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HONG KONG / LONDON: Global banks faced a new dirty money scandal on Monday as they sought to limit the fallout from a stash of leaked documents showing they transferred more than $ 2 trillion in shady funds over nearly two decades.
Based in Great Britain HSBC, Standard Chartered and Barclays, Deutsche Bank and Commerzbank of Germany, and JPMorgan Chase & Co and Bank of New York Mellon Corp were among the lenders named in the report by the International Consortium of Investigative Journalists and based on leaked documents obtained by an agency news.
While some banks said that many of the transactions occurred a long time ago, and had since put in place robust anti-money laundering controls, investors were clearly concerned.
Shares of HSBC and StanChart hit their lowest level in 25 years, though they fared slightly worse than their peers amid a sell-off in global stocks.
The reports were based on 2,100 leaked Suspicious Activity Reports (SARs), covering transactions between 1999 and 2017, submitted by banks and other financial firms to the US Department of the Treasury’s Financial Crime Enforcement Network (FinCen). .
Banks have spent billions to strengthen their anti-money laundering procedures in recent years after many faced huge fines for breaking the rules. They are required to file a SAR whenever they handle funds that raise suspicions of criminal activity.
But an analysis of 2,100 SARS, which worked with the International Consortium of Investigative Journalists and other media organizations, found that some reports were filed months after the suspicious transactions occurred, and that often little other follow-up action was taken. .
“This highlights the fact that financial crime risk management goes beyond the development of SAR,” said Etelka Bogardi, Hong Kong-based financial services partner at Norton Rose Fulbright.
Shares in Deutsche Bank, which participated in the largest SAR number on BuzzFeed’s record, fell more than 8% at one point Monday morning after the reports.
‘Solid action on dirty money’
The bank said the problems raised were “historic”, while the German Finance Ministry said Monday that the cases linked to Germany in the reports had already been dealt with.
Many of the suspicious transactions were linked to companies incorporated in Britain or in offshore British territories, prompting action groups to call for stricter rules.
“If the government cares at all about the UK’s reputation globally, it must stop rolling the red carpet to criminals and the corrupt, and refuse to legitimize their money through our companies and banks,” Global Witness said.
The UK government said in a statement that “criminals should not be able to profit from their illegal activities under any circumstances, and we have taken strong measures in recent years to crack down on dirty money.”
He added that he was working on reforms to his corporate registration system that will require more controls to the directors of the companies.
HSBC, whose shares fell as much as 6%, also said the information in the reports was historical, while Standard Chartered, which fell 5%, pointed to recent investments to improve its monitoring procedures.
Shares of JPMorgan and Bank of New York Mellon, which were also among the top five most frequently mentioned banks in reports, fell 2.6% and 2%, respectively.
BNY Mellon told Reuters that it could not comment on specific SARs, but that it was fully complying with all “all applicable laws and regulations.” JPMorgan said it has “thousands of people and hundreds of millions of dollars dedicated to this important work.”
Main centers of wealth
Global banks in recent years have driven investments in technology and personnel to address stricter anti-money laundering regulatory requirements and sanctions around the world.
Thousands of clients were kicked out of bank accounts in major wealth centers, including Hong Kong and Singapore, following a Malaysian money laundering scandal, the denunciation of the “Panama Papers” and a global push for tax transparency.
Compliance experts said part of the problem now was that banks were struggling to distinguish between transactions that were and were not suspicious, so they were simply submitting millions of SARS that enforcement agencies don’t have the ability to handle.
“Many banks are struggling with high false positive rates and backlog [of existing cases]. That’s why you see that sometimes the SARs were collected more than 100 days after the transaction, “said Cliff Lam, director of AlixPartners in Hong Kong.
