Secret docs show banks defy US crackdowns to serve oligarchs, criminals and terrorists

SPECIAL REPORT | Secret US government documents reveal that JPMorgan Chase, HSBC and other big banks have defied money laundering crackdowns by moving staggering sums of illicit cash for shadowy characters and criminal networks that have spread chaos and undermined democracy around the world.

The records show that five global banks — JPMorgan, HSBC, Standard Chartered Bank, Deutsche Bank and Bank of New York Mellon — kept profiting from powerful and dangerous players even after US authorities fined these financial institutions for earlier failures to stem flows of dirty money.

US agencies responsible for enforcing money laundering laws rarely prosecute megabanks that break the law, and the actions authorities do take barely ripple the flood of plundered money that washes through the international financial system.

In some cases, the banks kept moving illicit funds even after US officials warned them they’d face criminal prosecutions if they didn’t stop doing business with mobsters, fraudsters or corrupt regimes.

JPMorgan, the largest bank based in the US, moved money for people and companies tied to the massive looting of public funds in Malaysia, Venezuela and Ukraine, the leaked documents reveal.

READ MORE: US banks didn’t act on 'suspicious' Jho Low, 1MDB-linked transfers until too late, leak shows

The bank moved more than US$1 billion (RM4 billion) for the fugitive financier behind Malaysia’s 1MDB scandal, the records show, and more than US$2 million for a young energy mogul’s company that has been accused of cheating Venezuela’s government and helping cause electrical blackouts that crippled large parts of the country.

JPMorgan also processed more than US$50 million in payments over a decade, the records show, for Paul Manafort, the former campaign manager for US President Donald Trump.

The bank shuttled at least US$6.9 million in Manafort transactions in the 14 months after he resigned from the campaign amid a swirl of money laundering and corruption allegations spawning from his work with a pro-Russian political party in Ukraine.

Tainted transactions continued to surge through accounts at JPMorgan despite the bank’s promises to improve its money laundering controls as part of settlements it reached with US authorities in 2011, 2013 and 2014.

In response to questions for this story, JPMorgan said it was legally prohibited from discussing clients or transactions. It said it has taken a “leadership role” in pursuing “proactive intelligence-led investigations” and is developing “innovative techniques to help combat financial crime.”

Waving through suspect payments

HSBC, Standard Chartered Bank, Deutsche Bank and Bank of New York Mellon also continued to wave through suspect payments despite similar promises to government authorities, the secret documents show.

The leaked documents, known as the FinCEN Files, include more than 2,100 suspicious activity reports filed by banks and other financial firms with the US Department of Treasury’s Financial Crimes Enforcement Network. The agency, known in shorthand as FinCEN, is an intelligence unit at the heart of the global system to fight money laundering.

BuzzFeed News obtained the records and shared them with the International Consortium of Investigative Journalists (ICIJ). ICIJ organised a team of more than 400 journalists from 110 news organisations in 88 countries to investigate the world of banks and money laundering.

In all, an ICIJ analysis found that the documents identify more than US$2 trillion in transactions between 1999 and 2017 that were flagged by financial institutions’ internal compliance officers as possible money laundering or other criminal activity — including US$514 billion at JPMorgan and US$1.3 trillion at Deutsche Bank.

Suspicious activity reports reflect the concerns of watchdogs within banks and are not necessarily evidence of criminal conduct or other wrongdoing.

Though a vast amount, the US$2 trillion in suspicious transactions identified within this set of documents is just a drop in a far larger flood of dirty money gushing through banks around the world.

The FinCEN Files represent less than 0.02 percent of the more than 12 million suspicious activity reports that financial institutions filed with FinCEN between 2011 and 2017.

FinCEN and its parent, the Treasury Department, did not answer a series of questions sent last month by ICIJ and its partners.

FinCEN told BuzzFeed News that it does not comment on the “existence or non-existence” of specific suspicious activity reports, sometimes known as SARs.

Days before the release of the investigation by ICIJ and its partners, FinCEN announced that it was seeking public comments on ways to improve the US‘ anti-money laundering system.

More than 17,600 other records from whistleblowers

The cache of suspicious activity reports — along with hundreds of spreadsheets filled with names, dates and figures — flag bank clients in more than 170 countries who were identified as being involved in potentially illicit transactions.

Along with sifting through the FinCEN Files, ICIJ and its media partners obtained more than 17,6000 other records from insiders and whistleblowers, court files, freedom-of-information requests and other sources. The team interviewed hundreds of people, including financial crime experts, law enforcement officials and crime victims.

According to BuzzFeed News, some of the secret records were requested as part of US congressional investigations into Russian interference in the 2016 US presidential election. Others were gathered by FinCEN following requests from law enforcement agencies, BuzzFeed said.

The FinCEN Files offer unprecedented insight into a secret world of international banking, anonymous clients and, in many cases, financial crime.

They show banks blindly moving cash through their accounts for people they can’t identify, failing to report transactions with all the hallmariks of money laundering until years after the fact, even doing business with clients enmeshed in financial frauds and public corruption scandals.

Authorities in the US, who play a leading role in the global battle against money laundering, have ordered big banks to reform their practices, fined them hundreds of millions and even billions of dollars, and held threats of criminal charges over them as part of so-called deferred prosecution agreements.

A 16-month investigation by ICIJ and its reporting partners shows that these headline-making tactics haven’t worked. Big banks continue to play a central role in moving money tied to corruption, fraud, organised crime and terrorism.

"By utterly failing to prevent large-scale corrupt transactions, financial institutions have abandoned their roles as front-line defences against money laundering,” Paul Pelletier, a former senior US Justice Department official and financial crimes prosecutor, told ICIJ.

He said banks know that “they operate in a system that is largely toothless.”

Five banks

Five of the banks that appear most often in the FinCEN Files — Deutsche Bank, Bank of New York Mellon, Standard Chartered, JPMorgan and HSBC — repeatedly violated their official promises of good behaviour, the secret records show.

In 2012, London-based HSBC, the largest bank in Europe, signed a deferred prosecution deal and admitted it had laundered at least US$881 million for Latin American drug cartels. Narco-traffickers used specially shaped boxes that fit HSBC’s teller windows to drop off the huge amounts of drug money they were pushing through the financial system.

Under the deal with prosecutors, HSBC paid US$1.9 billion and the government agreed to put criminal charges against the bank on hold and dismiss them after five years if HSBC kept its pledge to aggressively fight the flow of dirty money.

During that five-year probationary period, the FinCEN Files show HSBC continued to move money for questionable characters, including suspected Russian money launderers and a Ponzi scheme under investigation in multiple countries.

Yet the government allowed HSBC to announce in December 2017 that it had “lived up to all of its commitments” under its deferred prosecution pact — and that prosecutors were dismissing the criminal charges for good.

In a statement to ICIJ, HSBC declined to answer questions about specific customers or transactions. HSBC said ICIJ’s information is “historic and predates” the end of its five-year deferred prosecution deal. During that time, the bank said, it “embarked on a multi-year journey to overhaul its ability to combat financial crime... HSBC is a much safer institution than it was in 2012.”

HSBC noted that in deciding to release the bank from the threat of criminal charges, the government had access to reports from a monitor who reviewed the bank’s reforms and practices.

The US Department of Justice declined to answer specific questions. In a statement, a spokesperson for the department’s criminal division said:

“The Department of Justice stands by its work, and remains committed to aggressively investigating and prosecuting financial crime — including money laundering — wherever we find it.”

Tomorrow:

'Everyone is doing badly': A mighty flow of dirty money swamps bureaucrats

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INTERNATIONAL CONSORTIUM OF INVESTIGATIVE JOURNALISTS (ICIJ) is a Washington-based independent international network of more than 200 investigative journalists and 100 media organisations in over 70 countries.