• Published on 22 September 2020
• 2188 Views
• Print

FINCEN investigation leak reveals global banks processed over $2 trillion in suspicious transfers between 1999 and 2017

Drawing on a cache of secret financial intelligence reports, the global investigation by more than 400 journalists reveals how banks continue to move dirty money for drug cartels, corrupt regimes, arms traffickers and other international criminals — and how a broken U.S.-led enforcement system perpetuates business as usual.

Obtained and shared by BuzzFeed News, the documents include more than 2,100 suspicious activity reports, or SARs, filed by global banks to the United States Treasury Department’s intelligence unit, the Financial Crimes Enforcement Network, known as FinCEN.

The International Consortium of Investigative Journalists, together with BuzzFeed News and 108 other media partners in 88 countries, spent 16 months organizing and analyzing the documents, dubbed the FinCEN Files. ICIJ and its partners collected additional leaked documents from sources, reading through voluminous court and archival records and interviewing hundreds of people, including crime fighters and crime victims.

The Treasury Department documents reveal how major banks continued to move staggering sums of suspect cash even while on criminal probation after highly touted money-laundering crackdowns by U.S. and U.K. authorities.

ICIJ’s analysis of the FinCEN Files and U.S. authorities’ enforcement actions indicates that imposing fines and deferring prosecutions of banks and declining to prosecute bank executives hasn’t stopped banks from continuing to profit from moving suspect transactions.

Because of their access to the U.S. Federal Reserve System, global banks’ U.S. operations serve as switchboard operators for dollar transactions, allowing them to see who is sending what money where and when.

When they see a suspicious transaction, they are empowered to take action to stop it — but they often don’t have to. Instead, they can simply send a SAR to FinCEN at the Treasury Department. The FinCEN Files represent less than 0.02% of the more than 12 million suspicious activity reports that financial institutions filed between 2011 and 2017.

The sweeping, unprecedented leak shows banks moved more than $2 trillion in payments between 1999 and 2017 they themselves believed were suspicious, plus hundreds of spreadsheets, involving financial institutions with flagged clients in more than 170 countries. SARs reflect concerns by watchdogs within banks and financial institutions and are not necessarily indicative of any criminal conduct or other wrongdoing.

An ICIJ analysis found that banks in the FinCEN files regularly processed transactions to companies registered in so-called secrecy jurisdictions and did so without knowing the ultimate owner of the account. At least 20% of the reports contained a client with an address in one of the world’s top offshore financial havens, the British Virgin Islands, while many others provided addresses in the U.K., the U.S., Cyprus, Hong Kong, the United Arab Emirates, Russia and Switzerland.

ICIJ’s analysis found that in half of the reports banks didn’t have information about one or more entities behind the transactions. In 160 reports, banks sought more information about corporate vehicles, only to be met with no response.

Key findings of ICIJ’s FinCEN Files investigation include:

• Global banks moved more than $2 trillion between 1999 and 2017 in payments they believed were suspicious, and flagged bank clients in more than 170 countries who were identified as being involved in potentially illicit transactions. The figures include $514 billion at JPMorgan Chase and $1.3 trillion at Deutsche Bank.
• The FinCEN Files show that five global banks — JPMorgan Chase, HSBC, Standard Chartered Bank, Deutsche Bank and Bank of New York Mellon — moved illicit cash for shadowy characters and criminal networks even after U.S. authorities fined these financial institutions for earlier failures to stem flows of dirty money.
• In half of the FinCEN Files reports, banks didn’t have information about one or more entities behind the transactions.
• JPMorgan Chase moved money for companies tied to the massive looting of public funds in Venezuela, Malaysia and Ukraine, including under-the-table payments from disgraced Ukrainian officials to Paul J. Manafort Jr., U.S. President Donald Trump’s convicted former campaign manager.
• Deutsche Bank ignored red flags for years and played an integral role in the historic $230 billion money laundering scandal now engulfing Danske Bank’s Estonian operation. The German giant’s automated systems flagged one anonymous U.K.-registered shell company — later revealed as a major laundering vehicle — a dozen times but the bank still processed $2.6 billion and didn’t file a SAR for years until a separate scandal brought the shell company to light.
• Danske Estonia bankers implicated in the scandal ran a secret side company to help set up U.K. shell companies on a wholesale basis for anonymous clients.
• Shadowy entities with ties to the Baltics, known as formation agencies, use a loophole in U.K. corporate law to mass produce anonymous U.K.-registered shell companies and help them set up accounts in corrupt Baltic banks. Nine agencies alone set up 2,447 companies found in the FinCEN Files.
• HSBC continued to transmit money for alleged money launderers and an international Ponzi scheme even while it was serving a five-year probation with U.S. courts.
• In 2014, a U.S. task force recommended that the Treasury Department designate Dubai-based gold conglomerate Kaloti Jewellery Group as a money laundering threat under the USA Patriot Act — but the government didn’t act.
• Banks reported more than $4.8 billion between 2009 and 2017 in suspicious transactions with links to Venezuela. Nearly 70% of that amount had a Venezuelan government entity, such as the Ministry of Finance or the state oil company, as a party.

Re-disseminated by The Asian Banker from ICIJ.org