FinCEN files were released a year ago, but money laundering remains a challenge



A year ago today, BuzzFeed News and the International Consortium of Investigative Journalists released the FinCEN files, the largest reporting project ever undertaken, which revealed how terrorists, kleptocrats and organized criminals were laundering huge sums of money through many of the world’s largest banks and in full view of the US Treasury Department.

The series, developed over 16 months by a team of more than 400 journalists from 108 media outlets in 88 countries, sparked immediate reverberations. It has brought down the stock prices of several global banks, triggered inquiries and calls for reform in countries as disparate as the UK, Thailand and Belgium, and led EU lawmakers to propose in July an ambitious set of laws including a new authority in charge of combating money laundering and the financing of terrorism.

But what is potentially the biggest reform took place in the United States last December when, in a time of intense political division and after years of delay, Congress passed the 2020 Anti-Money Laundering Act, described at the time as the greatest anti-money laundering law. money laundering reform within a generation. Early in his administration, President Joe Biden followed up by identifying financial corruption as a pressing national security issue. The Treasury Department is developing rules to implement the new law that aim to eliminate the anonymity of shell companies – opaque financial entities popular with criminals and other malicious actors eager to find safety in the US dollar for their money. illicit earnings. In the eyes of many observers, the effectiveness of these rules is essential to the success of the law.

For the whole movement, the whistleblower who triggered the FinCEN investigation is sitting behind bars. Natalie Mayflower Sours Edwards was a senior intelligence analyst at the Financial Crimes Enforcement Network, or FinCEN, the Department of the Treasury’s arm responsible for combating international money laundering. Edwards had tried to alert the agency to his concerns about system faults. She was arrested in October 2018 and charged with conspiring to disclose documents comprising over 2,100 top secret “suspicious activity reports” or SARs, amassed by the agency after being found with a USB drive and phone. laptop indicating that she was sharing the documents with BuzzFeed News reporter Jason Leopold.

Edwards’ attorney, Stephanie Carvlin, told the court that Edwards feared that “if FinCEN is unable to effectively assist law enforcement, terrorist activity may go unnoticed.” She said she tried to contact Congress and identify herself as a whistleblower before addressing the press. In January 2020, she pleaded guilty to one count of conspiracy and faces a maximum sentence of five years in prison. In June 2021, U.S. District Court Judge Gregory Woods sentenced her to six months in prison.

BuzzFeed News editor-in-chief Mark Schoofs credited Edwards with doing “more to bring transparency to the global financial system than almost anyone else in recent memory” and called on President Biden to grant a grace.

The SARS treasury detailed more than $ 2 trillion in suspicious transactions and provided unprecedented insight into the global flight of dirty money seeking refuge, often in the United States. He showed how, amid weak enforcement of weak laws, some of the world’s most notorious criminals manipulated the international banking system to legitimize money from drug trafficking, terrorism, and looting from impoverished countries.

FinCEN files showed that banks often seemed to have no idea how much money they were transferring. He revealed how five global banks, including JPMorgan Chase, HSBC and Deutsche Bank, continued to handle suspicious transactions after paying heavy fines and vowing to clean up their actions. JPMorgan Chase, the largest bank in the United States, has transferred money for individuals and businesses linked to the looting of public funds in Malaysia, Venezuela and Ukraine.

Anonymous shell companies have let a construction mogul drain millions of state agencies in Venezuela, including a poverty alleviation program. A network of shell companies allowed Ukrainian oligarch Ihor Kolomoisky to move fraudulent money from his own country to factories in the United States, many of which he let fall into disrepair and ultimately abandoned, along with their workers. The US State Department finally sanctioned Kolomoisky earlier this year.

The new law targets shell companies, which reveal almost no information about themselves and have no other real purpose than to mask the secret movement of capital around the world.

In Washington, a measure had been in place for years that would require U.S. shell companies to disclose who owned and profited from them. By December, the FinCEN files had given Congress the momentum it needed to finally pass the measure.

The plan was so popular that Republicans joined with Democrats in overriding President Donald Trump’s veto, which he released citing a provision regarding social media companies. The veto waiver was the first under Trump’s presidency.

“Investigation reports have shed light on money laundering, and the sustained public attention has certainly helped to cross the finish line to these provisions,” said Sen. Ron Wyden, a Democrat of the ‘Oregon, after the publication of the FinCEN Files articles a year ago.

Implementation of the mandate has been left to FinCEN, the intelligence division of the Treasury Department that has long been overwhelmed by the amount of dirty money flowing through the US financial system. FinCEN’s main tool for tracking illicit funds is the Suspicious Activity Report, a form that banks fill out whenever they believe a customer may be involved in money laundering, terrorist financing, or criminalization. ‘other financial crimes.

FinCEN received over 2 million reports in a single year – far more than what officials can analyze or, according to many sources, even read.

The FinCEN Files investigation showed that the SAR repository did little to strengthen oversight or prevent future wrongdoing. The new legislation obliges the agency to set up and monitor an additional system that identifies owners of front companies.

The Treasury Department is working to determine who will be covered by the new disclosure rules. The law specifies that it applies to any small business, limited liability company, “or other similar entity” with fewer than 20 employees or less than $ 5 million in annual sales. State-owned companies are already making similar disclosures.

In a statement sent to ICIJ, FinCEN wrote: “Implementation is a top priority for FinCEN, and we are working diligently with our national and international industry partners and law enforcement actors. and regulations to take concrete steps to strengthen US national security. and protect the American financial system and the American people.

FinCEN questions whether other types of businesses, such as partnerships, trusts and other entities, should also be included. Financial reformers fear that getting it wrong will allow criminals to exploit exemptions and hide behind another kind of paper company.

A major industry lobby, the National Federation of Independent Businesses, has called on FinCEN to exclude “sole proprietorships and partnerships” from the new, higher disclosure threshold. Their concern is that small businesses without significant administrative staff could face an unfair administrative burden and risk facing fines.

Inclusion advocates such as the FACT Coalition, a Washington public interest group concerned with financial reform, have pushed for a broader interpretation.

“We seek to include partnerships, sole proprietorships, business trust foundations and trade associations,” said Erica Hanichak, director of government affairs for the FACT Coalition. If these are excluded, supporters say the new law would provide a secrecy loophole.

Anti-corruption advocates say another piece of the legislation, less publicized, could soon pay off for whistleblowers.

The legislation established a new FinCEN whistleblower program that would offer incentives in the form of monetary rewards and protection against retaliation to people who come forward to report financial crimes.

In the world of stock markets and securities, those who report misconduct can earn a share of the financial penalties imposed as a result. Over the past 11 years, approximately 200 whistleblowers have raised over $ 1 billion through this program.

But there hadn’t been a similar process for people reporting corruption or money laundering in banks.

It’s unclear how the new rules would have affected Edwards, a member of the Chickahominy tribe, who lives with her husband and daughter in Virginia. She began serving her six-month prison sentence in West Virginia on September 3.

“You really need to change our perception of government whistleblowers,” said Mary Inman, a lawyer specializing in cases like hers. “The government needs to take a much more enlightened vision. “

Before going to jail, Edwards told BuzzFeed News she believed her decision to share what she knew would force bankers to confront the flood of dirty money that sustains terrorist networks, drug traffickers and others. criminals. “I am absolutely proud of what I have done,” she said, “and I know American lives have been saved.”


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