On September 20th, the International Consortium of Investigative Journalists (ICIJ) –the reporters who brought us the “Panama Papers” and the “Paradise Papers” — released the “FinCEN Files,” in collaboration with Buzzfeed News.
The FinCEN Files are the result of a U.S. leak of 2,100 “Suspicious Activity Reports” (SARs) –covering over 18,000 transactions — filed by banks when they believe a transaction may involve fraud, corruption, or other criminal activity. SAR reports are not public. A former U.S. Treasury official leaked the documents to expose corruption.
The public should be concerned about the volume of suspect bank transactions that are the tip of the iceberg in terms of illicit funds, money laundering and tax dodging. The U.S. has become one of the largest global destinations for illicit funds and tax dodging due to weak disclosure laws –with states like Delaware that do not require corporations to disclose their true beneficial owners.
Over the 18 years between 1999 and 2017, banks moved $2 trillion in funds that they considered suspicious, generating substantial fees in the process. Some of the biggest global banks involved included Deutsche Bank, JP Morgan Chase, HSBC, Barclays Bank, and Bank of New York Mellon. Almost half the $2 trillion in suspicious loans were made by Deutsche Bank, a bank that has paid substantial fines for past money laundering activities.
The Suspicious Activity Reports (SARs) showed that banks often moved funds for companies registered in offshore tax havens, such as the Cayman Islands and British Virgin Islands, where the identity of the owner was not known. Banks could have refused these transactions. But in many cases they allowed the transactions to proceed and then filed a SAR report to cover their reporting obligations.