Fresh calls to overhaul global regulation of the banking system to curb the circulation of illicit cash have followed Sunday's publication of investigative reporting based on leaked documents which show the extent to which U.S. and international banks have helped the world's oligarchs and criminal underground move and launder illegally obtained funds despite repeated vows to inhibit the flow of such "dirty money."
"Money laundering isn't a victimless crime. The free flow of dirty cash helps sustain criminal gangs and destabilize nations. And it is a driver of global economic inequality."
—International Consortium of Investigative Journalists
Called the "FinCEN Files"—a reference to top-secret files sent to the U.S. Department of Treasury's Financial Crimes Enforcement Network—the new investigation is the product of a collaborative effort coordinated by the International Consortium of Investigative Journalists (ICIJ).
A team of more than 400 reporters from around the world analyzed thousands of suspicious activity reports (SARs) and other government documents obtained in a leak to BuzzFeed News to provide an "unprecedented view of global financial corruption, the banks enabling it, and the government agencies that fail to stop it."
Exposing what they called "industrial-scale money laundering" facilitated by the "blind eye" of financial institutions, researchers uncovered more than $2 trillion of "dark money" that passed through the banking system undetected by law enforcement officials and regulatory agencies between 1999 and 2017.
The investigation unearthed dozens of connections between banks, governments, and "shadowy entities," including money launderers, drug cartels, organized crime outfits, terrorist financiers, and other corrupt individuals. For instance, some of the financial transactions of Paul Manafort—former manager of President Donald Trump's 2016 election campaign—were flagged as early as 2012.
According to the journalists involved, their examination of the financial industry "shows how big banks have profited from serving shadowy characters even after authorities fined them for earlier failures."
The charts below depict the ten banks that filed the most suspicious activity reports with FinCEN and the median number of days it took the top five banks to submit a report after a suspicious financial transaction occurred:
When banks encounter a transaction they consider suspicious, they may freeze or reverse they payment and return the transfer fee, or they can take the fee, move the money, and file a SAR highlighting the transfer for regulators.
If banks fail to file a SAR, they can incur fines or penalties. FinCEN received more than two million SARs in 2019 alone, according to ICIJ and BuzzFeed.
But as the investigation demonstrated, banks appear to have no problem transferring potentially illicit money and collecting a transaction fee before flagging the transfer as suspicious in their reporting to FinCEN.
The journalists who analyzed over 2,100 SARs, less than 0.02% of the more than twelve million SARs filed between 2011 and 2017, found that—rather than freezing or reversing suspicious transactions and returning transfer fees—banks cleared more than $2 trillion in payments that they later identified as suspicious.
BuzzFeed editor Ariel Kaminer described this as a "failure or, quite possibly, refusal on the part of banks and governments to stop" the flow of "vast oceans of dirty money that are coursing through the world's economy."
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Kaminer explained that in addition to mapping flows of dirty money, the investigation seeks to show the negative impacts of the illicit economic activities given tacit approval by banks and governments.
ICIJ's reporting on "global banks that have long catered to oligarchs and despots and have felt little real pressure to stop" includes several examples of "the punishing human cost of laundered trillions"—illustrating how "dirty cash" profits from opioids to arms sales to workplace accidents destroy the "dreams and lives" of people worldwide.
BuzzFeed has documented how the world's biggest banks have responded to the FinCEN Files. Financial institutions like Deutsche Bank claimed to "have devoted significant resources to strengthening our controls" and said they are "very focused on meeting our responsibilities and obligations."
But the investigation showed that Deutsche—which accounted for $1.3 trillion worth of potentially illicit transactions—processed $2.6 billion for an anonymous U.K-registered shell company despite flagging it a dozen times and "didn't file a SAR for years until a separate scandal brought the shell company to light."
On social media, economist Robert Reich said that "Deutsche Bank is a criminal enterprise that needs to be shut down."
Deutsche Bank is a criminal enterprise that needs to be shut down. https://t.co/FkyPXivpG2
— Robert Reich (@RBReich) September 21, 2020
"Nearly every national security and public safety threat we that we face—from terror financing and sanctions evasion to the opioid crisis and human trafficking—is either motivated or facilitated by money," explained Clark Gascoigne, interim executive director of the Financial Accountability and Corporate Transparency (FACT) Coalition. "The FinCEN Files reveal that the system we've established to follow that money is broken."
"It's time," Gascoigne added, "to overhaul our anti-money laundering system and prioritize the fight against illicit finance."
Gascoigne advocated "enacting bipartisan legislation to end the incorporation of anonymous shell companies in the National Defense Authorization Act," this fall, but said "we must go farther."
The interim director of FACT pushed for: "Exponentially increasing the staff and resources devoted to FinCEN, overhauling safeguards in the correspondent banking system, expanding anti-money laundering requirements to other gatekeepers to the financial system, and holding individual leaders at financial institutions personally accountable for facilitating financial crimes."
ICIJ insisted that "money laundering isn't a victimless crime."
"The free flow of dirty cash helps sustain criminal gangs and destabilize nations," the group said. "And it is a driver of global economic inequality."