Financial institutions are required to include geographic risk in their anti-money laundering (AML) programs.  There are at least two domestic higher-risk geographic locations in the United States used for law enforcement and investigative purposes which are:

• High Intensity Drug Trafficking Area (HIDTA)
• High Intensity Financial Crimes Area (HIFCA)

The short video below highlights some key metrics on HIDTA and HIFCA and how it can be incorporated as one of the factors to calculate risk.  A common misconception is that customers and transactions in HIDTA and HIFCA regions are automatically high-risk.  Identifying customers and transactions in HIDTA and HIFCA regions has a host of benefits including, but not limited to reporting, custom detection scenarios, uncovering unknown unknowns and exposing hidden links among networks of bad actors.

As stated in the Federal Financial Institutions Examination Council (FFIEC) BSA/AML examination manual:

"Identifying geographic locations that may pose a higher risk is essential to a bank’s BSA/AML compliance program. U.S. banks should understand and evaluate the specific risks associated with doing business in, opening accounts for customers from, or facilitating transactions involving certain geographic locations."

High Intensity Drug Trafficking Area (HIDTA)

The High Intensity Drug Trafficking Areas (HIDTA) program, created by Congress with the Anti-Drug Abuse Act of 1988, provides assistance to Federal, state, local, and tribal law enforcement agencies operating in areas determined to be critical drug-trafficking regions of the United States.

Source: https://www.whitehouse.gov/ondcp/high-intensity-drug-trafficking-areas-program

High Intensity Financial Crime Area (HIFCA)

HIFCA stands for High Intensity Financial Crime Area," these high risk areas were first announced in the 1999 National Money Laundering Strategy and were conceived in the Money Laundering and Financial Crimes Strategy Act of 1998 as a means of concentrating law enforcement efforts at the federal, state, and local levels in high intensity money laundering zones.

Source: https://www.fincen.gov/hifca

Challenge

The challenge is that HIDTA and HIFCA have been designated by state and county and don't include cities, towns and zip codes.  Financial institutions usually follow the standard United States address format convention of:

Name

Address line 1

City

State

Zip code

In other words, the county is generally not captured as a data element during the client on-boarding process or when transferring funds.  Hence, in order to leverage the leverage the HIDTA and HIFCA regions the organization must convert all of the counties to cities, towns and zip codes.

Solution

Data Derivatives has collected all of the relevant HIDTA and HIFCA data sources and converted the designated counties to a data file that can be easily consumed and integrated into an organization's AML, know your customer (KYC), customer due diligence (CDD), enhanced due diligence (EDD), transaction monitoring, and risk assessment program.  This information can be leveraged in the customer risk rating process or when monitoring transactions for suspicious activity. 

As an example, customers located or transacting business in the HIDTA and HIFCA regions along the Southwest border could pose additional AML risk to the financial institution.