What's going on this week?

Happy New Year! This week we look at the FinCEN Files and explore the question of whether suspicious activity reports (SARs) in their current form actually help or hinder the compliance process.

SAR — a Red Flag or a Passing Slip?

Over the last several years the total amount of AML penalties have been on the rise. While AML penalties given in 2018 were around $4 billion and doubled to about $8 billion in 2019, the first half of 2020 already estimates to approximately $6 billion total.

Additionally, the recent FinCEN leaks alleging major FIs (HSBC, JP Morgan, Deutsche Bank, Standard Chartered and Barclays) in facilitating large financial transactions linked to money laundering, drug trafficking, terrorism, circumventing sanctions and a Ponzi scheme, are also not an encouragement.

However, these concerning events are a good reason to start asking questions and addressing the challenges that are evident in the AML sector.

The Investigation

400 journalists from 88 countries have analyzed more than 2500 leaked FInCEN reports that banks sent to the US authorities between 2000 and 2017. These reports are known as SARs - suspicious activity reports that banks have to send to the Financial Crimes Enforcement Network (FinCEN) for any transaction made in US dollars regardless of where it takes place.

According to BuzzFeed News journalists, who carried out the investigation along with the International Consortium of Investigative Journalists (ICIJ), the thousands of pages of SARs were challenging to read as these documents are dense, complicated and nuanced. Moreover, they are only one piece of the story.

A SAR typically tells you what information the bank has on the customer, potentially some of their contact information such as an address or a telephone number, the branch where the suspicious activity occurred and a narrative explaining why this transaction was flagged. To make sense of this data, the leaked SARs were systematized by John Templeton, a BuzzFeed News data analyst, and compiled into a searchable database.

This allowed investigators to notice patterns and look at the bigger picture, as one SAR on its own might make little to no sense. Yet seeing the patterns means nothing if one doesn’t know the characters of the plot, so BuzzFeed News paired with ICIJ journalists of various backgrounds from all over the world to make sense of the findings and bring the story to light.

The analysis led to the following allegations:

• Millions of dollars were moved from a known Ponzi scheme by HSBC


• A sanctioned Russian individual used Barclays bank to circumvent sanctions


• The husband of a high profile Conservative Party donor was funded by a Russian oligarch


• JP Morgan potentially permitted a crime boss to move millions of dollars though the UK


• Standard Chartered moved money for Arab Bank, which is alleged to have links to terrorism

These findings pose a number of questions:

How and why was this even possible? Have these breaches been intentionally accommodated by financial institutions or is this the result of the AML system’s shortcomings?

Who should be held accountable? And, of course, what can be done to prevent this from happening in the future?

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