FinCEN file research leads to new banking laws


Exposing a torrent of gross money that the world’s most powerful banks trade in the eyes of government regulators, the FinCEN files research has wiped out the financial industry like few stories since the Great Recession and catalyzed blunt action in the U.S. and beyond.

In the weeks following BuzzFeed News, the International Consortium of Investigative Journalists and 108 newsrooms around the world began publishing stories based on a cache of secret records, British lawmakers launched a formal research on bank supervision in Britain, defended members of the European Parliament a stronger response across the continentand investigations were opened in countries ranging from Thailand to Liberia.

Significantly, the FinCEN files gave a definite boost to Washington, DC, to move on for a moment new law targeting one of the most effective money laundering tools cited in the stories: hedging corporations. The legislation, passed last week with overwhelming bipartisan support, requires many of these secret American companies to reveal who owns them and who benefits.

The Corporate Transparency Act marks the most substantial revision of anti-money laundering laws since the Patriot Act in 2001.

Provisions the legislative package, included in the annual defense spending bill, also addresses many other systemic problems identified in the FinCEN files, which exposed the ineffectiveness of government oversight and the myriad of ways in which banks do not maintain the flow of defense. gross money.

Among these reforms: The Department of Justice should submit annual reports justifying its use of deferred processing agreements: candy agreements that allow banks that have enforced anti-money laundering laws to avoid criminal trials and convictions. The U.S. Treasury Department will also look for new technologies to better identify criminal money flows and to increase communication between the private sector and federal agencies. And those who whistle for misconduct would get new protections.

While President Donald Trump has vowed to veto the bill because it does not repeal a set of unrelated protections for social media companies, lawmakers could overturn the veto.

Public officials have cited the BuzzFeed News – ICIJ investigation as the reason why reforms gained support after years of inaction. “The history of BuzzFeed makes it clear that we need to strengthen, reform and update our nation’s anti-money laundering laws,” said Sen. Sherrod Brown, the top Democrat on the Senate Banking Committee. “This action has long been expected.”

Senator Ron Wyden, a Democrat in the Senate Finance Committee, also referred to the FinCEN files on the day the legislation was passed and said, “The goal.” (Wyden supported the reforms but voted against broader legislation for reasons unrelated to financial regulation).

To continue the investigation of FinCEN files, journalists from six continents examined a wide-ranging disclosure of suspicious activity or SAR reports from the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The SARs detailed more than $ 2 trillion in suspicious transactions in almost every corner of the world, with journalists linking money flows to terrorist groups, drug lords and kleptocrats. The 16-month investigation established how banks have helped facilitate large-scale money laundering and how national regulators have failed to rule criminals nor should they stop banks.

Weeks before the publication, journalists working on the FinCEN files informed government leaders of their findings and solicited comments. Officials of the WE and the UK announced that it would change the anti-money laundering rules: the exact rules showing the FinCEN files were incomplete and ineffective.

After BuzzFeed News contacted the U.S. Treasury Department, the agency announced that it would begin receiving suggestions from the public and privileged individuals on how to update the 1970 Bank Secrecy Act, which has ruled for a long time. of time the policies against money laundering in the country. Pressure groups, banks, financial services companies and academics sent 110 comments, and many confirmed what the FinCEN files had shown: protections against money laundering in the US need to be protected.

Meanwhile, on September 18, two days before the publication of the first stories of FinCEN Files, officials in London announced plans to improve the way the UK collects information about companies registered there.

“It’s hard not to believe that the imminent release of the FinCEN files has forced them,” said Tom Keatinge, director of the Center for Financial Crimes and Security Studies at the Royal United Services Institute.

Once the stories came into the public eye, calls for reform increased.

British legislators released a formal investigation into the “deeply worrying” issues raised in the FinCEN files. Parliamentary Treasury Committee he promised examine the progress that government regulators and law enforcement agencies have made in preventing money laundering.

Speaking in the European Parliament, politicians called for uniform regulation and stronger supervision in the form of a new control agency or greater powers for the existing body, the European Banking Authority.

“The existing system against money laundering it just doesn’t work“Said Eero Heinäluoma, a Finnish member of the European Parliament, during a debate on the FinCEN files.” It’s a Swiss cheese, full of holes. “

Other national governments have also jumped to conclusions. In Seychelles and Liberia, journalists ’revelations were referred to anti-corruption units for further action.

At the same time, criminals and autocratic regimes, long accustomed to keeping their financial relations secret, attacked journalists. Before and after the publication of the FinCEN files, journalists from countries in Africa and the Middle East were summoned, intimidated and threatened with lawsuits. In Turkey, a court blocked the publication of several stories of FinCEN files.

At the same time, FinCEN files have proven to be a powerful tool in the international struggle for transparency and accountability.

Niger activists presented a history of FinCEN Files as part of an innovative lawsuit that sought to force the government to open a $ 120 million corruption investigation that an official audit said was missing. In Thailand, regulators are survey four national banks whose transactions were highlighted by one analysis for the series. And the Belgian banks proposed the creation of a platform to exchange information on suspicious transactions, and US banks supported legislation aimed at shell companies.

By contrast, the banking industry pressure group has tried to minimize the findings of the investigation.

The Institute of Banking Policy issued a statement, with the support of ads on social media, trying to throw cold water on the importance of FinCEN files.

The institute discussed a central finding: that banks sometimes continue to process transactions for customers who had been repeatedly flagged for suspicious behavior. The pressure group said the government “frequently” tells banks to keep these accounts open so police officers can control them.

Among the documents in the FinCEN files, however, BuzzFeed News could only find two mentions of this instruction.

The pressure group has also argued that a large proportion of SARs have nothing to do with illegal activity. Citing information from the survey of 14 banks, the group said: “Our data indicate that around 4 per cent of SARs result in any law enforcement monitoring. A small subset of these results in a arrest and, finally, in a conviction ”.

The group also said: “Ultimately, this means that 90-95% of the people who report to the banks were probably innocent.”

But the lack of official monitoring does not necessarily mean that the marked activity is lawful. Federal investigators do not have the resources to prosecute all potential customers and do not automatically alert banks when investigating SAR subjects, according to interviews with police officials.

By law, banks must report when they detect transactions that have the hallmarks of money laundering or other financial misconduct. SARs are not evidence of a crime in themselves, but are considered vital for law enforcement to engage in illegal activities.

During a speech this month to the American Bankers Association, FBI Director Christopher Wray dit RAEs “capture an incredible range of behaviors” and allow agents to “follow financial routes, investigate specific people and entities, identify potential customers, connect points, and advance research.” Records, according to law enforcement sources, can help track parts of drug networks, clarify funding behind terrorist cells, and help officials decide whether to blacklist companies. or people involved in misconduct.

Contacted by BuzzFeed News with questions about this story, the Bank Policy Institute responded by citing again its own research on the subject and reiterating that the FinCEN files were based on a portion of “incredibly narrow” documents, a fraction of the millions submitted each year. .

Immediately after the publication of the FinCEN files, global banking shares fell dramatically, but it was more than sharing values ​​that boiled the industry. The series also motivated reflection and debate in various media and industry forums. “That banking scandal is nonsense,” he said Independent, noted a UK publication. “The reverberations … will be felt for months, if not years.”

In more than 100 opinion articles and columns that have been published in commercial and business publications since September, industry experts have pointed to the FinCEN files as they advocate for change. At International Banker, Laurent Liotard-Vogt and Florent Palayret, who work at the business management consultancy Chappuis Halder & Co., proposed solutions, including regulations to prevent shell companies, and concluded, “It’s the whole system that’s about to collapse and needs to be rethought.”

Nine days after the findings of the FinCEN file investigation were revealed, Linda A. Lacewell, the superintendent of the New York State Department of Financial Services, published his own analysis, noting that the series provided an opportunity to address long-standing issues. “Now, with this new focus, we need to act,” he wrote.

Senator Elizabeth Warren, Member of the Committee on Banking, Housing and Urban Affairs, has cited stories of the call for substantial changes in supervision.

In a statement to BuzzFeed News this week, he said the Corporate Transparency Act should be just a first step and will advocate for additional reforms, including making Wall Street more accountable for financial crimes. “I will keep pushing mine legislation to hold executives personally and criminally accountable when their organizations break the law. “

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