The FinCEN files investigation leads to new banking laws


Exposing the torrent of dirty money that the most powerful banks in the world deal with in front of the eyes and ears of government regulators, FinCEN Files The investigation has upset the financial industry like a few stories since the Great Recession – and spurred strong action in the US 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 classified records. An official investigation into Britain’s supervision of banks, MEPs called for Stronger response across the continentInvestigations have been opened in countries ranging from Thailand to Liberia.

Significantly, the FinCEN files made a final push in Washington, DC to pass on a momentous moment new law Target one of the most effective money laundering tools mentioned in the stories: anonymous shell companies. The legislation, which was passed last week with overwhelming bipartisan support, requires many of these secretive US companies to disclose who owns them and who benefits from them.

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

Provisions In the legislative package, included in the annual Defense Spending Bill, it also addresses several other systemic problems identified in the FinCEN files, which have revealed the ineffectiveness of government oversight and the myriad ways in which banks fail to stem the flow of dirty money.

Among those reforms: The Ministry of Justice will have to file annual reports justifying its use of delayed prosecution agreements – intimate deals that allow banks that conflict with anti-money laundering laws to avoid prosecution and criminal convictions. The U.S. Treasury will also seek new technologies to better identify criminal money flows and to increase communication between the private sector and federal agencies. And those who blew the misconduct whistle will receive new protection.

Despite President Donald Trump’s pledge to veto the sweeping bill – because it does not revoke an unrelated set of protections for social media companies – lawmakers can override the veto.

Government officials cited the BuzzFeed News-ICIJ investigation as the reason the reforms are gaining support after years of inaction. “The BuzzFeed story demonstrates that we need to strengthen, reform and update our nation’s anti-money laundering laws,” said Senator Sherrod Brown, the senior Democrat on the Senate Banking Committee. “This action is long overdue.”

Senator Ron Wyden, a senior Democrat on the Senate Finance Committee, also referred to the FinCEN files on the day the legislation was passed, saying, “Investigative reports shed light on money laundering and the ongoing public interest certainly helped spread these provisions on the finish line. . ” (Wyden supported the reforms but voted against the broader legislation for reasons unrelated to financial regulation.)

To pursue the investigation of the FinCEN files, reporters on six continents searched for a widespread revelation of suspicious activity reports, or SARs, from the US Treasury’s Financial Crime Enforcement Network (FinCEN). SAR reports detail more than $ 2 trillion in suspicious transactions in nearly every corner of the world, with reporters tying money flows to terrorist groups, drug leaders and corrupt people. The 16-month investigation revealed how banks helped facilitate large-scale money laundering and how national regulators failed to rein in criminals or crack down on the banks.

Weeks before publication, journalists working on the FinCEN files informed government leaders of their findings and requested comment. Officials in we And the UK announced that it would change its anti-money laundering rules – the exact rules that the FinCEN files showed were infringing and ineffective.

After BuzzFeed News contacted the US Treasury, the agency announced that it would begin receiving suggestions from the public and insiders on how to update the 1970 Banking Secrecy Act, which had long governed the nation’s anti-money laundering policies. Lobbyists, banks, financial services firms, and academics provided 110 comments, and many confirmed what the FinCEN files showed: America’s anti-money laundering safeguards urgently need reform.

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

“It’s hard not to believe that the imminent publication of the FinCEN files is getting their hands on it,” said Tom Keating, director of the Center for Financial Crime and Security Studies at the Royal United Services Institute.

As the stories appeared in public opinion, calls for reform escalated.

British legislators Launched A formal investigation into the “extremely troubling” questions raised in the FinCEN files. House Treasury Committee vow To examine the progress made by government regulatory agencies and law enforcement agencies in preventing money laundering.

Speaking in the European Parliament, politicians He called for uniform regulations Stronger oversight in the form of a new supervisory agency or greater powers of the current body, the European Banking Authority.

“The current anti-money laundering system It simply does not workEero Heinäluoma, a Finnish member of the European Parliament, said during a discussion about the FinCEN files. “It’s Swiss cheese, full of holes.”

Other national governments also jumped to the results. In the Seychelles and Liberia, the revelations from journalists were referred to anti-corruption units for further action.

At the same time, criminals and authoritarian regimes, which have long been accustomed to keeping their financial dealings secret, attacked journalists. Before and after the FinCEN files were published, journalists in countries in Africa and the Middle East were subjected to shouting, intimidation, and threats of lawsuits. In Turkey, a court has banned publishing multiple stories for FinCen files.

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

Activists in Niger presented the FinCEN files story as part of a groundbreaking lawsuit seeking to force the government to open a corruption investigation into the $ 120 million that an official auditor said was lost. In Thailand, the organizers Investigation Four local banks whose transactions were highlighted by A. analyzing For the series. And Belgian banks Proposal Create a platform to share information on suspicious transactions, and US banks have supported legislation targeting shell companies.

By contrast, the banking industry’s lobbying arm tried to downplay the findings of the investigation.

The Bank Policy Institute issued a statement, Backed by ads on social media, in an effort to throw cold water on the importance of FinCEN Files.

The institute questioned a central finding: that banks sometimes continue to process transactions for customers who have been repeatedly reported for their suspicious behavior. The lobby group said the government “repeatedly” asked banks to keep these accounts open so law enforcement agents could monitor them.

Among the documents in the FinCEN files, however, BuzzFeed News found only two mentions of any of these instructions.

The pressure group has also argued that a significant portion of SARs have nothing to do with illegal activity. Citing survey information from 14 banks, the group said: “Our data indicate that around 4 percent of SAR results in any follow-up by law enforcement. A small subset of these results leads to an arrest and eventual conviction.”

The group also said, “Ultimately, this means that 90-95% of individuals reported by banks are likely innocent.”

But a lack of formal follow-up does not necessarily mean that the activity being reported was legal. Federal investigators do not have the resources to hunt every potential client nor do they automatically notify banks when they investigate SAR issues, interviews with law enforcement officials show.

By law, banks are required to file a report when they discover transactions that bear the hallmarks of money laundering or other financial misconduct. SARs per se are not evidence of a crime but are vital for law enforcement to pursue illegal activity.

During a speech this month to the Association of American Bankers, FBI Director Christopher Wray She said SAR “captures an incredible array of behavior” and allows agents to “track financial paths, investigate specific individuals and entities, identify potential clients, connect points, and conduct investigations.” The records, according to law enforcement sources, can help track parts of drug networks, clarify the funding behind terrorist cells, and help officials determine whether to blacklist companies or individuals involved in misconduct.

BuzzFeed News contacted questions about this story, and the Bank Policy Institute responded by citing again its own research on the issue and asserting that FinCEN files are based on a “very narrow” slice of documents, a fraction of the millions filed each year.

In the wake of the publication of the FinCEN files, global banking stocks Landed heavilyBut it was more than just the stock values ​​that caused the revelry in the industry. The series also sparked reflection and discussion in a range of media and industry forums. “That banking scandal is Dozy,” he said independent, UK post, note. “Echoes … will be felt for months if not years.”

In over 100 opinion articles and columns published in trade and business publications since September, industry experts have referenced FinCEN files while calling for change. At International Banker, Laurent Liotard-Vogt and Florent Palayret, who work for business management consulting firm Chappuis Halder & Co. , Proposal The solutions, including regulations to prevent shell companies, concluded: “The whole system is on the verge of collapse and needs to be rethought.”

Nine days after the findings of the FinCEN files investigation were revealed, Linda A. New York State Department of Financial Services, Published her own book analyzingNoting that the series provided an opportunity to address chronic problems. “Now, with these new lights, we must act,” she wrote.

Senator Elizabeth Warren, Member of the Banking, Housing and Urban Affairs Committee, Quote The stories call for fundamental changes in censorship.

In a statement to BuzzFeed News this week, it said the Corporate Transparency Act should be just a first step and would call for additional reforms, including making Wall Street more accountable for financial crimes. “I will keep pressing legislation To hold executives personally and criminally responsible when their organizations violate the law. “

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