A cache of leaked documents suggests increased scrutiny on suspect transactions at banks does little to stem the flow of trillions of dollars linked to suspicious activity -- and shares of the biggest global lenders fell.
A new investigation by the International Consortium of Investigative Journalists says JPMorgan Chase, Deutsche Bank, and HSBC were among the global banks who “kept profiting from powerful and dangerous players” in the past two decades even after the US imposed penalties on these financial institutions.
The documents detailed 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, the report said.
Almost 90 financial institutions appear in the roughly 2,100 documents obtained, a fraction of the 2 million reports filed annually.
Banks moved money for people or entities they couldn’t identify, and in many cases failed to file the required suspicious activity reports until years afterward, according to the investigation.
The report, based on leaked documents obtained by BuzzFeed News and shared with the consortium, said that in some cases the banks kept moving illicit funds after receiving warnings from US officials.
The top two banks are Deutsche Bank, which disclosed $1.3 trillion of suspicious money in the files, and JPMorgan, which disclosed $514bn, the analysis found. Other lenders include HSBC, Standard Chartered and Bank of New York Mellon, it said.
“They need to do a better job of shutting down these accounts once they see repeated reasons for filing suspicious activity reports,” Tom Cardamone, managing director of Global Financial Integrity, a Washington-based organisation tracking illegal money flows worldwide, said.
There are “clients so bad that numerous SARs are being filed about them, but no one ever does anything about it.”
The documents shed light on a faulty system where banks complain about reports that get no follow-up from authorities, while critics say lenders are checking off boxes without taking meaningful steps to stop financial crime.
It all risks another black eye for major international banks that paid a total of $20bn from 2012 through 2015 for having lax controls against money laundering, helping clients evade taxes or violate US sanctions.
Shares in Deutsche Bank fell 7.5%, while HSBC slid 4% and JPMorgan shares were down 3%.
The investigation was based on more than 2,100 “suspicious activity reports” filed by banks with the US Department of Treasury’s Financial Crimes Enforcement Network.
Those filings represent just 0.02% of more than 12 million suspicious activity reports filed between 2011 and 2017.
The report, dubbed the FinCEN Files, was the result of an investigation by more than 100 news organisations in 88 countries, Buzzfeed said.