Careers

Here’s How This Could Be Stopped Right Now


In an explosive investigative report by Buzzfeed News, the International Consortium of Investigative Journalists and other news organizations, it was revealed that $2 trillion of questionable transactions were laundered through the largest most prominent banks in the world. The funds flowed, according to the reports, to “terrorists, kleptocrats and drug kingpins,” enriching the banks and their shareholders.

The investigative journals allege, “These documents, compiled by banks, shared with the government, but kept from public view, expose the hollowness of banking safeguards, and the ease with which criminals have exploited them. Profits from deadly drug wars, fortunes embezzled from developing countries and hard-earned savings stolen in a Ponzi scheme were all allowed to flow into and out of these financial institutions, despite warnings from the banks’ own employees.”

The reporting covers roughly two decades worth of bank and customer transactions. The data was composed from suspicious activity reports (SARs) filed by the banks and other financial institutions with the U.S. Department of Treasury’s Financial Crimes Enforcement Network. FinCen is a division within the United States Treasury that is responsible for the oversight, review, examination and investigations into allegations of “money laundering, terrorist financing and other financial crimes.”

SARs filings are required by banks when there is a belief that money is being used for questionable purposes. It doesn’t necessarily mean that the clients, banks or employees conducted illegal activities. Rather, the SARs filing is intended to alert the appropriate authorities that the transaction in question should be reviewed and investigated, in addition to their own internal compliance review efforts.

HSBC, JPMorgan, Deutsche Bank, Standard Chartered and Bank of New York Mellon were all named in the reporting. A number of other banks were referred to in the piece as well, including Société Générale, State Street, Commerzbank AG and China Investment Corporation. 

The reporters claim that “even after they were prosecuted or fined for financial misconduct, banks such as JPMorgan Chase, HSBC, Standard Chartered, Deutsche Bank and Bank of New York Mellon continued to move money for suspected criminals.”  

The share prices of the bank stocks have been hit hard in stock market trading on Monday. Investors are concerned that there could be other violative matters that haven’t been disclosed and the possibility of litigation risk—relative to the leaked information. Additionally, the banks are dealing with serious issues related to the economic impact of Covid-19. There is worry over the ability of customers to repay their loans, mortgages and credit card bills, in light of the fact that over 60 million Americans have lost their jobs since the outbreak started.

Some of the findings in the report are as follows:

  • Standard Chartered moved money on behalf of Al Zarooni Exchange, a Dubai-based business that was later accused of laundering cash on behalf of the Taliban. During the years that Al Zarooni was a Standard Chartered customer, Taliban militants staged violent attacks that killed civilians and soldiers.
  • HSBC’s Hong Kong branch allowed WCM777, a Ponzi scheme, to move more than $15 million—even as the business was being barred from operating in three states. Authorities say the scam stole at least $80 million from investors—mainly Latino and Asian immigrants. The company’s owner used the looted funds to buy two golf courses, a 7,000-square-foot mansion, a 39.8-carat diamond and mining rights in Sierra Leone.
  • Bank of America, Citibank, JPMorgan, American Express and others collectively processed millions of dollars in transactions for the family of Viktor Khrapunov, the former mayor of Kazakhstan’s most populous city (even after Interpol issued a Red Notice for his arrest). Khrapunov, who had already fled to Switzerland and who claims the allegations are politically motivated, was later convicted in absentia on charges that included bribe-taking and defrauding the city through the sale of public property.
  • JPMorgan, the largest bank based in the United States, moved money for people and companies tied to the massive looting of public funds in Malaysia, Venezuela and Ukraine, according to the leaked documents. The bank moved more than $1 billion for the fugitive financier behind Malaysia’s 1MDB scandal and more than $2 million for a young energy mogul’s company that has been accused of cheating Venezuela’s government and helping cause electrical blackouts that crippled large parts of the country.
  • JPMorgan also processed more than $50 million in payments in over a decade, the records show, for Paul Manafort, the former campaign manager for President Donald Trump. The bank shuttled at least $6.9 million in Manafort transactions in the 14 months after he resigned from the campaign, amid a swirl of money laundering and corruption allegations spawning from his work with a pro-Russian political party in Ukraine. By December 2013, JPMorgan had filed at least eight SARs on accounts and companies controlled by Manafort, flagging more than $10 million, according to a FinCEN research report. Manafort was convicted of bank and tax fraud in 2018.

To place things into perspective, the referenced banks maintain substantial compliance departments with hundreds—or even thousands—of anti-money laundering, financial crime, SARs, OFAC and related legal, risk and audit professionals whose sole jobs are to review transactions to ensure that their banking clients are not violating rules and regulations. The banks have deployed top technologies, software and utilize outside vendors to ensure compliance. The overwhelming majority of these compliance and anti-money laundering professionals take their responsibilities seriously and aggressively push back against the business and dedicate themselves to ensuring that bank customers don’t use their companies to launder money or engage in unlawful activities, such as funding acts of terrorism.

To stop the types of behavior referenced in the piece, the government should take criminal actions against the people involved with the infractions. Instead of a slap on the wrist or a fine, which is like a parking ticket to the bank, there should be draconian punishments for offenders.

Eric Young is a 40-year regulatory and compliance executive with hands-on management and chief compliance officer experience. He worked at top organizations, such as the Federal Reserve Bank, JP Morgan, General Electric, S&P Global Ratings and four international banks. He retired and is now an Adjunct Professor at Fordham University School of Law, and is writing a book about “corporate culture, compliance and the board of directors.” Young brings up some interesting points that haven’t been raised in the reporting. In the course of an anti-money laundering investigation, the government sometimes asks these banks “not to close the accounts so that the money flows can continue to be monitored by the government intelligence agencies.”

Young asserts, “CEOs and the executive management are viewed by many, including in Congress, as not accountable enough for misconduct and compliance violations.” He contends that it’s time the tough question is addressed, “Is criminal prosecution of executives more appropriate to set the long-term tone and culture?” Subjecting bankers, traders, brokers and executives to criminal liability is a sure-fire way to get their attention. The thought of going to jail over a money laundering scandal will ensure that the bank CEO and top executives will immediately put a stop to any transactions that appear to run afoul of the rules and regulations. If a CEO or senior-level executive knows that there is even a remote chance that they could face prison time, the bank’s behavior would change overnight.

Several senior regulatory officials agree with Young. “The bankers will never learn until you start putting silver bracelets on people,” said Paul Pelletier, a former senior U.S. Justice Department lawyer. “Think of the message you’re sending to repeat offenders.” Thomas Nollner, a former regulator with the Office of the Comptroller of the Currency, stated, “These guys know what they’re doing. You break the law, you should go to jail, period.”

BuzzFeed included a link to the responses from the banks. Click here to read their responses.



Source link

Leave a Reply