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The FinCEN Files

 

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.

 

Suspicious Activity Reports following the FinCEN leaks | 2020

What are the risks associated with the suspicious activity reporting regime? Do you know the potential pitfalls? Mark Taylor, Product Director, ICA, and Martin Woods, Financial Crime Consultant and Advisor, discuss some practicalities - the differences between a concern and a suspicion, the risks for the MLRO and the follow-up action to be taken once a SAR has been lodged with the relevant authorities.

A must watch for those who care about saving lives.

ICA has discussed the FinCEN files and the implications for global anti money laundering policy with members from across the world.

This took place in the context of our Professional Postgraduate Diploma programme and generated some interesting discussion and observations including:

Useful Resources

Back to the drawing board on transaction monitoring

In the wake of the FinCEN Files leaks, Martin Woods examines whether monitoring text rather than numbers in transactions could serve as a solution to our greater anti-money laundering woes.

Find out more

National Crime Agency’s information on SARs

A 10 min read written as a guide to SARs – their value, who completes and how they are used by the law enforcement agencies. Contains links to further reading from the NCA

Find out more

National Crime Agency’s information on SARs Regime Good Practice: FAQs on DAML

A 30 min read written as a FAQ guide on the use and role of Defence Against Money Laundering (DAML)

Find out more

Managing Money Laundering Risk, Best Practice in CDD and Risk Assessment

Video addressing key aspects of CDD, including KYC issues such as source of funds, source of wealth, fake identities and recent laundromat scandals

Find out more

6 ways to write better, more effective SARs

15 min read on key attributes of good SARs and pitfalls to avoid

Find out more

A 360-degree view of AML, ABC, Sanctions and CTF

Video exploring recent events, regulatory actions and trends, exploring Danske Bank and Swedbank ML issues, Troika Laundromat and false trade

Find out more

Beneficial Ownership Monitoring: Learn the Challenges and Practicalities

Video from Dun & Bradstreet focusing on challenges of establishing and monitoring beneficial ownership in the real world

Find out more

New technologies within Financial Crime Compliance

65 min video considering the role of new technologies and their usage in financial crime controls

Find out more

ICA Certificate in KYC and CDD

An introductory-level course providing a foundation knowledge of KYC and CDD concepts.

Find out more

ICA Certificate in Anti Money Laundering

A practical, introductory-level course that will give you a solid understanding of core money laundering and terrorist financing risks.

Find out more

ICA Advanced Certificate in Practical CDD

The only professional qualification in practical CDD, it has been designed for KYC Analysts and professionals who manage CDD risk.

Find out more

Help and support

Alternatively contact us on: +44(0)121 362 7534 / studentservices@int-comp.org (Qualifications)

or +44(0)121 362 7747 / membership@int-comp.org (Membership)

or +44(0)121 362 7657 / assessment@int-comp.org (Assessment)

or +44 (0) 121 362 7503 / epa@int-comp.org (End Point Assessment)