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Illustration: Aïda Amer/Axios

2 million suspicious activity reports, or SARs, are filed by banks every year. Those reports are sent to the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN), which has the job of determining whether the reports are evidence of criminal activity, and whether that activity should be investigated and punished.

The catch: FinCEN only has 270 employees, which means that FinCEN is dealing with a ratio of roughly 150 reports per employee per week. So it comes as little surprise to learn that most of the reports go unread, and the activity in them unpunished.

  • That's a massive job: It can take a team of investigators weeks or months to investigate a single report.

For the record: A tiny subset of FinCEN reports — 2,100 in all — was leaked to BuzzFeed News two years ago. That kicked off a major international investigation, involving more than 400 journalists in 88 countries. After 16 months of work, their findings are now public.

  • The journalists didn't have all the tools of law enforcement at their disposal, but they did have the luxury of being able to spend as much time as they wanted on one small group of reports.
  • What they found was more or less what you'd expect: Some of those reports detailed what looks to be criminal activity by criminals. That's why they were marked suspicious by the banks.
  • Journalists can't prove that any behavior was criminal. But it does seem with hindsight that banks allowed a lot of illegal money laundering to continue.

Between the lines: We don't know how much of that activity was caught or investigated by law enforcement. But it's a safe bet that it wasn't enough.

  • We do know that the banks seem to have been generally happy to continue working with their customers after filing the SARs.
  • All too often the banks file their SARs long after the criminals have moved on. The main reason for doing so is just that it's almost impossible to prosecute a bank for abetting money laundering if it has filed a SAR on the activity in question.

The bottom line: Banks need to be an integral part of the fight against money laundering, rather than simply filing SARs to protect themselves. The entire system needs a massive technological and financial upgrade — and law enforcement needs to grow more teeth, especially when it comes to prosecuting banks.

  • My thought bubble: Money laundering persists because banks make more money when it exists than when it doesn't. The only effective way to fight it is to ensure that's no longer the case.

Go deeper

Dion Rabouin, author of Markets
Dec 14, 2020 - Economy & Business

Pandemic-era debt could spawn new global wave of "zombie firms"

Reproduced from BofA Global Research; Note: Banks included are Federal Reserve, European Central Bank, Bank of Japan, Bank of England, Bank of Canada and Reserve Bank of Australia; Chart: Axios Visuals

Fears are mounting that a massive growth in debt and the current policy environment — described as "monetary policymaking on steroids," by Michael Arone, chief investment strategist for State Street Global Advisors, earlier this year — could be producing a new global wave of "zombie firms," a new G30 report by top economists and central bankers warns.

What it means: "The term 'zombie firms' was coined to refer to firms propped up by Japanese banks during Japan’s so-called 'Lost Decade,' following the collapse in 2001 of the Japanese asset price bubble," according to the report.

Huge wildfire reaches edge of Sequoia National Park

A plume of smoke and flames rise into the air as the fire burns towards Moro Rock during the KNP Complex fire in the Sequoia National Park near Three Rivers, California, on Saturday. Photo: Patrick T. Fallon/AFP via Getty Images

Firefighters in Sequoia National Park were working into the night after two wildfires merged to reach the edge of the Giant Forest Saturday.

Why it matters: The Giant Forest contains over 2,000 giant sequoias, including the General Sherman Tree — considered the world's largest by volume. Park officials wrapped the trees in foil last week as the Paradise and Colony Fires, now known as the KNP Complex Fire, neared. And officials said early Sunday protection efforts appeared to be working.

2 hours ago - World

U.S. drone strike victims' families in Afghanistan seek compensation

A relative of Ezmarai Ahmadi, who was killed by a U.S. drone strike, looks at the wreckage of a vehicle that was damaged in the strike in the Kwaja Burga neighbourhood of Kabul on Saturday. Photo: Hoshang Hashimi AFP via Getty Images

Relatives of 10 Afghans killed by a U.S. drone strike in Kabul last month said Saturday they want to see punishment and compensation over the deaths.

Driving the news: The relatives said it's "good news" that the U.S. had "officially admitted" that "they had attacked innocents" in the Aug. 29 strike that killed Zamarai Ahmadi, an aid worker with a U.S.-based group, and nine family members, but they still need "justice," per AFP.

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