Compass Money: FinCEN Files – The War Against Dirty Money

Thousands of financial documents involving about $2 trillion of transactions were leaked on September 20, revealing how major global banks have been moving around illicit money for years. The 2,500 documents, collectively dubbed the FinCEN files, were investigated and publicized by journalists at Buzzfeed News and the International Consortium of Investigative Journalists (ICIJ).

Financial information leaks have happened before, such as in the case of the 2015 Swiss Leaks and the 2016 Panama Papers. However, this leak stands out from the rest: the FinCEN files do not come from just one or two companies, but from a vast number of globally-respected banks. 

U.S. banks are required by law to file suspicious activity reports (SARs) when they have concerns about transactions that their clients conducted in U.S. dollars. Written by banks’ compliance officers, the reports are sent to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury that collects SARs and makes reports available to federal law enforcement agencies.

The reports cite more than 200,000 suspicious transactions from 1999 to 2017 that culminated in around $2 trillion. Throughout almost two decades, banks including JPMorgan Chase, Citigroup, Bank of America, Deutsche Bank, HSBC, and Standard Chartered participated in money laundering for their clients. Money laundering is the practice of masking illegally obtained money by putting it through various transactions, such as into various bank accounts, in order to delink it with the crime. 

Not only did banks launder money, but the U.S. government also did not stop it. The investigation reveals that even after these banks and the U.S. federal government were aware of criminal financial activity, they did nothing to curb—or prevent—it.

The abuses are far from few: Standard Chartered moved cash for Al Zarooni Exchange for over a decade, even while fully aware that the Dubai-based business was funding Taliban militants’ terrorist attacks. JP Morgan permitted more than $1 billion from an unknown company to move through, later realizing it was owned by someone on the FBI's Top 10 Most Wanted list. HSBC Hong Kong’s approval of an already-banned business to move money resulted in at least $80 million stolen from Latino and Asian immigrant investors. Citibank, Bank of America, American Express, and others moved millions of dollars for Viktor Khrapunov’s family even after Interpol issued a notice for Khrapunov’s arrest.

The consequences of the banks’ wrongdoings and government agencies’ neglect are profound. Not only do criminals go beyond the reach of authorities and oppressors consolidate power, but citizens may lose trust in their governments to protect sensitive information. The effects are also greatly personal: parents grieve over fallen children in battle, families have savings stolen by predatory schemes, teenagers are overtaken by drugs.

Many individuals have voiced their thoughts. In a tweet, Senator Bernie Sanders wrote, “The business model of Wall Street is fraud. It is not the exception to the rule—it is the rule. Break them up.” Senator Elizabeth Warren called for the passage of a legislation to hold Wall Street executives accountable for illegal bank activities. Robert Mazur, a former federal special agent, said that making public the FinCEN files "will hopefully get people who are in a position of power to correct an apparent systemic failure.”

In light of the public disapproval of this type of corruption, various solutions have been proposed. One solution could be to require company owners to disclose themselves to the Treasury Department, thus making sure that no use shell companies as ways to conceal their identities. Another proposal calls for greater public accountability; negative reports made public prompt banks to act openly and cleanly. Some have even asked for SARs to be replaced with direct arrest of the lawbreakers. 

No matter the solution, one thing is clear: as Linda Lacewell, Superintendent of the New York State Department of Financial Services, put it, “Banks must put integrity at the center of what they do and empower compliance personnel to act. The SAR should be the beginning of the analysis not the end [sic]. We must act.”