Everyone reports information to FinCEN and this includes banks from unlikely countries like China. Bank transactions leave a trail of paperwork and footprints and this is how some people get caught. Image source: International Consortium of Investigative Journalists
There have been major leaks in recent years of secret documents that have opened up the secret deals, agreement and dubious transactions that have brought into public domains. In Malaysia, we had some pretty interesting revelations related to 1MDB and abuse of powers. In the last weeks, the latest leak that has been making news is the FinCEN document leaks.
FinCEN stands for Financial Crimes Enforcement Network and it is part of the United States Department of the Treasury. Its main mission is to safeguard the financial system from illicit use, combat money laundering and its related crimes including terrorism, and promote national security through the strategic use of financial authorities and the collection, analysis, and dissemination of financial intelligence.
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.
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.
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.
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.
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BBC further reports some of the interesting revelations:-
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 husband of a woman who has donated £1.7m to the UK’s governing Conservative Party’s was secretly funded by a Russian oligarch with close ties to President Putin.
The UK is called a “higher risk jurisdiction” and compared to Cyprus, by 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.
Chelsea owner Roman Abramovich once held secret investments in footballers not owned by his club through an offshore company.
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.
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.
The FinCEN leak also raises possible transactions that impact Malaysian banks:-
A total of 23 transactions that flowed to or from banks in Malaysia between 2010 and 2016 had been flagged by US-based banks as suspicious, a leaked document of the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) revealed.
Out of the 23 transactions, a total of US$4.88 million involved incoming funds and US$13.38 million involved outgoing funds, according to the International Consortium of Investigative Journalists’ (ICIJ) website.
Public Bank Bhd was linked to seven transactions involving US$13.37 million sent out of Malaysia, followed by AmBank with two transactions involving a total of US$2.9 million received.
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FinCEN is just one of the safeguards under the US banking system but it does not mean that each country reported under the leak does not have its own banking safeguards themselves.
It is the same in Malaysia, there are tight regulations prescribed by Bank Negara Malaysia which is the Central Bank of Malaysia. Other than standard regulatory reports to be submitted on a periodic basis, there are strict laws on capital adequacy, compliance, enforcement, supervision and risk management as prescribed under the Financial Services Act 2013.
The one that closely relates to FinCEN is the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 which see serious offenders getting imprisonment up to 15 years and a fine of 5 times of sum or value of the proceeds of unlawful activity.
The issue is not the absence of process or law but rather enforcement, adherence, documentation and follow up; otherwise, you have incidents of people getting millions of money in their account without their knowledge and on dubious circumstances.