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A data leak from the US Treasury Department reveals serious problems in the fight against money laundering. As a result, well-known banks have transferred billions of euros for dubious customers and thus undermined their own standards.
By Petra Blum and Andreas Braun, WDR and Philipp Eckstein, Jan Strozyk and Benedikt Strunz, NDR
For years, banks around the world have done business with high-risk clients, circumventing anti-money laundering precautions and making corruption and crime possible. Despite strict anti-money laundering regulations, they accepted suspected mobsters, million-dollar scammers and sanctioned oligarchs as clients and made billions worth of transfers for them. They were very reluctant to report these events, in some cases years late.
This is the result of a joint investigation by numerous media partners, published under the name FinCEN Files and based on thousands of pages of secret money laundering reports. They were in germany NDR, WDR, “Süddeutsche Zeitung” (SZ) and “Buzzfeed News” involved. Research shows how easy it appears to be for money launderers, drug cartels or corrupt politicians to access the international financial market.
International financial institutions involved
Some of the world’s largest financial institutions, including Deutsche Bank, JP Morgan, and HSBC, have even continued to make profits from shady clients after they had already been sanctioned in the United States for money laundering violations.
Undermine your own standards
In many cases, banks undermined their own anti-money laundering rules, for example by verifying new customers. For example, although they are required to do so, they have often been unable to clarify who owns the funds deposited to them on behalf of the mailbox companies.
Banks are not required to stop suspicious transactions, but they can. In current cases, they almost never made use of this, but took a long time to report the suspicion: on average, almost six months elapsed between the bank’s first suspicion and the report to the anti-money laundering authority. In some cases, banks did not report suspected money laundering to US authorities until years later, despite the warnings. Meanwhile, the business continued.
Suspicious transfers also at Deutsche Bank
The leak also makes Deutsche Bank difficult to explain. According to US investigators, Russian criminals and a money launderer working for terrorist groups are said to have laundered money through the bank’s Moscow branch. A company attributed to Igor Putin, a cousin of Russian President Vladimir Putin, is also said to have been involved in illicit cash flows. Deutsche Bank described the processes on request as “criminal acts of individuals”, which have been extensively investigated, reported to supervisory authorities and personal consequences drawn up at the board level, according to a spokesperson.
According to FinCEN files, not only could the money launderers have used the global infrastructure of Germany’s largest bank for a longer period of time and to a greater extent than previously assumed, but apparently many security systems in the bank have also failed. According to an investigation by SZ, the current head of Deutsche Bank, Christian Sewing, Ed and WDR as head of corporate audit at the time, he shared the responsibility of ensuring that money launderers apparently could not use the bank for stock transactions before it became apparent. The former Sewing department spent several months investigating the stock trading department’s operations in Russia in 2014 and had nothing serious to complain about.
The work had “serious flaws”
An external investigation, commissioned by Deutsche Bank itself, later concluded that the examination carried out by the Sewing department was “seriously flawed” and that the work was “inadequate”. Deutsche Bank denies the direct or indirect involvement of the current CEO in the review of the Moscow business. At that time, he had not seen or signed the audit in question and was therefore not responsible for it. In addition, since then, the bank has realigned customer feedback and greatly expanded money laundering controls.
Apparently there is no purification in HSBC
The failure of state sanctions is particularly clear in the example of HSBC: in 2012, the main bank was able to avoid criminal prosecution for numerous violations in relation to money laundering for drug cartels by paying US $ 1.9 billion. . The deal also included a kind of five-year trial period. At the end of the trial period in 2017, the bank itself claimed that it had implemented numerous reforms and was now able to crack down on financial crime much more effectively.
FinCEN files now suggest, however, that HSBC transferred money for suspected money launderers to the Russian mob during the trial period and processed funds for a fraudulent pyramid scheme, the origin of which is being investigated in several countries. She is also said to have transferred many millions of dollars to a Panamanian company that, according to US authorities, is suspected of laundering money from drug deals.
When asked, HSBC stated that it could not comment on specific customer relationships, but that it had “completely renewed its ability to fight financial crime in these five years.” The bank had been thoroughly reviewed and no criminal charges were filed at the end of the trial period.
JP Morgan continues to move money for scammers
Even in the case of the largest bank in the United States, JP Morgan, a hefty fine apparently did not mean that one was no longer conducting risky business. JP Morgan was fined around $ 2.6 billion in 2014 for profiting from the financial operations of convicted fraudster Bernard Madoff. The investigation now shows that JP Morgan continued to move funds for scammers in subsequent years, for example in connection with various corruption cases in Venezuela. When asked, the bank made only general comments, stating that it was investing “considerable resources” in the fight against money laundering and financial crime.
Suspicious Activity Reports (SARs) are generally classified as secret in the US Banks and financial institutions submit these reports to FinCEN and list which transactions they found suspicious and for what reasons. Also in Germany, banks are obliged to report suspicious transactions. As a result, criminal investigations can be initiated. It is not known how many of the available reports this happened.
The United States Department of the Treasury does not comment
The US Department of the Treasury responded to a request made by the ICIJ on behalf of all the media involved that it essentially should not comment on reports of money laundering. The agency noted that publication of these reports was prohibited in the United States and that investigations could be compromised as a result.
The correspondence banking system remains a weak point
Therefore, the media partners who worked on the FinCEN archives will not publish the data in its entirety for this reason and for source protection reasons. However, the findings shed light on the systemic errors in the fight against money laundering and are therefore of great public interest. Many criminals seem to know the vulnerabilities well. One of them is the so-called correspondent banking system. The data shows that money launderers repeatedly use small banks, for example in the Baltic States, for their businesses that are in a correspondent banking relationship with a large bank.
The procedure aims to give small banks access to international markets by transferring their funds on behalf of the larger banks. This is especially true for transactions in US dollars, a kind of universal currency in world trade. Branchless banks in the US can also use correspondent banking to conduct dollar business with the help of larger institutions.
Often times, it is not clear to the sending bank where the money is coming from and who will benefit from the transactions. Criminals seem to deliberately exploit this. Deutsche Bank only appears in documents with more than 500 correspondent bank relationships with mostly small banks.
The data support the impression that correspondent banks are often not interested in the origin of the money. Due to the increased risk of money laundering, Deutsche Bank announced last year that it would end its correspondent banking relationships in some countries. Estonia, Latvia and Lithuania are said to be among them.
