Sep 20, 2020 - Economy & Business

Leaked Treasury documents reveal how dirty money moves through global banking system

Deutsche Bank
Photo: Eduardo Parra/Europa Press via Getty Images

Thousands of leaked government documents covering at least $2 trillion worth of transactions reveal how some of the world's biggest banks knowingly moved around the money of oligarchs, terrorists and criminals, with few consequences, according to a massive investigation by BuzzFeed News, the International Consortium of Investigative Journalists (ICIJ) and hundreds of other news organizations.

The big picture: The investigation, published on Sunday, examines more than 2,100 suspicious activity reports (SARs) filed by banks and other financial firms with the U.S. Department of Treasury’s Financial Crimes Enforcement Network, known as FinCEN.

Key findings:

  • "Five global banks — JPMorgan, HSBC, Standard Chartered Bank, Deutsche Bank and Bank of New York Mellon — kept profiting from powerful and dangerous players even after U.S. authorities fined these financial institutions for earlier failures to stem flows of dirty money," the ICIJ writes.
  • "U.S. agencies responsible for enforcing money laundering laws rarely prosecute megabanks that break the law, and the actions authorities do take barely ripple the flood of plundered money that washes through the international financial system," the ICIJ reports.
  • "Big banks shift money for people they can’t identify and in many cases fail to report suspect transactions until years after the fact."
  • BuzzFeed News adds: "These documents, compiled by banks, shared with the government, but kept from public view, expose the hollowness of banking safeguards, and the ease with which criminals have exploited them. Profits from deadly drug wars, fortunes embezzled from developing countries, and hard-earned savings stolen in a Ponzi scheme were all allowed to flow into and out of these financial institutions, despite warnings from the banks’ own employees."
  • "Laws that were meant to stop financial crime have instead allowed it to flourish. So long as a bank files a notice that it may be facilitating criminal activity, it all but immunizes itself and its executives from criminal prosecution. The suspicious activity alert effectively gives them a free pass to keep moving the money and collecting the fees."

By the numbers, per BuzzFeed and the ICIJ:

  • BuzzFeed received thousands of secret government documents more than a year ago.
  • Among the leaked documents were 2,100 SARs, totaling more than 22,000 pages.
  • BuzzFeed shared the SARs with the ICIJ and more than 400 journalists from 110 news organizations in 88 countries.
  • The documents provide information on more than 10,000 people and organizations in at least 170 countries and territories.
  • More than 250 SARs referenced people with addresses in the U.S.
  • At least 120 people referenced in the SARs had addresses in Russia.
  • Individuals or organizations with addresses in the U.K., China, Germany, the United Arab Emirates, Canada and Ukraine appeared in at least 20 reports each.
  • In total, the SARs flagged more than $2 trillion in transactions between 1999 and 2017.
  • The documents include SARs filed by nearly 90 financial institutions. The 10 most common banks were Deutsche Bank, Bank of New York Mellon, Standard Chartered, JPMorgan Chase, Barclays, HSBC, Bank of China, Bank of America, Wells Fargo and Citibank.
  • JPMorgan Chase flagged "more than $335 billion in suspicious activity, relating to more than 100,000 wire transfers 'sent, received or processed' over the course of a decade-plus by MKS, a Switzerland-based company that trades precious metals."
  • The ICIJ notes that the "FinCEN Files represent less than 0.02% of the more than 12 million suspicious activity reports that financial institutions filed with FinCEN between 2011 and 2017."

What they're saying: According to BuzzFeed, the banks mentioned in the reports could not comment on individual transactions due to privacy laws, but many did provide general statements in response to questions about the investigation.

Bank Policy Institute President Greg Baer said in a statement:

"It does not make sense that the basis for media allegations that banks knowingly hid illegal activity consisted solely of Suspicious Activity Reports that those banks filed alerting law enforcement to that very activity. Clearly, there is more to this story, but unfortunately the reporting failed to unearth it, and the banks are legally prohibited from telling their side. In some cases, if the past is any guide, that story likely includes law enforcement asking a bank to keep open an account it has identified as suspicious so that law enforcement can track where the money is going and gather further evidence to support an arrest and conviction."

Institute of International Finance President Tim Adams, a former Treasury official, said in a statement:

“The findings of today’s reports once again emphasize the need to pursue intelligence-led changes for financial crime risk management - driven by meaningful improvements to public-private sector cooperation and cross-border information sharing, coupled with the use of technology - to enhance the global anti-financial crime framework,” said Tim Adams, IIF President and CEO. “I hope these findings spur urgent action from policymakers to enact needed reforms. 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.”

Go deeper: Read the full FinCEN Files investigation

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