The FinCEN Files. Swiss Leaks, Panama Papers, Paradise Papers and now, The Financial Crimes Enforcement Network (FinCEN) Files. The recent Sept. 20 release of the controversial  FinCEN Files  circulated after a BuzzFeed News collaborative investigation  highlighted imperfections in the global anti-money-laundering framework is the latest mass data dump on international money laundering, comparable to the releases of the Panama Papers in 2016 and the Paradise Papers in 2017.

The files, obtained by Buzzfeed and the International Consortium of Investigative Journalists contain Suspicious Activity Reports (SARs) filed with the U.S. Department of Treasury’s Financial Crimes Enforcement Network, or FinCen, between 1999 and 2017. The suspicious transactions outlined in the documents total $2 trillion.

FinCEN Files, Photo: BBC News.

What are FinCEN Files?

FinCEN is the US Financial Crimes Enforcement Network. The FinCEN Files refer to a set of over 2,100 “Suspicious Activity Reports” (SARs) and other documents, most of which were filed by banks with the United States Department of the Treasury’s Financial Crime Enforcement Network sent to the US authorities between 2000 and 2017.  Any discrepancies or concerns related to the transaction made in US dollars need to be sent to FinCEN, even if they took place outside the US.

These files and documents were leaked to Buzzfeed News and other 108 news organisations in 88 countries, including the BBC's Panorama programme. Almost 80 per cent of these SARs involving transactions worth $2 trillion were reported by top global banks such as Deutsche Bank, Bank of New York Mellon (BMYM), Standard Chartered Bank, Citibank, and JP Morgan Chase.

Key Revelations of the investigation

The FinCEN files constitutes almost 2,657 documents, including 2,121 suspicious activity reports(Sars), these are the examples of how those concerns are recorded. Apparently, majority of the  SARs were filed by Deutsche Bank, Bank of New York Mellon (BNYM), Standard Chartered Bank, Citibank, and JP Morgan Chase. The concerned transactions amount to $2 trillion. Transactions also revealed the involvement of  a global diamond firm owned by Indian-born citizens named in several offshore leaks; a sponsor of the Indian Premier League (IPL) team. Among the major global revelations, the investigation traced a Rhode Island drug dealer’s dollars to a chemist’s lab in Wuhan, China.

The investigation brought down the curtain from the illegal transfer of millions of dollars of stolen money around the world by HSBC. The Investigation also revealed the involvement of JP Morgan in laundering more than $1 billion through a London account without knowing who owned it. Evidence also shows 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. There has been evidence also in relating to a woman who has donated £1.7m to the UK's governing Conservative Party's  which was secretly funded by a Russian oligarch with close ties to President Putin. Record also reveals the collusion of Standard Chartered in moving cash for Arab Bank, funding terrorism.

FinCEN Files Reports, Photo: Indian Express.

SARs do not imply that banks have broken any law or regulation. FinCEN shares SARs with the authorities including the Federal Bureau of Investigation(FBI) and the US Immigration and Customs Enforcement. They detect crimes and investigates the whole scenario and try to find out the direct evidence to prove legal cases. However, the vast majority of these Suspicious Activity Reports (SARs), are never even read, much less investigated.

Indian Scenario

The FinCen files have revelaed almost 406 transactions as “Potentially Suspicious” involving almost all major Indian lenders, including State Bank of India(102 transactions), Punjab National Bank(290), Union Bank(99), ICICI Bank(57), HDFC Bank(253), Axis Bank(41), Bank of Baroda (93)and IndusInd Bank (117) among others. According to the FinCEN Files, Indian banks received $482,181,226 from outside the country and transferred $406,278,962 from the country. These transactions were flagged to the US authorities.

The Financial Intelligence Unit-India (FIU-IND) performs the same duties as FinCEN  does in the USA. The Intelligence Unit was setup in 2004, it is authorised to obtains Cash transaction reports (CTRs), Suspicious transaction reports (STRs), and Cross border wire transfer reports. Suspicious or irresolute transactions are shared with agencies like the Enforcement Directorate, the Central Bureau of Investigation and the Tax Authority for the purpose of launching probes to check possible instances of money laundering, tax evasion and terror financing.

Why does this matter?

The FinCEN Files leak have shows flaws in the financial crime compliance ecosystem. Banks are supposed to make sure they don't help clients to launder money or move it around in ways that break the rules. They are bound by laws and regulations to know about the clients details and take actions against those involved in dirty money from clients and informing the authorities to deal with the problem. If they have evidence of criminal activity they should stop moving the cash.

FinCEN has warned that the revelations could impact ongoing AML investigations, compromise US national security and even threaten the safety of employees of the institutions named in the documents. The FinCEN Files shows the loopholes in the current compliance system. Clients should never have been on-boarded in the first place, and this happened, either because the banks failed to identify beneficial ownership, or because of ineffective or lacking anti-financial crime risk policy, which would have determined that no business should be conducted with them.  Due diligence checks are required to prevent such mishaps in the future.  It is clear that part of the solution lies with our members and the global financial crime prevention community who are key to the current response to financial crime as well as the evolution of the anti money laundering framework.

To know about the 6 PML Compliant Checks that you can execute on your corporate customers and vendors to stay out of trouble, visit the article titled,''Anti-Money Laundering- A Guide to Enhanced Due Diligence" available on SignalX Blog.

SignalX presents solutions for the Financial Crime Compliance in a reformed AML landscape. Smart technology could enhance a range of crucial AML processes, including customer due diligence, adverse media checks and sanctions screening.

To schedule a demo for SignalX's Anti-money laundering screening solution, AML Compliant Due Diligence Checks, please visit https://signalx.ai/.