Why are banks letting corrupt money pass through their systems?

David Brancaccio, Daniel Shin, and Erika Soderstrom Sep 25, 2020
Heard on: Marketplace Morning Report
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Mark Wilson/Getty Images

Why are banks letting corrupt money pass through their systems?

David Brancaccio, Daniel Shin, and Erika Soderstrom Sep 25, 2020
Mark Wilson/Getty Images
HTML EMBED:
COPY

A new investigative report from BuzzFeed News has alleged that a number of large banks allow scammers, money launderers and corrupt officials move trillions of dollars freely, despite anti-money laundering laws and monitoring systems that flagged suspicious activity from their customers, according to documents, records and interviews collected by BuzzFeed News’ investigative unit.

“Marketplace Morning Report” host David Brancaccio spoke to BuzzFeed News senior investigative reporter Jason Leopold about the “FinCEN Files,” and what the investigation revealed about the gaps and holes in banking finance regulations.

Below is an edited transcript of David Brancaccio’s interview with Jason Leopold.

David Brancaccio: All right, big banks report suspicious stuff they come across. But it seems as if the crooks keep using these banks. What does that tell you about this early warning system that the banks are using?

Leopold: Well, as we seen this week, just from the response to our investigation is that the system is kind of broken. I mean, the agency that receives these suspicious activity reports filed by the banks — the Financial Crimes Enforcement Network — they receive millions of them. They just don’t have the staff, the personnel, to read everything.

Brancaccio: And so what critics of the system seem to be saying here is that it may not be enough for the banks to say, “Hey, we think we see something.” They would like the banks themselves to also take action if they spot a red flag waving?

Leopold: Well, the banks have always been on the front line against money laundering and illicit financing — financial crime — in terms of helping and assisting the government. In this case, what they’re doing is they’re filing these suspicious activity reports, which they’re bound to do by the law, and that’s it. So they’re not doing anything beyond that, based on our investigation, and they’ve continued to move the suspicious transactions.

Brancaccio: There’s so many examples in your series. One that comes to mind, Standard Chartered, the big international bank, moved money for a Dubai-based outfit that was accused of laundering money for the Taliban. But it’s a lot of other big names, not just Standard Chartered.

Leopold: Yeah, you know, HSBC is a bank that popped up again and again and again in our review of these suspicious activity reports. And they are best known for paying a record fine back in 2012 for laundering money for drug cartels and terrorist organizations. And they were appointed a monitor, an independent monitor that would sort of oversee and make sure they got their act together. And what we found in these documents is that while they were under the watch of an independent monitor, they were moving tens of millions of dollars for an individual who was running essentially a Ponzi scheme and fleeced hardworking people out of, you know, almost $80 million. And this was what was happening while they were under the watch of a monitor.

Brancaccio: Now, the reaction from authorities, since you published at the beginning of the week, seems to be, from my reading, more centered on how terrible it is the reports got to the media.

Leopold: You know, we had reached out to the Treasury Department’s Financial Crimes Enforcement Network about a month ago. And on Sept. 1, they posted a statement to their website. That statement said that the release of these suspicious activity reports is illegal. And they are aware that the media will be publishing something soon revolving around it. And they went on to explain how this would be a threat to national security, and said that they referred the matter to the Justice Department and their own internal watchdog for investigation. So, they never actually responded to us. They only posted the statement. But many people that we’ve spoken with have said that, you know, this is important information that needs to be disclosed to the public. There’s a real public interest here, in order to explain and understand how the banks have been essentially facilitating this behavior, and how the government agencies that are supposed to keep watch over it are just — they’re not doing enough. I don’t want to say they’re not doing anything. They’re just not doing enough. Essentially, what they’re doing is they’re collecting lots and lots and lots of information, putting it into a database, and that’s where it sits.

Brancaccio: But one of the other criticisms of these documents being allowed to come to light is that maybe banks will now be less likely to report suspicious behavior, if they know it ends up in a BuzzFeed report someday.

Jason Leopold: You know, that’s been something that the banks have been talking about for quite some time. They always had worried about information that would be revealed about their customers. But let me just take this moment to note here that we as a news organization, as well as our partner news organizations around the world who we shared these documents with, we have been extremely careful. We have redacted all personal information — personal identifiable information — there [are] no account numbers. So I understand what the banks are saying here and what their responses their knee-jerk response, but they have long kind of been pressing for reforms to the law that requires them to file the suspicious activity reports. I certainly think that this probably will perhaps spur that, but I want to make sure that listeners know that we were extremely careful because we recognize, you know, how critical this information is as it relates to individuals and certain entities.

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