Over 2100 Suspicious Activity Reports (SARs) made by banks and forwarded to FinCEN, the US financial regulator, were leaked to media on the 21st of September. The International Consortium of Investigative Journalists (ICIJ) and its 108 partner companies in 88 countries received these papers, which sent shockwaves across the banking sector in both private and public settings.
Leaked files containing almost $2 trillion in transactions have shown how some of the world's largest banks have enabled offenders to transfer illicit money around the globe. They also reveal how Russian oligarchs have used banks to circumvent restrictions designed to prevent them from transferring money to the West.
FinCEN stands for the Financial Crimes Enforcement Network of the United States. These are the people in charge of combating financial crime at the US Treasury. Concerns regarding US money transactions, even if they occurred outside the US, must be reported to FinCEN.
Suspicious activity reports, or SARs, are one way to document those concerns. If a bank is concerned that one of its customers is up to no good, it must file one of these reports. The report is forwarded to the relevant authorities.
What Are The FinCEN Files?
The FinCEN files include over 2,500 papers, the majority of which were data provided to US authorities by banks between 2000 and 2017. These documents are among the most tightly guarded secrets in the worldwide financial industry. Banks use them to report suspicious activity, but they are not proof of wrongdoing or criminal activity. They were leaked to media, which shared them with a group of investigative journalists worldwide, who then spread them to 108 news organizations in 88 countries. Hundreds of journalists have been digging through the extensive, technical material, exposing some of the operations that banks would much rather the public remain unaware of.
What Has Been Revealed?
- HSBC enabled fraudsters to transport millions of dollars in stolen funds globally, despite learning the plan was a scam from US authorities.
- JP Morgan enabled a firm to move more than $1 billion via a London account without revealing the identity of the account's owner. Later, the bank found that the firm was perhaps controlled by a criminal on the FBI's 10 Most Wanted list.
- Evidence suggests one of Russian President Vladimir Putin's closest friends used Barclays Bank in London to circumvent restrictions prohibiting him from accessing financial services in the West. Some of the funds were used to purchase artwork.
- A Russian businessman with close links to President Putin surreptitiously sponsored the spouse of a lady who gave £1.7 million to the UK's ruling Conservative Party.
- FinCEN's intelligence branch has labeled the United Kingdom as a "greater risk jurisdiction" compared to Cyprus. The reason for this is because the SARs contain a large number of UK-registered businesses. The FinCEN data list almost 3,000 UK firms, more than any other country.
- Chelsea owner Roman Abramovich once had hidden stakes in footballers not owned by his team through an offshore firm.
- The central bank of the United Arab Emirates failed to act on alerts concerning a local business that was assisting Iran in evading sanctions.
- Deutsche Bank transferred dirty money from money launderers to organized criminals, terrorists, and drug traffickers.
- After clients' accounts at the Jordanian bank were exploited to support terrorists, Standard Chartered transferred funds for Arab Bank for more than a decade.
Why Is This Leak Different?
In recent years, there have been many major financial data leaks, including:
- 2017 Paradise Papers - A massive quantity of leaked records from an offshore legal service company Appleby and business services firm, Estera. Until Estera became independent in 2016, the two worked together under the Appleby brand. They exposed politicians', celebrities', and business leaders' offshore financial dealings.
- 2016 Panama Papers - Papers from the legal firm Mossack Fonseca were leaked, revealing more about how wealthy people exploited offshore tax-havens.
- 2015 Swiss Leaks – Papers from HSBC's Swiss private bank revealed how the company used the country's banking secrecy regulations to assist clients in avoiding paying taxes.
- In 2014, LuxLeaks released papers from PricewaterhouseCoopers, which revealed that large corporations were taking advantage of tax arrangements in Luxembourg to lower the amount they had to pay.
The FinCEN files are single in that they are made up of documents from various institutions rather than just one or two. As a result, they draw attention to a variety of potentially suspicious activities involving businesses and people, as well as issues regarding why institutions that had detected this activity did not always act on their concerns.
Even if a bank continues to assist with suspicious activity and collect fees after filing a complaint with the authorities, prosecuting it or its officials is extremely tough. The leak, according to FinCEN, might jeopardize US national security, risk investigations and endanger the safety of institutions and persons who make reports. The UK has announced measures to modify its company information database in order to combat fraud and money laundering.