The FinCEN Files show only the tip of the iceberg that is the global financial system’s vulnerability to abuse by criminals and the corrupt, Transparency International said today. Banks, regulators, law enforcement and policy makers must take decisive action to stop flows of dirty money.
The FinCEN Files investigations by BuzzFeed News and media organisations in dozens of countries, coordinated by the International Consortium of Investigative Journalists, show how major banks continued to process payments identified as being at high risk of money laundering and other crimes. Banks that had repeatedly been warned or sanctioned by U.S. regulators and had committed to strengthen their anti-money laundering frameworks repeatedly processed transactions from clients they had flagged with Suspicious Activity Reports (SARs).
Maira Martini, Research and Policy Expert on Corrupt Money Flows at Transparency International, said:
“The FinCEN Files are further proof that the global anti-money laundering system is broken. Banks are meant to be the first line of defence against corrupt money flows, but without proper supervision and accountability for banks and their employees, they have little incentive to cut off suspicious clients. It is not enough to submit poor-quality or delayed Suspicious Activity Reports and continue processing payments.”
“However, the problem is actually bigger than the FinCEN Files show. We know that most of the banks involved in major corruption scandals from the past few years didn’t even file SARs, or only did so when details had already emerged in the media,” added Martini.
Occasional fines and deferred prosecution agreements have proven ineffective for stopping banks repeating the same offences over and over again. To create an effective deterrent against processing high-risks payments, Transparency International calls on all national competent authorities to quickly impose proportional and effective sanctions on banks, their employees and senior managers that breach anti-money laundering obligations.
Supervision of the banking sector must be improved worldwide, not only in the U.S. The FinCEN Files highlight financial institutions in several EU countries that also processed suspicious transactions. Better mechanisms to deal with cross-border transactions are necessary. At a minimum, national authorities must cooperate to ensure that, wherever possible, financial intelligence is shared with the country where the suspicious transaction originates.
Banks’ inability to identify the true owners of companies involved in transactions should accelerate reforms to end anonymous company ownership, Transparency International said. According to ICIJ, banks lacked information about one or more entities behind suspicious transactions in half the SARs filed to authorities.
Daniel Eriksson, Managing Director of Transparency International, said: “Once again, the tireless work of investigative journalists has helped expose a systemic failing with huge repercussions for ordinary people worldwide. At the same time, governments are attempting to silence those exposing corruption, and in nearly all countries whistleblowers are not adequately protected by law. These latest revelations should be a wake-up call for governments to get serious about holding the powerful to account and protecting those who expose the truth.”
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- Transparency International UK: Banking data leak is more stark evidence of the UK’s role in global money laundering and corruption
- Transparency International EU: In the wake of the FinCEN Files, the EU must take urgent steps to establish an independent anti-money laundering supervisory body and an EU financial intelligence unit