Background

The International Consortium of Investigative Journalists (ICIJ) and BuzzFeed (a US based internet news and entertainment provider) have published a series of articles from 20 September relating to the leaking of around 2,100 Suspicious Activity Reports (SARs) which had been submitted to the US Financial Crimes Enforcement Network (FinCEN) between 1999 and 2017. Shortly afterwards, the BBC screened an episode of the Panorama programme, also based around the leaked SARs.

The emerging narrative is complex, nuanced and much of the information had been reported many years ago.  We will, over the coming days and weeks, provide our members and readership with clear information about the key elements, developments and issues at the heart of the story. We will also review relevant regulatory principles and definitions and share practical materials that provide further context and guidance around the emerging themes.

What do the files contain?

The disclosures contained within the FinCEN Files identify a wide range of concerns linked to events that took place over many years and across multiple jurisdictions and are drawn from a small fraction of the total number of SARs submitted in this period. The rationale for selecting this particular set of documents is not yet clear.

The material can be marshalled in various ways and from different perspectives. However, four key themes have emerged, supported by 24 detailed case histories:

• Corruption (14 cases described in detail)
• Embezzlement (3 cases described in detail)
• Sanctions evasion (2 cases described in detail)
• Fraud (5 cases described in detail)

Some of the activities and clients described in the reports had been previously brought to notice in the context of organised crime and corruption and the ICIJ highlights that transactions continued to be processed despite these concerns and SARs being completed.

An example given is that of Isabel dos Santos, an Angolan billionaire about whom the ICIJ reported on in 2012. Five global banks continued to process transactions relating to dos Santos and her family after these allegations had been publicised.

The FinCEN Files also refer to the Ruja Ignatova fraud case, a creator of a bogus crypto currency. Ms Ignatova is a fugitive, having been charged by the US authorities and the reports describe two SARs involving 13 banks, 29 transactions and $137.6million of transactions between 2015 and 2016.

There are also examples of basic Know Your Customer (KYC) information not being recorded, such as CDD files not identifying beneficial owners of shell companies and other entities. A large number of clients were registered within the BVI and the reports often noted a lack of understanding of the rationale for the structure of the client entity and its transactions.

The balance

A key message emerging from the FinCEN Files is that the raising of a SAR does not in itself end the movement of suspicious money and the reports raise questions about the motivation of global banks and the effectiveness of law enforcement response.

The reports also note that the submission of a SAR is not necessarily indicative of criminal conduct or wrongdoing. When journalists have approached banks for comment, it appears they have not responded with detail on individual cases however this lack of response is to be expected in line with their legal responsibilities. There are clear requirements contained within the Proceeds of Crime Act 2002 (POCA) and equivalent US legislation regarding disclosure of information linked to SARs which prohibits the release of this information.

SAR submissions

While the information detailed in the FinCEN Files demonstrates that criminal activity continues at a pace despite the submission of SARs, it is important to note that SARs do contribute to positive law enforcement outcomes and the protection of people, companies and communities.

Key questions financial services professionals should consider right now include:

• what are the rules around investigating possible suspicion and completing a SAR?
• when is it appropriate to use the word “suspicion” or the word “concern”?
• how should I safeguard my reputation, my firm and my clients?
• what are the barriers and implications regarding identifying beneficial owners?
• are reporting obligations clearly understood across my organisation?

Future impact

There is no denying that vast amounts of dirty money continue to circulate in the global financial system and the FinCEN Files state that more can be done by financial services, law enforcement and legislators to prevent this. However, it is also clear that part of the solution lies with our members and the global financial crime prevention community who are key to the current response to financial crime as well as the evolution of the anti money laundering framework.