FinCEN Files Leak Shows Big Banks Moved Illicit Funds


U.S. FinCEN files leak has revealed a slew of major banks allowed criminals to launder money in transactions worth more than $2 trillion.

September 21, 2020 | AtoZ MarketsSeveral global banks moved large sums of allegedly illicit funds over a period of nearly two decades, despite red flags about the origins of the money, BuzzFeed and other media reported on Sunday, citing confidential documents submitted by banks to the U.S. government.

The media reports were based on leaked suspicious activity reports (SARs) filed by banks and other financial firms with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCen).

The SARs, which the reports said numbered more than 2,100, were obtained by BuzzFeed News and shared with the International Consortium of Investigative Journalists (ICIJ) and other media organizations.

In all, the ICIJ reported that the files contained information about more than $2 trillion worth of transactions between 1999 and 2017. These transactions were flagged by internal compliance departments of financial institutions as suspicious. The SARs are in themselves not necessarily proof of wrongdoing, and the ICIJ reported the leaked documents were a tiny fraction of the reports filed with FinCEN.

Which banks are in the FinCEN files leak?

Six global banks appeared most often in the documents — HSBCJPMorgan ChaseDeutsche Bank, Standard Chartered, Barclays, and Bank of New York Mellon, the ICIJ reported. The SARs provide key intelligence in global efforts to stop money laundering and other crimes. The media reports on Sunday painted a picture of a system that allows vast amounts of illicit funds to move through the banking system.

A bank has a maximum of 60 days to file SARs after the date of the initial detection of a reportable transaction, according to the Treasury Department’s Office of the Comptroller of the Currency. The ICIJ report said in some cases the banks failed to report suspect transactions until years after they had processed them.

The SARs also showed that banks often moved funds for companies that were registered in offshore havens, such as the British Virgin Islands, and did not know the ultimate owner of the account, the report said. Staff at major banks often used Google searches to learn who was behind large transactions, it said.

What do the FinCEN files reveal?

Deutsche Bankfined numerous times by CFTC and EU agencies for AML failures, accounts for more than half of suspicious payments in the leak. the German bank pushed money through accounts belonging to criminals, drug traffickers, and terrorists.

HSBC reported that millions of dollars in stolen money had moved around its accounts, even after watchdogs warned it about a Ponzi scheme.

Barclays Bank allowed a Russian billionaire Arkady Rotenberg to avoid sanctions preventing him from using financial services in the West.

Standard Chartered reported the movement of cash between Arab Bank accounts used for funding international terrorism.

JP Morgan filed SARs showing that more than $1 billion filtered through a London-based account. According to the FinCEN file, the bank did not know who owned the account. It later discovered it may have belonged to someone on the FBI’s Most Wanted list.

“I hope these findings spur urgent action from policymakers to enact needed reforms,” said Tim Adams, chief executive of the trade group Institute of International Finance, in a statement. “As noted in today’s reports, the impacts of financial crime are felt beyond just the financial sector – it poses grave threats to society as a whole.”

The banks’ comments on the leaks

The banks mentioned in the leaks have since made statements to make clear that they have sought to improve their processes. In a statement to Reuters, HSBC said:

“All of the information provided by the ICIJ is historical. The bank said as of 2012, “HSBC embarked on a multi-year journey to overhaul its ability to combat financial crime across more than 60 jurisdictions.”

Standard Chartered said in a statement to Reuters:

“We take our responsibility to fight financial crime extremely seriously and have invested substantially in our compliance programmes.”

BNY Mellon told Reuters it could not comment on specific SARs. “We fully comply with all applicable laws and regulations, and assist authorities in the important work they do,” the bank said.

JPMorgan said it has “thousands of people and hundreds of millions of dollars dedicated to this important work.” “We have played a leadership role in anti-money laundering reform,” the bank said in a statement.

In a statement on Sunday, Deutsche Bank said the ICIJ had “reported on a number of historic issues.”

“We have devoted significant resources to strengthening our controls and we are very focused on meeting our responsibilities and obligations,” the bank said.

How the leaked FinCEN files impacted the banking sector

Shares in the banking sector had fallen on Monday morning as the markets reacted to the leak. Barclays, HSBC and Standard Chartered all saw their shares drop on the London Stock Exchange on Monday morning. Meanwhile, shares in HSBC dropped by more than 4% in Hong Kong to their lowest level since 1995.

We do not know how the leaks and any subsequent reaction from regulators will affect the banks’ spending on AML systems and fraud detection technology.

Read also: US Congress Wants FinCEN to Study Blockchain Technology

On the one hand, we could see banks’ regulatory requirements become more stringent as supervisors launch a crackdown, leading to more spending on compliance tools. On the other hand, the notion that banks continue to work with questionable clients even after they have been flagged as suspicious or even placed on a national sanctions list will lead people to ask why they are spending so much on the technology in the first place.

Think we missed something? Let us know in the comment section below.

  1. I am Satoshi says:

    And they are telling me that crypto is criminal?
    Banks are gone rogue

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