The FinCEN Files: A Leak of SARs Shows Widespread Corruption in the Global Banking Sector

FinCEN Leaks

In yet another stunning leak of classified documents, Buzzfeed News, in collaboration with the International Consortium of Investigative Journalists (ICIJ) and hundreds of other news sources worldwide, released a series of articles showing how global banking conglomerates have failed to prevent or curtail money laundering.

The disclosed documents, which consist of thousands of suspicious activity reports (SARs) submitted to the Financial Crimes Enforcement Network (FinCEN) of the US’s Department of Treasury between 2000 and 2017, revealed that financial institutions and regulatory authorities have allowed illicit funds to be moved throughout the globe with nary a peep.

According to the US Department of Treasury, SARs must be filed by financial institutions “no later than 30 calendar days after the date of initial detection of facts that may constitute a basis for filing a suspicious activity report.” 

In the case a specific suspect has not been linked to the questionable transaction, “a financial institution may delayfiling a suspicious activity report for an additional 30 calendar days to identify a suspect.” 

However, “in no case shall reporting be delayed more than 60 calendar days after the date of initial detection of a reportable transaction.”

Some of the hardest hit banks involved in the leak include HSBC, Standard Chartered, JP Morgan, Barclays and Deutsch Bank, among a host of others.

Here’s a summary of some of the leaks’ findings.

HSBC Transferred Millions as Part of a Ponzi Scheme

HSBC moved millions of dollars for Chinese national Ming Xu as part of a massive Ponzi scheme know as WCM777, which drained money from low-income immigrant communities in the US—particularly California—as well as poor families in countries such as Colombia and Peru.

Despite receiving warnings from regulatory authorities in California in September of 2013, HSBC continued to transfer funds related to the Ponzi scheme to accounts in Hong Kong. These transactions finally ended in April 2014 when the US SEC filed charges against Ming Xu and closed his accounts. 

During this time, HSBC filedthree SARs concerning this movement of funds with the first coming in late October 2013. HSBC officials flagged these transactions as having “no apparent economic, business, or lawful purpose” and likened them to “Ponzi scheme activities.”

According to the BBC, “between 2011 and 2017 HSBC identified suspicious transactions moving through accounts in Hong Kong of more than $1.5bn – about $900m linked to overall criminal activity.”

Despite the submission of these SARs, HSBC’s filings “failed to include key facts about customers, including the ultimate beneficial owners of accounts and where the money came from.”

JP Morgan May Have Laundered Money for Russian Mobster

The FinCEN Files also showed that JP Morgan potentially laundered billions of dollars for Semion Mogilevich, a Russian mobster who has been accused of drug trafficking, weapons dealing and even murder.

A SAR filed by JP Morgan in 2015 reveals that the bank’s London branch transferred roughly 1.02 billion dollars between 2002 and 2013 for an anonymous company called ABSI Enterprises, one referred to in the SAR as being linked to Mogilevich.

JP Morgan said in a statement: “We report suspicious activity to the government so that law enforcement can combat financial crime. 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.”

According to Buzzfeed News, JP Morgan was also linked with the processing of “millions of dollars in transactions for the family of Viktor Khrapunov, the former mayor of Kazakhstan’s most populous city, even after Interpol issued a Red Notice for his arrest.”

Barclays Allegedly Launders Money for Close Putin Associate

The FinCEN Files also revealed that close Putin associate, Arkady Rotenberg, laundered millions using Barclays in the UK and secretive accounts linked to him despite having been financially sanctioned by both the US and the EU back in 2014. 

The leaked documents show that several accounts tied to Rotenberg and his family remained opened until 2017.

Barclays responded to this allegation by stating: “We believe that we have complied with all our legal and regulatory obligations including in relation to US sanctions. Given the filing of a SAR is not itself evidence of any actual wrongdoing, we would only terminate a client relationship after careful and objective investigation and analysis of the evidence, balancing potential financial crime suspicions with the risk of ‘de-banking’ an innocent customer.”

Money laundering

Politicians and Financial Analysts React to the FinCEN Files

Speaking about this latest leak, MEP Sven Giegold said this is “a wake-up call” for the EU to be tougher on banks and money laundering.

“What is new now is that we know with dates and amounts how long some of these business relationships were kept, even after the public authority was involved,” Giegold said.

He also called the EU to establish an office dedicated to supervising anti-money laundering activities, adding that, since “crime is globalizing, AML institutions cannot stay national.”

Financial analysts also urged governments throughout the globe to look into reforming what has become a broken system to prevent money laundering and other illicit financial activities.

Speaking to CNBC, Rachel Wooley, Director of Financial Crime at Fenergo, a regulatory consulting firm, said this latest disclosure reveals a “systemic failure across the entire financial system and industry” and that, since “the days of hiding behind complexity and paper pushing are gone, the entire industry needs to collaborate more effectively in order to adhere to policy and prevent crime from entering the financial system.”

Similarly, Tim Adams, the President and CEO of the Institute for International Finance, said that the data disclosed via the FinCEN Leaks “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.”

As a result of the FinCEN Leaks, shares for the banking sector dropped precipitously on Monday. 

JP Morgan’s shares dropped by 3.1 per cent, Deutsch Bank’s by 8.8 per cent and Standard Chartered’s by 5.8 per cent.

HSBC was one of the hardest hit as its shares fell to a 25-year low and closed at a 5.3 per cent loss.


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