ICIJ’s FinCEN Files Expose How Banks Turn a Blind Eye to Suspicious Transactions

A 16-months long investigation identified more than $2 trillion in transactions that were flagged as possible money laundering or other criminal activity. The records—which were obtained by BuzzFeed News and reviewed by a team of more than 400 journalists—show banks blindly moving cash through their accounts for people they can’t identify, failing to report transactions with all the hallmarks of money laundering until years after the fact.

Authorities in the United States, who play a leading role in the global battle against money laundering, have ordered big banks to reform their practices, fined them hundreds of millions and even billions of dollars, and held threats of criminal charges over them as part of so-called deferred prosecution agreements. A new 16-months long investigation by the International Consortium of Investigative Journalists (ICIJ) and its reporting partners shows that these headline-making tactics haven’t worked. Big banks continue to play a central role in moving money tied to corruption, fraud, organized crime, and terrorism.

ICIJ organized a team of more than 400 journalists from 110 news organizations in 88 countries to investigate the world of banks and money laundering, as detailed in records obtained by BuzzFeed News. The leaked documents, known as the FinCEN Files, include more than 2,100 suspicious activity reports filed by banks and other financial firms with the US Department of Treasury’s Financial Crimes Enforcement Network. The agency, known in shorthand as FinCEN, is an intelligence unit at the heart of the global system to fight money laundering. The FinCEN Files offer unprecedented insight into a secret world of international banking, anonymous clients and, in many cases, financial crime.

In all, the ICIJ documents identify more than $2 trillion in transactions between 1999 and 2017 that were flagged by financial institutions’ internal compliance officers as possible money laundering or other criminal activity, including $514 billion at JPMorgan and $1.3 trillion at Deutsche Bank.

They show banks blindly moving cash through their accounts for people they can’t identify, failing to report transactions with all the hallmarks of money laundering until years after the fact, and even doing business with clients enmeshed in financial frauds and public corruption scandals.

“By utterly failing to prevent large-scale corrupt transactions, financial institutions have abandoned their roles as front-line defenses against money laundering,” Paul Pelletier, a former senior US Justice Department official and financial crimes prosecutor, told ICIJ. According to him, banks know that “they operate in a system that is largely toothless.”

Linda A. Lacewell, the superintendent of the New York State Department of Financial Services, acknowledged that insiders have long known that the financial system is awash with trillions of dollars in dirty money. Efforts in the US and other countries to prevent banks from waving through illicit funds largely rely on a system of self-reporting. Financial firms are required to file “suspicious activity reports” whenever they spot transactions that may be linked to criminal conduct. Obviously, suspicious activity reports reflect the concerns of watchdogs within banks and are not necessarily evidence of criminal conduct or other wrongdoing. But these reports have “become a free pass for banks,” said Lacewell.

Though a vast amount, the $2 trillion in suspicious transactions identified within this set of documents is just a drop in a far larger flood of dirty money gushing through banks around the world. The FinCEN Files represent less than 0.02 percent of the more than 12 million suspicious activity reports that financial institutions filed with FinCEN between 2011 and 2017.

FinCEN and its parent, the Treasury Department, did not answer a series of questions submitted in August by ICIJ and its partners. FinCEN told BuzzFeed News that it does not comment on the “existence or non-existence” of specific suspicious activity reports, sometimes known as SARs. Days before the release of the investigation by ICIJ and its partners, FinCEN announced that it was seeking public comments on ways to improve the US anti-money laundering system.

The ICIJ investigation has elicited responses from regulators around the world.

In England, Mark Steward, the Financial Conduct Authority’s head of enforcement, expressed surprise that some banks viewed their responsibility to stop financial crime as a “bureaucratic exercise in red tape.”

“What that tells me is that the point of anti-money laundering controls has somehow got lost and gone missing from the challenge, and understanding that this is all about reducing crime of a very serious nature,” Steward told City AM. According to him, there was no major bank in Britain that has not been or is not currently the subject of an ongoing probe related to the adequacy of their dirty money safeguards.

In Portugal, the investigation prompted Transparency International to ask the Bank of Portugal to disclose its conclusions and the measures it has undertaken concerning the suspicious payments processed by EuroBIC, a small Portuguese bank. “Taken together, the revelations from the Luanda Leaks and the FinCEN Files present a definitive example that, despite glaring risks, anti-money laundering is not a priority for Portugal,” said Karina Carvalho, Transparency International Portugal’s executive director.

Separately, Russian authorities this week reportedly said suspicious activities flagged in the FinCEN Files had already been reviewed by the country’s regulators, and that some cases had resulted in criminal investigations and convictions.

ICIJ’s Belgium partners—from Le Soir, Knack, and De Tijd—will testify in the Belgian parliament about the FinCEN Files next month, according to ICIJ member Lars Bové.

Coming back to the US, in the wake of the FinCEN Files investigation, prominent senators including Bernie Sanders and Elizabeth Warren have joined watchdog groups and banking regulators in calling for a crackdown on dirty money and banks that profit from it. 

According to the leaked documents, JPMorgan, the largest bank based in the US, moved money for people and companies tied to the massive looting of public funds in Malaysia, Venezuela, and Ukraine. The bank moved more than $1 billion for the fugitive financier behind Malaysia’s 1MDB scandal, the records show, and more than $2 million for a young energy mogul’s company that has been accused of cheating Venezuela’s government and helping cause electrical blackouts that crippled large parts of the country.

JPMorgan also processed more than $50 million in payments over a decade, the records show, for Paul Manafort, the former campaign manager for President Donald Trump. The bank processed at least $6.9 million for Manafort in the 14 months after he resigned from the campaign amid a swirl of money laundering and corruption allegations spawning from his work with a pro-Russian political party in Ukraine. In 2019, Manafort was convicted and sentenced on a number of charges, including bank and tax fraud.

Tainted transactions continued to surge through accounts at JPMorgan, the ICIJ report alleges, despite the bank’s promises to improve its money laundering controls as part of settlements it reached with US authorities in 2011, 2013, and 2014.

JPMorgan said it was legally prohibited from discussing its clients and their transactions. It said it has taken a “leadership role” in pursuing “proactive intelligence-led investigations” and developing “innovative techniques to help combat financial crime”.

HSBC, Standard Chartered Bank, Deutsche Bank, and Bank of New York Mellon also continued to wave through suspect payments despite similar promises to government authorities, the secret documents show. Along with JPMorgan, these banks appear most often in the FinCEN Files and repeatedly violated their official promises of good behavior.