Another year, another banking scandal. They’re like clock-work these days. This time, it’s the FinCEN files: a leak of 2,657 documents from the Financial Crimes Enforcement Network (FinCEN), a bureau of the US Treasury that deals with money laundering. The files total $2 trillion worth of transactions, and contain 2,121 ‘SARs’, Suspicious Activity Reports which banks are required to file if they suspect those using their services are doing something illegal. The FinCEN files were shared with the International Consortium of Investigative Journalists, which collectively investigated the Panama Papers and Paradise Papers. You can explore the leaked data yourself here.
The BBC has described the FinCEN files as “a leak of secret documents which reveal how major banks have allowed criminals to move dirty money around the world. They also show how the UK is often the weak link in the financial system and how London is awash with Russian cash.” So what the FinCEN files threaten to do is to put meat on the bones of what has already been widely known for years: that the financial system, with the City of London at its centre, turns literally trillions in dirty money into clean money, through a system of offshoring and ownership secrecy.
From the Bank of America to the Bank of China, there are few banks that aren’tcaught up in this leak. This is a systemic issue. 62 per cent involve Deutsche Bank in Germany, and at least 20 per cent involve addresses tied to the British Virgin Islands, a UK administered tax haven. Even North Korea, the world’s most secretive state, appear to have got in on the scam, using shell firms to launder money through US banks. All in all, there are 1680 leaked transactions involving the UK, with $2.3 billion sent to Britain and $3.6 billion sent out.
One of the big perpetrators is HSBC, the UK’s largest bank. Shortly after avoiding a US criminal prosecution for laundering nearly $1 billion on behalf of Mexican drug cartels by agreeing to improve its procedures, they allowed $900 million in transfers linked to criminal activity pass through its accounts between 2011 to 2017. That included a Ponzi scheme (the WCM777 scheme), which led to the death of an investor, Reynaldo Pacheco. HSBC did nothing about WCM777 despite filing a SAR and despite three US states already filling charges against the scheme’s owners. HSBC finally shut the account in 2014 when there was almost no cash left in it.
Barclays is also in trouble, having apparently allowed billionaire Arkady Rotenberg, a close associate of Russian President Vladimir Putin, to dodge sanctions and launder money. And of course Russian Tory donors are involved. The husband of Lubov Chernukhin, who has given £1.7 million to the Tories and paid to meet the last three Prime Ministers, received £6.1 million from a British Virgin Islands company linked to Suleyman Kerimov, billionaire and Russian politician facing sanctions in the US and allegations of tax fraud in France.
The UK Government appears to have got ahead of the story, announcing planson Friday to reform Companies House to “clamp down on fraud and money laundering”. FinCEN itself has announced last week that it’s consulting on proposals for an “explicit requirement for a risk assessment process” by financial institutions in relation to customers. There will be a storm around the banks all week, but there has been plenty of week-long storms before. The cynic in me thinks there are two trillion reasons why this won’t be the beginning of the end of offshoring and financial secrecy.
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