FinCEN leak suggests new AML measures may not go far enough… for banks

The leaked documents show many banks 'enabling' money laundering.

Leaked documents from the U.S. Financial Crimes Enforcement Network (FinCEN) imply that the agency’s revamped efforts to identify illicit transactions and money laundering may not be sufficient. But on this occasion, the institutions described as being at fault are not crypto exchanges, but some of the world’s best-known banks.

BuzzFeed News reported on Sept. 20 that it received thousands of documents detailing “suspicious activity reports,” or SARs, from banks to FinCEN between 2000 and 2017. According to the news outlet, the reports “offer an unprecedented view of global financial corruption, the banks enabling it, and the government agencies that watch as it flourishes.”

Some of the more contentious information in the SARs implies that FinCEN took little or no action to stop banks from enabling money laundering from suspicious individuals and institutions on some occasions. 

“Laws that were meant to stop financial crime have instead allowed it to flourish,” BuzzFeed News stated. “So long as a bank files a notice that it may be facilitating criminal activity, it all but immunizes itself and its executives from criminal prosecution. The suspicious activity alert effectively gives them a free pass to keep moving the money and collecting the fees.”

New AML laws for financial institutions

News of the leak comes just one week after the financial regulator announced that it would be making sweeping changes to its anti-money laundering (AML) rules designed to identify and combat illicit financial activity through robust record-keeping and risk assessment requirements. 

Regulations are one thing; enforcement is another. BuzzFeed News stated that although the financial watchdog received millions of SARs in a 17-year period from many financial institutions, it was not always able to force banks to effectively prevent money laundering.

The SARs reveal that money laundering issues have penetrated deep into financial institutions, with BuzzFeed reporting many banks including JPMorgan Chase, HSBC, Standard Chartered, Deutsche Bank, and Bank of New York Mellon enabling “a shadow financial system” through which illicit funds can travel freely.

According to experts, “Some banks treat SARs as a kind of get-out-of-jail-free card, filing alerts about a huge array of transactions without actually moving to halt them,” the news outlet reported. “In some cases, banks filed numerous reports on the same clients, detailing their suspected crimes over the course of years while continuing to welcome their business.”

“The networks through which dirty money traverse the world have become vital arteries of the global economy. They enable a shadow financial system so wide-ranging and so unchecked that it has become inextricable from the so-called legitimate economy. Banks with household names have helped to make it so.”

The Mt. Gox connection

According to TrustNodes, the institution which had the most suspicious activity reports with FinCEN in the latest leak was Mayzus Financial Services (MFS), allegedly a fiat intermediary of Bitcoin exchange BTC-e. The exchange was allegedly involved in moving funds from the infamous Mt. Gox hack, in which thieves stole 850,000 Bitcoin (BTC) in 2014. The stolen crypto would be worth roughly $9.3 billion today.

MFS and its subsidiaries, including MoneyPolo, have issued various statements on the nature of the relationship, although the company is on record as saying that BTC-e “has never had any direct link to our company, neither structurally, nor personally”.

There are reportedly more than 2,000 documents in the latest leaked FinCEN files.