FinCEN Files: All You Need to Know about the Documents Leak

Leaked documents involving about $2tn of transactions have revealed how some of the world’s biggest banks have allowed criminals to move dirty money around the world.

They also show how Russian oligarchs have used banks to avoid sanctions that were supposed to stop them getting their money into the West.

It’s the latest in a string of leaks over the past five years that have exposed secret deals, money laundering and financial crime.

What are the FinCEN Files?

The FinCEN files are more than 2,500 documents, most of which were files that banks sent to the US authorities between 2000 and 2017. They raise concerns about what their clients might be doing.

These documents are some of the international banking system’s most closely guarded secrets.

Banks use them to report suspicious behaviour but they are not proof of wrongdoing or crime.

They were leaked to Buzzfeed News and shared with a group that brings together investigative journalists from around the world, which distributed them to 108 news organisations in 88 countries, including the BBC’s Panorama programme.

Hundreds of journalists have been sifting through the dense, technical documentation, uncovering some of the activities that banks would prefer the public not to know about.

Two Acronyms You Need to Know

FinCEN is the US Financial Crimes Enforcement Network. These are the people at the US Treasury who combat financial crime. Concerns about transactions made in US dollars need to be sent to FinCEN, even if they took place outside the US.

Suspicious activity reports, or SARs, are an example of how those concerns are recorded. A bank must fill in one of these reports if it is worried one of its clients might be up to no good. The report is sent to the authorities.

Also Read: MAS Technology Risk Management Guidelines

Why Does this Matter?

If you are planning to profit from a criminal enterprise, one of the most important things to have in place is a way of laundering the money.

Laundering money is the process of taking dirty money – the proceeds of crimes such as drug dealing or corruption – and getting it into an account at a respected bank where it will not be linked with the crime.

The same process is needed if you are a Russian oligarch whom Western countries have taken sanctions against to stop you getting your money into the West.

Banks are supposed to make sure they don’t help clients to launder money or move it around in ways that break the rules.

By law, they have to know who their clients are – it’s not enough to file SARs and keep taking dirty money from clients while expecting the authorities to deal with the problem. If they have evidence of criminal activity they should stop moving the cash.

Fergus Shiel from the International Consortium of Investigative Journalists (ICIJ) said the leaked files were an “insight into what banks know about the vast flows of dirty money across the globe”.

He said the documents also highlighted the extraordinarily large amounts of money involved. The documents in the FinCEN files cover about $2tn of transactions and they are only a tiny proportion of the SARs submitted over the period.

What Has Been Revealed?

• HSBC allowed fraudsters to move millions of dollars of stolen money around the world, even after it learned from US investigators the scheme was a scam.
• JP Morgan allowed a company to move more than $1bn through a London account without knowing who owned it. The bank later discovered the company might be owned by a mobster on the FBI’s 10 Most Wanted list.
• Evidence that one of Russian President Vladimir Putin’s closest associates used Barclays Bank in London to avoid sanctions which were meant to stop him using financial services in the West. Some of the cash was used to buy works of art.
• The UK is called a “higher risk jurisdiction” like Cyprus, according to the intelligence division of FinCEN. That’s because of the number of UK registered companies that appear in the SARs. Over 3,000 UK companies are named in the FinCEN files – more than any other country.
• The United Arab Emirates’ central bank failed to act on warnings about a local firm which was helping Iran evade sanctions.
• Deutsche Bank moved money launderers’ dirty money for organised crime, terrorists and drug traffickers. More details (BuzzFeed News)
• Standard Chartered moved cash for Arab Bank for more than a decade after clients’ accounts at the Jordanian bank had been used in funding terrorism.

Also Read: How Bank Disclosure Of Customer Information Work For Security

Why is this Leak Different?

There have been a number of big leaks of financial information in recent years, including:

• 2017 Paradise Papers – A huge batch of leaked documents from an offshore legal service provider Appleby and corporate services provider Estera. The two operated together under the Appleby name until Estera became independent in 2016. They revealed the offshore financial dealings of politicians, celebrities and business leaders
• 2016 Panama Papers – Leaked documents from the law firm Mossack Fonseca showed more about how wealthy people were using offshore tax regimes to their benefit
• 2015 Swiss Leaks – Documents from HSBC’s Swiss private bank showed how it was using the country’s banking secrecy laws to help clients avoid paying tax
• 2014 LuxLeaks contained documents from the accountancy firm PricewaterhouseCoopers showing that big companies were using tax deals in Luxembourg to reduce the amount they were having to pay

Also Read: 10 Best, Secured And Trusted Disposal Contractor In Singapore

The FinCEN papers are different because they are not just documents from one or two companies – they come from a number of banks.

They highlight a range of potentially suspicious activity involving companies and individuals and also raise questions about why the banks which had noticed this activity did not always act on their concerns.

FinCEN said the leak could impact on US national security, compromise investigations, and threaten the safety of institutions and individuals who file the reports.

But last week it announced proposals to overhaul its anti-money laundering programmes.

The UK has also unveiled plans to reform its register of company information to clamp down on fraud and money laundering.