An investigation into a US regulator's files shows that some of the biggest names in finance – and regulators – are failing to stop transactions
A stunning revelation has been made over the weekend: that some of the world’s largest banks have failed to effectively operate anti-money laundering safeguards.
According to an investigation by the International Consortium of Investigative Journalists, major banks “move trillions of dollars in suspicious transactions, enriching themselves and their shareholders while facilitating the work of terrorists, kleptocrats, and drug kingpins.”
The report focuses on files from FinCEN, the US Treasury’s Financial Crimes Enforcement Network which were obtained by Buzzfeed News. Some 22,000 pages of previously unreleased documents detail $2 trillion worth of transactions across more than 170 countries between 1999 and 2017.
But the dirty money moving through the global banking system is almost certainly far larger, as the documents obtained account for just 0.02% of the more than 12 million suspicious activity reports (SARs) filed with FinCEN between 2011 and 2017.
The documents are compiled by banks and other financial organizations and filed with the regulator but not made public.
Internal warnings ignored
They reveal that – even when suspicious transactions are flagged by the banks’ own employees – illicit funds such as drug money, stolen Ponzi scheme investments, and embezzled fortunes have all flowed through banks unhindered.
These transactions are often by individuals or entities that the banks cannot identify and the report says that regulators may not be informed of the suspicious activity until well after the act – sometimes years later.
Even when clients are the subject of multiple SARS, banks still fail to shut down their accounts, the report says, which can leave financial institutions open to penalties later.
“Filing SARs is not a get-out-of-jail-free card,” Dan Stipano, partner at law firm Buckley told Bloomberg. “Many banks have faced major enforcement actions after having filed many SARs if they failed to take the appropriate action on their clients. SARs don’t cover your back necessarily.”
Banks respond
Although many of the banks named in the investigation have said they are legally prohibited from commenting on clients or investigations, some have issued statements regarding the report.
JP Morgan told Bloomberg News: “We have played a leadership role in anti-money laundering reform that will modernize how the government and law enforcement combat money laundering, terrorism financing and other financial crimes.”
HSBC told Reuters that the transactions in the report are all historic and it has since launched a “multi-year journey to overhaul its ability to combat financial crime.”
Deutsche Bank issued a statement stating that the matters raised in the report had been dealt with by the regulators.
“The fight against financial crime, money laundering and capital flight has been a priority for investigating authorities and financial institutions alike. The world’s leading financial institutions, including Deutsche Bank, have invested billions of dollars to more effectively support authorities in this effort. Naturally, this leads to increased detection levels,” the Deutsche Bank statement said.
Shares of many global banks dropped early Monday.
170+ countries. 22,000+ pages. More than $2 trillion. Go behind the scenes of our unprecedented #FinCENFiles investigation. https://t.co/h3yjVlsg0z
— BuzzFeed News (@BuzzFeedNews) September 20, 2020
