The investigation into FinCEN fraud leads to New Banking Laws

Exposing a torrent of dirty money that the world’s most powerful banks are transacting in view of government regulators, the Lime FinCEN an investigation has ruined the financial industry like few stories since the Great Recession – and catalyzed the action of force in the United States 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 secret records, British lawmakers launched a formal investigation into British bank oversight, supported the members of the European Parliament a stronger response across the continent, and investigations have been opened in countries ranging from Thailand to Liberia.

Significantly, the FinCEN Files provided a final boost in Washington, DC, for the passage of a moment new law take a look at one of the most effective money laundering tools mentioned in the stories: shell companies. The legislation, passed last week with overwhelming bipartisan support, requires many of these secret American companies to reveal who owns them and who benefits from them.

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

Provisions in the legislative package, included in the annual defense spending bill, they also address some of the other systemic problems identified in the FinCEN Files, which highlight the ineffectiveness of government oversight and the myriad of ways in which banks they fail to stop the flow of dirty money.

Among those reforms: The Department of Justice should submit annual reports justifying the use of deferred prosecution agreements – candy agreements that allow banks to enforce anti-money laundering laws to avoid trial and criminal convictions. The U.S. Treasury Department will also look at new technologies to better identify criminal money flows and to increase communication between the private sector and federal agencies. And those who blow the whistle for misconduct will receive new protections.

Even if President Donald Trump made the veto vote the general bill – because it doesn’t revoke a set of independent protections for social media – lawmakers could overturn the veto.

Public officials cited the BuzzFeed News – ICIJ survey as a reason why reforms have gained support after years of inaction. “The history of BuzzFeed makes it clear that we need to strengthen, reform and update our nation’s laws against money laundering,” said Sen. Sherrod Brown, the first Democrat on the Senate Banking Committee. “This action has been long.”

Senator Ron Wyden, the Democratic nominee for the Senate Finance Committee, also referred to the FinCEN Files the day the legislation was passed, saying: “The investigative report shed light on money laundering and the sustained public interest has certainly helped to move these provisions across the board. ” (Wyden supported the reforms but voted against broader legislation for reasons unrelated to financial regulation.)

To pursue the investigation of the FinCEN Files, journalists on six continents have leaked a wide-ranging disclosure of suspicious activity reports, or SARs, from the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department. United States. The SARs detailed more than $ 2 trillion in suspicious transactions in almost every corner of the globe, with journalists linking money flows to terrorist groups, drug kingdoms and kleptocrats. The 16-month investigation established how banks have helped facilitate mass money laundering and how national regulators have failed to reignite criminals or reduce banks.

Weeks before the publication, journalists working on the FinCEN Files informed government officials of their findings and asked for comment. Officers in the US and the UK have announced that they will change the anti-money laundering rules – the exact rules the FinCEN Files show were broken and ineffective.

After BuzzFeed News contacted the U.S. Treasury Department, the agency announced that it will begin taking suggestions from the public and insiders on how to update the Bank Secretary’s Law. the 1970s, which has long governed the country’s policies against money laundering. Lobbyists, banks, financial services companies, and academics have submitted 110 comments, with numerous confirming what the FinCEN Files had shown: U.S. anti-money laundering protections need to be reviewed.

Meanwhile, on September 18, two days before the publication of the first stories of the FinCEN Files, official in London announced plans to improve the way the UK collects information on companies registered here.

“It’s hard not to believe that the imminent publication of the FinCEN Files has forced its hand on this,” said Tom Keatinge, director of the Center for Financial Crime and Security Studies at the Royal United Services Institute.

Once the stories came into the public eye, the calls for reform became stronger.

British legislators launched a formal inquiry into the “deeply disturbing” questions posed in the FinCEN Files. Parliamentary Treasury Committee promise to examine what progress government regulators and law enforcement agencies have made to prevent money laundering.

Speaking in the European Parliament, politicians he demanded uniform regulations is stronger supervision in the form of a new supervisory agency or more powers for the existing body, the European Banking Authority.

“The existing anti-money laundering system it 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 have also jumped on the bandwagon. In the Seychelles and Liberia, journalists ’revelations were referred to anti-corruption units for further action.

At the same time, criminals and autocratic regimes, long accustomed to keeping their financial reports secret, flashed at journalists. Before and after the publication of the FinCEN Files, journalists in African and Middle Eastern countries were shouted at, intimidated and threatened with lawsuits. In Turkey, a court has blocked the publication of several stories by File FinCEN.

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

Activists in Niger have presented a FinCEN Files story as part of a revolutionary process that sought to force the government to open a $ 120 million corruption investigation that an official audit said was missing. In Thailand, regulators are probe four national banks whose transactions were highlighted by one analysis for the series. And Belgian banks proposal the creation of a platform to exchange information on suspicious transactions, and US banks have supported legislation aimed at shell companies.

The lobbying arm of the banking industry, on the other hand, has tried to downplay the findings of the investigation.

The Institute for Banking Policy has published a statement, supported by announcements on social media, trying to launch cold water on the significance of the FinCEN Files.

The institute disputed a central finding: that banks continue to sometimes transact transactions for customers who had been repeatedly branded for suspicious behavior. The lobbying group said the government “often” tells banks to keep these accounts open so law enforcement officers can monitor them.

Among the documents in the FinCEN leaflets, however, BuzzFeed News could find only two mentions of such an instruction.

The lobbying group also argued that a large proportion of SARs had nothing to do with illegal activity. Citing survey data from 14 banks, the group said: “Our data indicate that about 4 percent of SARs result in any follow-up to law enforcement. A small subset of these results in an arrest and ultimately a conviction. “

The group also said: “In the end, this means that 90-95% of the individuals the banks report were probably innocent.”

But the lack of official follow-up does not necessarily mean that the marked activity was lawful. Federal investigators do not have the resources to remove any lead and do not automatically notify banks when investigating SAR subjects, show interviews with law enforcement officials.

By law, banks must report when they report transactions that bear the hallmarks of money laundering or other financial misconduct. SARs are not only evidence of a crime but are considered vital for law enforcement to engage in illegal activities.

During a speech this month to the American Banking Association, FBI Director Christopher Wray he said SARs “capture an incredible range of behavior” and allow agents to “track financial traces, investigate specific individuals and entities, identify drivers, connect points, and advance investigations.” The records, according to law enforcement sources, can help track parts of drug networks, clarify funding behind terror cells, and help officials decide whether to blacklist businesses. or individuals involved in misconduct.

Contacted by BuzzFeed News with questions about this story, the Institute for Banking Policy responded by also citing its own research on the issue and reiterating that the FinCEN files were based on an “incredibly narrow” slice of documents. millions archived each year.

Later after the publication of the FinCEN Files, world banking actions it fell dramatically, but it was more than share values ​​that had the industry buzzing. The series has also sparked reflection and debate in a number of media and industry forums. “That banking scandal is a scam,” he said Independent, a publication in the UK, noted. “The reverences … will be heard for months, if not years.”

In more than 100 opinion articles and columns that have been published in trade and commercial publications since September, industry experts have pointed to the FinCEN Files as they advocate for change. At International Banker, Laurent Liotard-Vogt and Florent Palayret, who work in the business management consulting firm Chappuis Halder & Co., proposal solutions, including regulations to prevent shell companies, and concluded, “It’s the whole system that’s in the process of collapsing and needs to be rethought.”

Nine days after the revelation of the results of the FinCEN Files investigation, Linda A. Lacewell, the superintendent of the New York State Department of Financial Services, published his analysis, noting that the series provides the opportunity to tackle the usual problems. “Now, with this new spotlight, we have to act,” he wrote.

Senator Elizabeth Warren, member of the Committee on Banking, Housing and Urban Affairs, he quoted stories in call for substantial changes in oversight.

In a statement to BuzzFeed News this week, he said the Corporate Transparency Act should be just a first step and advocate for additional reforms, including making Wall Street more accountable for financial crimes. “I will continue to push mine.” legislation to hold personal and criminal leaders accountable when their organizations exploit the law. ”

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