The investigation of the FinCEN files has uncovered a stream of dirty money that the world’s most powerful banks are running under the scrutiny of state regulators. It has disrupted the financial industry like hardly any other story since the Great Recession – and sparked violent measures in the US and beyond.
In the weeks after BuzzFeed News, the International Consortium of Investigative Journalists, and 108 newsrooms around the world began publishing reports based on classified records, UK lawmakers opened a formal investigation into UK banking regulators, for which members signed up of the European Parliament started a stronger response across the continent, and investigations have opened in countries from Thailand to Liberia.
Significantly, the FinCEN Washington, DC files provided a final push for significant new law targeting one of the most effective money laundering tools identified in the stories: anonymous Shell companies. The legislation, passed last week with overwhelming support from both parties, requires many of these secret American corporations to disclose who they belong to and who benefits from them.
The Corporate Transparency Act is the most fundamental revision of anti-money laundering laws since the Patriot Act in 2001.
The provisions of the legislative package, which is included in the annual defense spending bill, also address many other systemic problems listed in the FinCEN files, which highlight the ineffectiveness of government oversight and the myriad of ways banks run the flow dirty money cannot slow down.
These reforms include: The Justice Department would have to submit annual reports justifying the use of deferred law enforcement agreements – treasury agreements that allow banks that have violated anti-money laundering laws to avoid trials and criminal convictions. The U.S. Treasury Department would also look to new technology to better identify criminal cash flows and improve communications between the private sector and federal agencies. And those who don’t care about wrongdoing would receive new protection.
Although President Donald Trump has vowed to veto the overriding law for not removing independent protections for social media companies, lawmakers could override the veto.
Officials cited BuzzFeed News – ICIJ’s investigation as a reason the reforms found support after years of inactivity. “The BuzzFeed story makes it clear that we need to strengthen, reform, and update our country’s anti-money laundering laws,” said Senator Sherrod Brown, the top Democrat on the Senate Banking Committee. “This action is long overdue.”
Also referring to the FinCEN files on the day the laws were passed, Senator Ron Wyden, the senior Democrat on the Senate Finance Committee, said, “Investigative reporting has shed light on money laundering and the continued public interest has certainly helped these provisions get across the finish line. “(Wyden supported the reforms but voted against the broader legislation for reasons unrelated to financial regulation.)
In order to continue investigating the FinCEN files, reporters on six continents reviewed a comprehensive Suspicious Activity Report (SAR) disclosure from the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN). In the SARs, suspicious transactions in almost all parts of the world have been reported with more than $ 2 trillion. Reporters linked streams of money with terrorist groups, drug queens and kleptocrats. The 16-month investigation revealed how banks have helped facilitate large-scale money laundering and how national regulators have failed to rule the criminals or contain banks.
Weeks before the release, journalists working on the FinCEN files informed the heads of government of their findings and asked for comments. Officials in the US and the UK announced that they would change the anti-money laundering rules – the exact rules listed on FinCEN’s files were broken and ineffective.
After reaching out to the Treasury Department, BuzzFeed News announced that it would be accepting suggestions from the public and insiders to update the 1970 Banking Secrecy Act, which has long governed the country’s anti-money laundering policy. Lobbyists, banks, financial service providers and academics submitted 110 comments, many of which confirmed what the FinCEN files had shown: US protection against money laundering urgently needs revision.
Meanwhile, on September 18, two days before the first FinCEN Files stories were released, officials in London announced plans to improve the way the UK gathers information about companies registered there.
“It’s hard to believe that the upcoming release of the FinCEN files led to this,” said Tom Keatinge, director of the Center for Financial Crime and Security Studies at the Royal United Services Institute.
As soon as the stories became public, calls for reform became louder and louder.
The UK legislature opened a formal investigation into the “deeply worrying” issues raised in the FinCEN files. Parliament’s Finance Committee pledged to review the progress state regulators and law enforcement agencies have made in preventing money laundering.
In the European Parliament, politicians called for uniform rules and greater supervision in the form of a new supervisory authority or greater powers for the existing body, the European Banking Authority.
“The existing anti-money laundering system 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 also pounced on the results. In the Seychelles and Liberia, revelations by journalists have been passed on to anti-corruption departments for further action.
At the same time, criminals and autocratic regimes, long used to keeping their financial dealings secret, started beating journalists. Before and after the FinCEN files were published, reporters in countries in Africa and the Middle East were yelled at, intimidated and threatened with lawsuits. In Turkey, a court blocked the publication of several FinCEN Files stories.
At the same time, the FinCEN files have proven to be an effective tool in the international fight for transparency and accountability.
Activists in Niger filed a FinCEN file story in a groundbreaking lawsuit to compel the government to open a $ 120 million corruption investigation that official audit found disappeared. In Thailand, regulators are investigating four domestic banks whose transactions have been highlighted through analysis for the series. And Belgian banks proposed the creation of a platform for exchanging information on suspicious transactions, and American banks supported legislation for Shell companies.
In contrast, the banking sector lobby has tried to downplay the results of the investigation.
The Bank Policy Institute issued a statement, backed by ads on social media, trying to throw cold water on the importance of the FinCEN files.
The institute denied a central finding: banks sometimes continue to process transactions for customers who have been repeatedly flagged for suspicious behavior. The lobby group said the government “often” urges banks to keep these accounts open so law enforcement officers can monitor them.
However, among the documents in the FinCEN files, BuzzFeed News could only find two mentions of such an instruction.
The lobby group has also argued that a large proportion of the SARs have nothing to do with illegal activity. Citing survey information from 14 banks, the group said, “Our data shows that approximately 4 percent of SARs result in law enforcement follow-up. A tiny subset of these results in arrest and ultimately conviction. “
The group also said, “Ultimately, this means that 90-95% of the people banks report on were likely innocent.”
However, a lack of official follow-up does not necessarily mean that the flagged activity was lawful. Federal investigators do not have the resources to follow up on every lead, and they do not automatically notify banks when investigating SAR issues, as interviews with law enforcement officers show.
The law requires banks to file a report when they discover transactions that have the characteristics of money laundering or other financial misconduct. SARs are not in themselves evidence of a crime, but they are considered essential for law enforcement to pursue illegal activity.
Speaking to the American Bankers Association earlier this month, FBI Director Christopher Wray said SARs “capture an incredible range of behaviors” and allow agents “to follow financial trails, investigate specific individuals and organizations, identify leads,” Connect the dots and advance the investigation. ”Law enforcement officials say the recordings can help track down pieces of drug networks, clear up the funding behind terrorist cells, and help officials decide whether to target black companies or individuals involved in misconduct List should be set.
The Bank Policy Institute, contacted by BuzzFeed News with questions about this story, reiterated its own research on the matter, reiterating that the FinCEN files were based on an “incredibly narrow” portion of the documents, a fraction of the millions filed annually .
Immediately after the FinCEN files were released, global banking stocks fell dramatically, but it was more than just stocks that got the industry moving. The series also sparked reflection and debate in a number of media and industry forums. “This banking scandal is a fool,” noted the British publication Independent. “The reverberation … will be felt for months, if not years.”
In more than 100 opinion pieces and columns that have been published in specialist and business magazines since September, industry experts have referred to the FinCEN files and advocated changes. In International Banker, Laurent Liotard-Vogt and Florent Palayret, who work at management consultancy Chappuis Halder & Co., suggested solutions, including regulations to prevent shell companies, and concluded: “It’s the entire system that works on The verge of collapse is in need of reconsideration. “
Nine days after the results of the investigation into the FinCEN files were announced, Linda A. Lacewell, superintendent of the New York State Department of the Treasury, released her own analysis and found that the series was an opportunity to address longstanding problems. “Now, with this new spotlight, we have to act,” she wrote.
Senator Elizabeth Warren, a member of the Banking, Housing and Urban Affairs Committee, cited the stories when she called for significant changes in oversight.
In a statement to BuzzFeed News earlier this week, she said the Corporate Transparency Act should only be a first step and she will push for additional reforms, including making Wall Street more accountable for financial crimes. “I will continue to push my legislation to hold executives personally and criminally accountable if their organizations circumvent the law.”