risk housing tenants on the basis of past rental histories.
- Deterring tax payers trying to avoid their fiduciary obligations by moving wealth surreptitiously out of a tax-levying jurisdiction.
- Discovering safe havens where criminals park the proceeds of crime.
- Accounting for how a large sum of money handed to a targeted individual disappears.
- Checking to see if a corrupt individual has had any sudden and unexplained windfalls.
- Detecting relationships between terrorist cells through remittances.
Finance Intelligence and Its Components
In the modern global and competitive business world, it is very important to companies to enjoy financial success. This financial success can be achieved through financial discipline, goal setting and periodic reviews. Companies which have enjoyed financial success are likely to see that trust among employees have increased; profit has improved, and employee turnover has decreased. These three factors contribute a lot to stability in a company which in turn is the cradle for growth.
Finance intelligence is a combination of art as well as science. FININT talks about empowering employees with basic finance knowledge so that they can make a sound business decision. It is a skill set which every senior executive needs to have. Finance intelligence helps employees’ ask the right question(s) for a business decision.
Components
Finance intelligence is a skill set comprising of the following four competencies;
- Understanding the foundation,
- Understanding the art,
- Understanding the analysis and
- Understanding the big picture.
Understanding the Foundation
Organizations need to build on strong foundation for their non-finance manager to understand the concept of finance. The foundation requires basic understanding of income statement, cash flow and balance sheet. Non-finance managers should not be baffled when presented with an array of numbers. The purpose of finance intelligence is to ensure that when non-finance managers are presented numbers, they should be competent enough to make business sense out of them.
Understanding the Art
Finance as well as accounting is considered science and art. Both disciplines try to quantify what cannot always be represented as numbers. This quantification of concept is based upon rules, assumption and principles. Non-finance managers should be able to apply this art/science to scenarios and make financial sense out of them. By doing this, they are prepared for any challenging scenarios.
Understanding the Analysis
Once the basic idea of finance and its utility is formulated, the application part comes from the picture. Numbers presented to non-finance managers can be better understood, right questions can be asked, and further analysis can be done around that. Finance intelligence equips managers to make sense of various ratio analyses, return on investment, etc. The new understanding helps them make informed and calculated decisions.
Understanding the Big Picture
It has been observed that the financial numbers alone do not tell the complete story about what is happening within the organization. A financial result or analysis needs to be understood from top level or broader perspective. A financial result should be analyzed considering the macro environment under which the company is operating. The macro factors which influence financial results are competitive environment, government regulations, changing demographics, evolving technologies, etc.
Finance Intelligence and Beyond
Understanding the finance concepts and finance intelligence competency are first steps in gaining broader financial knowledge. It should prepare managers to look beyond the finance numbers with an analytic eye and make informed decisions.
Culled and edited. Images: Google
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