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Bankers And Regulators Want More Cooperation To Combat Money Laundering

Bankers And Regulators Want More Cooperation To Combat Money Laundering

Spurred by the FinCEN Files, the financial industry is trying to clean up its act.
Financial industry experts called Monday for greater cooperation between bankers and law enforcement to help curtail the types of corruption and white-collar crime exposed by the FinCEN Files, a global investigation by BuzzFeed News and the International Consortium of Investigative Journalists.

At an online conference entitled “FinCEN Leak: Next Steps for the Financial Industry,” organized by the New York City Bar, banking executives, former regulators, and law enforcement agents said the 2020 release of the FinCEN Files, an investigation into major Western banks that facilitate transactions on behalf of suspected terror organizations, narcotics traffickers, and other financial criminals, was “very bad publicity for the bank industry.” But they also acknowledged that the articles, published in more than 80 countries, forced bankers, regulators, and law enforcement around the globe to reassess their approach to tracking and prosecuting financial crime.

“Cultural change, as with anything, is going to be extremely difficult,” said Terri Quintana, an intelligence research analyst who reviews suspicious financial transactions for the Department of Homeland Security. She pointed out that even when law enforcement and bankers spot questionable transactions, they sometimes fail to take basic follow-up steps to share that information, making criminal activity difficult to stop.

The panelists — which included a former federal prosecutor and two former bank regulators — offered concrete suggestions on how to curb the flow of dirty money across the globe. Among them: “clearer” penalties for bank executives who knowingly facilitate money laundering, tax evasion, or other financial crimes; better technology to track transactions; and more back-and-forth between the bank workers looking into suspicious customers and the law enforcement agents building potential criminal cases.

The session was the latest example of how the FinCEN Files has roiled the financial industry, provoking lasting impact in the US and overseas. The articles, based on a trove of thousands of closely guarded Treasury Department records, exposed the torrent of dirty money that the world’s most powerful banks transact in plain view of government watchdogs.

To publish the FinCEN Files, reporters on six continents sifted through 2,100 suspicious activity reports, known as SARs, from the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The SARs, submitted primarily by banks and other financial institutions, detailed more than $2 trillion in suspicious transactions around the globe, linking flows of money through huge international banks to terror groups, drug kingpins, and kleptocrats. The 16-month investigation revealed how banks have helped facilitate mass money laundering and how regulators have failed to take steps to clamp down on the financial institutions that allow the illicit earnings of criminals to be laundered.

After decades of silence, the banking industry, and lawmakers, have taken notice. “There has fully been a message from Congress that they want — possibly partly in response to the FinCEN Files coverage — increased punishment for [Bank Secrecy Act] violations,” said Robert Kim, a senior legal analyst with Bloomberg Law and a former manager at the Treasury Department’s Financial Crimes Enforcement Network on Monday. He pointed, in particular, to the Money Laundering Act of 2020, which passed about three months after BuzzFeed News and its partner organizations began publishing their reports.

Capitol Hill wasn’t the only place to take notice of the coverage.

Shortly after BuzzFeed News, the ICIJ, and 108 other newsrooms around the world began publishing stories, UK lawmakers launched a formal inquiry into Britain’s oversight of banks, members of the European Parliament advocated for a stronger response across the continent, and investigations were opened in countries ranging from Thailand to Liberia.

Weeks before publication began last September, journalists working on the FinCEN Files informed government leaders of their findings and requested comment. Before the stories were published, officials in the US and UK announced they would be changing anti–money laundering rules — the same rules that the FinCEN Files showed were broken and ineffective.

Perhaps most significantly, the coverage gave a critical final push for Congress’s passage of a groundbreaking new law that takes aim at revealing who owns shell companies — among the most effective and rampant money laundering tools cited in the FinCEN Files. The entities can be used to move money with near-total anonymity, making it next to impossible for law enforcement to confirm who benefits from the transactions.

To combat that problem, the new legislation, which had bipartisan support, requires companies registered in the US to disclose who owns them and who profits from them.

Lawmakers cited the BuzzFeed News–ICIJ investigation as a trigger for reforms that had idled in Washington after many years. “The BuzzFeed story makes clear we need to strengthen, reform, and update our nation’s anti–money laundering laws,” Sen. Sherrod Brown, the top Democrat on the Senate Banking Committee said in December. “This action is long overdue.”

Despite all the progress among lawmakers, little will change, Quintana said Monday, until bankers and law enforcement rethink the ways that they work together. For instance, federal agents rarely provide bankers with feedback on their SARs, making it harder for the industry to improve its reporting. Bankers, for their part, can do more to make sure that law enforcement has the most useful information at its fingertips when reviewing SARs.

It’s important to keep “that open line of communication between (anti–money laundering departments) and law enforcement,” said Quintana. “Contacting that law enforcement officer proactively when a SAR will be filed. That’s a cultural change within these institutions. There has to be some kind of cooperation so that will happen.”
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