The new investigation conducted by the International Congress of Investigative Journalists and 108 media outlets shows that famous institutions remain porous to money laundering and struggle to fight fraud

It is one of the most regulated sectors in the world, and yet the global banking sector remains porous to money laundering and struggles to combat the circulation of dirty money, according to the " FinCEN Files", the new investigation conducted by the International Congress of Investigative Journalists (ICIJ)  with the American news site BuzzFeed News and 108 international media, including Le Monde.

This investigation is based on a review of more than 2,100 suspicious activity reports (SARs) submitted by banks around the world to the U.S. Anti-Money Laundering Authority, the FinCEN (Financial Crimes Enforcement Network ). These SARs are the American equivalent of the suspicious reports that French banks must send to the Tracfin anti-money laundering unit when they suspect a risk of money laundering, terrorist financing or circumvention of embargoes and sanctions.

Passive circulation

These ultra-confidential reports represent a total of nearly $2.1 trillion (€1.773 trillion) in suspicious transactions, carried out over nearly two decades, from 1999 to 2017. They show that banks, which handle the bulk of international financial transactions, sometimes passively circulate, through the bank accounts of persons or companies they have not been able to identify, money that may be related to the laundering of illegal activities (tax fraud, crime money, trafficking in drugs, weapons, works of art, etc.).

These documents were obtained by BuzzFeed News. They are largely the result of the leak of files collected by the US Congressional Commission of Inquiry into Alleged Russian interference in the 2016 presidential campaign, which resulted in Donald Trump's victory. These suspicious reports, which represent only 0.02% of the SAR received by the FinCEN between 2011 and 2017, are therefore limited to a series of personalities, companies and banks directly or indirectly linked to the Russian case.  But if the prism of the investigation is primarily American, these documents incidentally reveal the extent of suspicious movements of money transiting through the world's largest banks.

They provide information on how banks around the world spot and report, or not, suspicious financial flows from one end of the planet to the other in their "pipes". As former Deutsche Bank and anti-money laundering expert Graham Barrow reminds us, "criminals do not launder their money themselves. They move it to safe places thanks to the banks." "The bank plays the role of the car in which the burglars flee after the robbery," says american expert Thomas Creal.

At a time of financial globalization, the conclusion is clear: despite the recent tightening of anti-money laundering rules, banks remain fallible. While the regulation of the global banking sector remains one of the major challenges of the coming decades, the " FinCEN Files" show the central role of systemic banks in the circulation of dirty money related to fraud, corruption, organized crime and terrorism.

The reports of the US financial intelligence unit reveal that at least five major banks – JPMorgan, HSBC, Standard Chartered Bank, Deutsche Bank and the Bank of New York Mellon  – have failed to stem certain illicit transfers of capital, sometimes even after being sanctioned and having made a commitment to the courts to strengthen their controls.

Five major banks mentioned

This is the case of the British giant HSBC, which had admitted, in 2012, to have laundered nearly $ 900 million for South American drug cartels. The bank had escaped criminal prosecution, in return for a fine of $1.9 billion and on the condition that it actively engage in the fight against money laundering. However, the " FinCEN Files" show that it continued to manage the money of Russian money launderers or notorious financial criminals, especially during the five-year probation period then set up by the American justice.

For its part, the first American bank, JPMorgan Chase, circulated more than $ 50 million on behalf of Paul Manafort, Donald Trump's former campaign manager. The money came in particular from an opaque British company, Novirex, whose strange behavior should have alerted him: $ 200,000 received from a company in the British Virgin Islands for "lingerie", $ 34,000 sent to Hong Kong for "keyboard stickers", $400,000 for "boots"... All with less than $2,500 in expenses reported in its financial reports. "What normal company buys computers, lingerie and buckets at the same time? " asks former British police officer Martin Woods, a specialist in anti-money laundering.

However, it was only following the revelations of the American press about the corruption of Paul Manafort by the Ukrainian regime that JPMorgan decided to send statements of suspicion. In March 2019, the former lobbyist was sentenced to forty-seven months in prison for bank and tax fraud. The trial showed that he had received $4 million from Novirex, owned by former Ukrainian President Viktor Yanukovych's right-hand man.

Another American behemoth, Citibank was just as complacent with the former Senegalese boss of the International Athletics Federation Lamine Diack. Sentenced on September 16, in Paris, to four years in prison, two of which were suspended, and a fine of 500,000 euros, he had hidden cases of doping in Russian athletics in exchange for bribes. The " FinCEN Files" show that the bank waited until 2016, almost a year after his arrest, to declare 112 suspicious payments related to Mr. Diack – or $ 55.7 million let pass without flinching for years, despite confounding clues.

Are these slippages isolated accidents? Not according to the United Nations, which estimates that barely 1% of the $2.4 trillion laundered each year is detected by the authorities. This seems to be confirmed by the confidential documents of the FinCEN, as the examples are teeming with transactions through offshore companies in opaque tax havens such as Cyprus, the British Virgin Islands, Hong Kong or the United Arab Emirates, and whose banks themselves do not know the true owners.

In theory, they are required to have strict mechanisms for verifying their customers: the "KYC" (know your customer) procedure. Yet in half of the 2,100 SARs reviewed by the ICIJ, the bank ignored this crucial information. Some statements of suspicion were filed only after press revelations or judicial investigations, when the money had already flowed elsewhere for a long time.

The bank JPMorgan , for example, reportedly funneled more than $1 billion for the Cypriot company ABSI Securities between 2010 and 2015, before discovering in the media that it belonged to Semyon Mogilevich, often described as the "boss of the bosses" of the Russian underworld. The latter refuted any link with the company.

Société Générale is not to be outdone. It was only following the Panama Papers revelations in 2016 that its New York branch was able to respond to the FinCEN, which questioned tens of millions of dollars spent through company accounts in the British Virgin Islands. These accounts had been opened with Société Générale's Swiss subsidiary, SGPB, which had refused to disclose the names of the clients hidden behind these offshore companies to its counterpart in New York, in the name of banking secrecy! It therefore took the "Panama Papers" to teach him that they were, in particular, members of the Rotenberg family, at risk, reputed to be close to Russian President Vladimir Putin. What she finally let the FinCEN know.

Yet the problem has persisted. As when Société Générale discovered in the press, in July 2017, the role played by its client Aras Agalarov, a Russian real estate tycoon, in Moscow's possible interference in the US presidential campaign. The new York branch of the bank is questioning several transactions it has validated, including a $19.5 million transfer between two agalarov accounts on June 20, 2016 – ten days after his secret meeting with Trump's team. She turned to the SGPB, in Switzerland, but the investigation stopped there: "After many reminders, [SGPB] was not able to respond to our requests," apologizes Société Générale New York to the FinCEN, in October 2017.

This thorny subject is not ignored by the supervisory authorities. In a September 2019 document on the "consolidated management" of banks' anti-money laundering systems, the Autorité de contrôle prudentiel et de résolution (ACPR), supervisor of French banks, points to "inadequacies" in terms of "intra-group exchange of personal information on customers", and calls on banks to put in place "mechanisms for a smooth and efficient sharing of information".

Sanctions that are too weak

Going through the thousands of pages of the " FinCEN Files", one thing is obvious: the big banks do not give themselves the means to effectively combat money laundering, by blocking the circulation of dirty money at the slightest suspicion. For John Cassera, a financial crime expert who worked for < a href="javascript:void(0);">FinCEN between 1996 and 2002, the fines imposed on banks for non-compliance weigh little against their profits. The American lawyer James S. Henry suggests directly questioning the responsibility of senior executives, by imposing "fines or imprisonment".

None of the banks solicited by the ICIJ and its partners wished to comment on these revelations. Subject to professional secrecy, they ensure, like Société Générale, that they cannot "comment, confirm or deny the identity of its customers or any financial transactions that the bank may have carried out on behalf of its customers". "Banks cannot comment on activity reports intended for financial intelligence units of states, being bound to the strictest confidentiality," adds the French bank.

Upon learning of the upcoming publication of the investigation, the FinCEN told iciJ that the publication of the SARs could "compromise law enforcement investigations and threaten the security of the institutions and individuals who file these reports," and that it could constitute a federal crime.