The new survey conducted by the ICIJ and 108 international media shows that the world's largest banks remain porous to money laundering and struggle to combat the circulation of dirty money.

Strategic and vital for the economy, banks have become, over the course of financial crises, one of the most regulated sectors in the world.

Yet, despite rules and controls, the global banking sector remains porous to money laundering and struggles to combat the circulation of dirty money, according to the " FinCEN Files", the new investigation conducted by the International Congress of Investigative Journalists (ICIJ)  with the American news site BuzzFeed News and 108 international media, including Le Monde.

This investigation is based on a review of more than 2,100 suspicious activity reports (SARs) submitted by banks around the world to the U.S. Anti-Money Laundering Authority, the FinCEN (Financial Crimes Enforcement Network ). These SARs are the American equivalent of the suspicious reports that French banks must send to the Tracfin anti-money laundering unit, as soon as they suspect a risk of money laundering, terrorist financing or circumvention of sanctions and embargoes.

Passive circulation

These ultra-confidential reports represent a total of nearly $2.1 trillion (€1.773 trillion) in suspicious transactions, carried out over nearly two decades, from 1999 to 2017. They show that banks, which handle the bulk of international financial transactions, sometimes passively circulate, through the bank accounts of persons or companies they have not been able to identify, money likely to be money laundered, resulting from illegal activities (tax fraud, crime money, trafficking in drugs, weapons, works of art, etc.).

"The bank plays the role of the car in which the burglars flee after the robbery" – Thomas Creal, financial crime expert

These documents were obtained by BuzzFeed News. They are largely the result of the leak of files collected by the US Congressional Commission of Inquiry into Alleged Russian interference in the 2016 presidential campaign, which resulted in Donald Trump's victory. These suspicious reports, which represent only 0.02% of the SAR received by the US anti-money laundering unit between 2011 and 2017, are therefore limited to a series of personalities, companies and banks directly or indirectly linked to the Russian case.

But if the prism of the investigation is primarily American, these documents incidentally reveal the extent of suspicious movements of money transiting through the world's largest banks.

They provide information on how banks around the world spot and report, or not, suspicious financial flows from one end of the planet to the other in their "pipes". As former financial controller at < a href="javascript:void(0);">Deutsche Bank and anti-money laundering expert Graham Barrow reminds us, "criminals do not launder their money themselves. They move it to safe places thanks to the banks." In other words, "the bank plays the role of the car in which the burglars flee after the robbery," says American financial crime expert Thomas Creal.

At a time of financial globalization, the conclusion is clear: despite the recent tightening of anti-money laundering rules, banks remain eminently fallible. While the regulation of the global banking sector remains one of the major challenges of the coming decades, the " FinCEN Files" show the central role of large systemic banks in the circulation of fraud-related flows of dirty money, corruption, organized crime and terrorism.

Five major banks mentioned

The reports of the US financial intelligence unit reveal that at least five major banks – JPMorgan, HSBC, Standard Chartered Bank, Deutsche Bank and the Bank of New York Mellon  – have failed to stem certain illicit transfers of capital, sometimes even after being sanctioned and having made a commitment to the courts to strengthen their controls.

This is the case of the British giant HSBC, which had admitted, in 2012, to have laundered nearly $ 900 million for South American drug cartels. The bank then escaped criminal prosecution, in return for a fine of $ 1.9 billion and on the condition of actively engaging in the fight against money laundering. However, the " FinCEN Files" show that it continued to manage the money of Russian money launderers or notorious financial criminals, especially during the five-year probation period then set up by the American justice.

Between 2013 and 2014, HSBC continued to transfer money on behalf of a company involved in large-scale financial fraud in the United States, operating as a Ponzi scheme – a scheme that involves cheating investors, by financing the returns promised by newcomers. A scam that has claimed tens of thousands of victims within the Asian and Latin American communities, for a total financial loss of 80 million euros. The company in question, WCM, was in the crosshairs of the authorities of three countries, and the bank's supervisory services knew full well that they were dealing with a probable scam. HSBC even left the company's account open after the freezing of its assets by the American authorities. ricaines, in March 2014.

Strange behaviors

For its part, the first American bank, JPMorgan Chase, circulated more than $ 50 million on behalf of Paul Manafort, Donald Trump's former campaign manager. The money came in particular from an opaque British company, Novirex, whose strange behavior should have alerted the bank's internal controls a long time ago: $ 200,000 received from a company in the British Virgin Islands for "lingerie", $34,000 sent to Hong Kong for "keyboard stickers", $400,000 for "boots"... All while declaring less than $2,500 in expenses in its financial reports! "If I were at JPMorgan, and I saw that, I'd think, 'This is appalling,'" said former British police officer Martin Woods, an anti-money laundering specialist. What normal business buys computers, lingerie and buckets at the same time? »

However, it was only following the revelations of the American press about the corruption of Paul Manafort by the Ukrainian regime that JPMorgan finally decided to send statements of suspicion to the authorities. In March 2019, the former lobbyist was sentenced to forty-seven months in prison for bank and tax fraud. The trial showed that he had received $4 million from Novirex, which turned out to belong to the right-hand man of former Ukrainian President Viktor Yanukovych.

The same JPMorgan allowed Malaysian billionaire financier Jho Low to transfer nearly $1.25 billion in suspicious funds in the space of three years. As revealed by a January 2017 SAR, the bank has validated thirty-three payments that would have allowed the purchase of shares in an upscale hotel in Manhattan – while Jho Low had been designated in 2015 as a key figure in the case of the Malaysian sovereign wealth fund 1MDB, the biggest international corruption scandal of the decade.

Simple searches Google

Another American behemoth, Citibank was just as complacent with the former Senegalese boss of the International Athletics Federation Lamine Diack. Sentenced on September 16, 2020, in Paris, to four years in prison, two of which were suspended, and a fine of 500,000 euros, he had hidden cases of doping in Russian athletics in exchange for bribes. The " FinCEN Files" show that the US bank waited until 2016, nearly a year after its arrest, to report to the authorities 112 suspicious payments linked to Mr. Diack – or $ 55.7 million let pass without flinching for years, despite confounding indications about the dubious nature of transfers.

As for Standard Chartered, it has not only maintained relations with the Jordanian bank Arab Bank, accused by the United States of financing terrorism. But its Hong Kong branch kept open accounts through which millions of dollars passed, for a company that was reselling archaeological pieces stolen in Afghanistan, India, Nepal... The art dealers at the heart of the traffic, Subhash Kapoor and Nancy Wiener, were indicted in New York in 2019. However, the " FinCEN Files" show that the bank did not know what this company was used for and where it was registered.

Are these slippages isolated accidents? Not according to the United Nations, which estimates that barely 1% of the $2.4 trillion laundered each year is detected by the authorities. This seems to be confirmed by the confidential documents of the FinCEN, as the examples are teeming with transactions carried out via offshore companies based in opaque tax havens such as Cyprus, the British Virgin Islands, Hong Kong or the United Arab Emirates, and whose banks themselves do not know the true owners.

In theory, banks are required to set up strict mechanisms for verifying their customers: the "KYC" (know your customer) procedure requires them to know who is the natural person benefiting from accounts opened in the name of a company. Yet in half of the 2,100 SARs reviewed by the ICIJ, the bank ignored this crucial information.

On many occasions, banks' internal auditors are content with simple searches Google to inquire about the identity of their customers. Often, they only file statements of suspicion after press revelations or judicial investigations into their clients, when the money has already been flowing elsewhere for a long time.

The bank JPMorgan , for example, reportedly funneled more than $1 billion for the Cypriot company ABSI Securities between 2010 and 2015, before discovering in the media that it belonged to Semyon Mogilevich, often described as the "boss of the bosses" of the Russian underworld. The latter refuted any knowledge of the company.

Sanctions that are too weak

Société Générale is not to be outdone. It was only following the revelations of the "Panama Papers", in April 2016, that its New York branch was able to respond to the FinCEN, which questioned several tens of millions of dollars having passed through the bank accounts of companies domiciled in the British Virgin Islands. Those accounts had been opened with Société Générale's Swiss subsidiary, SGPB, which had refused to disclose the names of the clients behind those offshore companies to its counterpart in New York, in the name of banking secrecy!

It therefore took the "Panama Papers" to teach him that they were, in particular, members of the Rotenberg family, at risk, reputed to be close to Russian President Vladimir Putin. What she finally let the FinCEN know.

However, the problem persisted after this episode. As when Société Générale discovered in the press, in July 2017, the role played by its client Aras Agalarov, a real estate tycoon close to Vladimir Putin, in the possible interference of Russia in the US presidential campaign. The New York branch of the bank then wondered about several transactions it had validated, including a transfer of $ 19.5 million between two accounts of Agalarov, on June 20, 2016 – ten days after his secret meeting with Donald Trump's team. She turned to the SGPB in Switzerland to find out where the money came from. But the investigation stops there: "After many reminders, [SGPB] was not able to respond to our requests," apologizes Société Générale New York to the FinCEN, in October 2017.

It is obvious that the big banks are not giving themselves the means to effectively combat money laundering

This thorny subject is not ignored by the supervisory authorities. In a September 2019 document on the "consolidated management" of anti-money laundering schemes for banks and insurers, the Autorité de contrôle prudentiel et de résolution (ACPR), which controls French banks, writes that significant efforts have been made. But points to "shortcomings" in terms of "intra-group exchange of personal information on customers", and calls on banks to set up "mechanisms allowing a fluid and efficient sharing of information".

Browsing the thousands of pages of the " FinCEN Files", one thing is obvious: the big banks do not give themselves the means to effectively combat money laundering, by blocking the circulation of dirty money at the slightest suspicion.

For John Cassera, a financial crime expert who worked for FinCEN between 1996 and 2002, the penalties imposed for non-compliance are simply too low. The fines of a few hundred million dollars ultimately weigh little against the profits of the big banks. U.S. attorney James S. Henry said that to really make a difference, "the senior executives who deal with this need to feel unsafe" – and therefore question their direct responsibility, by imposing "fines or jail."