Sep 21, 2020
Highlights From the FinCEN Files on Banks’ Suspect Transactions
(Bloomberg) -- The global financial industry is under the spotlight again after a cache of leaked documents show years of transactions handled by the world’s largest banks linked to money laundering, corruption and fraud.
The report dubbed the FinCEN files, released by the International Consortium of Investigative Journalists and based on leaked documents obtained by BuzzFeed News, said that in some cases the banks kept moving illicit funds after receiving warnings from U.S. officials. Here are some of the key facts and figures.
How much money’s involved?
Banks moved more than $2 trillion in transfers that their own compliance officers flagged as suspicious in around 2,100 filings with the U.S. Treasury’s Financial Crimes Enforcement Network, or FinCEN. The documents mainly cover payments from 2011 to 2017. The filings analyzed represent just 0.02% of more than 12 million suspicious activity reports filed over that time.
Almost 90 financial institutions appear in the documents, including many of the world’s biggest banks.
Deutsche Bank AG handled about $1.3 trillion of the suspicious transactions. JPMorgan Chase & Co. processed $514 billion, Standard Chartered Plc, $166 billion and Bank of New York Mellon Corp., $64 billion. At HSBC Holdings Plc, it was $4.5 billion. Other institutions named include Barclays Plc, Societe Generale SA, State Street Corp., Commerzbank AG and China Investment Corp.
Hundreds of millions of dollars of Russian and Ukrainian money passed through ING Bank Slaski SA, Poland’s Gazeta Wyborcza newspaper wrote on Sunday. Funds were wired through the unit to tax havens such as Cyprus until at least 2016.
The ICIJ report noted that JPMorgan moved more than $1 billion for the fugitive financier behind Malaysia’s 1MDB scandal, based on records. The bank also processed payments for Paul Manafort, the former campaign manager for President Donald Trump, after he resigned from the campaign amid money laundering and corruption allegations from his work with a pro-Russian political party in Ukraine, according to the investigation.
What’s at issue?
Banks are required to file Suspicious Activity Reports, or SARs, with the U.S. government within 30 or 60 days of learning of a questionable transaction. The reports aren’t necessarily indicative of criminal conduct or other wrongdoing but reflect compliance officers’ concerns.
Fines levied against HSBC and Standard Chartered in 2012 spurred a spike in suspicious activity reports, from about 60,000 that year to more than 2 million annually in recent years. Authorities follow up with banks on about 4% of the reports, according to a 2018 survey of the biggest lenders in the U.S.
Lenders have stressed that the leaked reports show their screening and monitoring systems are working as intended.
“We report suspicious activity to the government so that law enforcement can combat financial crime,” JPMorgan said in a statement. “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.”
“The issues have already been investigated and led to regulatory resolutions in which the bank’s cooperation and remediation was publicly recognized,” according to Deutsche Bank.
HSBC’s shares reached a 25-year low on Monday. Standard Chartered fell 5% in London trading, while Barclays and Deutsche Bank shares declined more than 8% as investors digested the report and also worried about tighter virus restrictions.
Still, some analysts said the report’s lasting impact on the sector may be relatively muted.
“A fair amount of what these files reveal covers known issues,” said Joseph Dickerson, an analyst at Jefferies. “It is too early to make a call on what the outcome of publishing this will be but it is hard to see how this data could be construed as ‘new news’ to banking regulators. It is therefore hard to see direct material financial consequences for banks such as Standard Chartered and HSBC at this time.”
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