Flows of dirty money must be stopped

Updated: Mar 25

Transparency International
Transparency International is calling for banks, regulators, law enforcement and policy makers must take decisive action to stop flows of dirty money. PHOTO: ImageCollab

The FinCEN Files show only the tip of the iceberg when it comes to the global financial system’s vulnerability to abuse by criminals and the corrupt, said Transparency International, a nonprofit organization taking action to combat global corruption, on 21 September. The organization is calling for banks, regulators, law enforcement and policy makers to take decisive action to stop flows of dirty money. Maira Martini, research and policy expert on Corrupt Money Flows at Transparency International, says the FinCEN Files investigations by media organizations in dozens of countries, coordinated by the International Consortium of Investigative Journalists (ICIJ), show how major banks processed payments identified as being at high risk of money laundering and other crimes. Banks that had repeatedly been warned or sanctioned by U.S. regulators and had committed to strengthen anti-money laundering frameworks repeatedly processed transactions from clients they had flagged with Suspicious Activity Reports. “The FinCEN Files are further proof that the global anti-money laundering system is broken. Banks are meant to be the first line of defense against corrupt money flows, but without proper supervision and accountability for banks and their employees, they have little incentive to cut off suspicious clients. It is not enough to submit poor-quality or delayed Suspicious Activity Reports and continue processing payments,” says Martini. However, according to the research and policy expert, the problem is bigger than the FinCEN Files show and Transparency International know that most of the banks involved in major corruption scandals from the past few years didn’t even file SARs or only did so when details had already emerged in the media. She says occasional fines and deferred prosecution agreements have proven ineffective for stopping banks repeating the same offenses again. Martini says supervision of the banking sector must be improved worldwide, not only in the United States. She says to create an effective deterrent against processing high-risks payments, Transparency International calls on all national competent authorities to quickly impose proportional and effective sanctions on banks, their employees and senior managers that breach anti-money laundering obligations. “The FinCEN Files highlight financial institutions in several European Union countries that also processed suspicious transactions. Better mechanisms to deal with cross-border transactions are necessary. At a minimum, national authorities must cooperate to ensure wherever possible, financial intelligence is shared with the country where the suspicious transaction originates,” says the research and policy expert. According to Transparency International, the banks’ inability to identify the true owners of companies involved in transactions should accelerate reforms to end anonymous company ownership. ICIJ says banks lacked information about one or more entities behind suspicious transactions in half of the SARs filed to authorities. “Once again, the tireless work of investigative journalists has helped expose a systemic failing with huge repercussions for ordinary people worldwide. At the same time, governments are attempting to silence those exposing corruption and in nearly all countries, whistleblowers are not adequately protected by law. These latest revelations should be a wake-up call for governments to get serious about holding the powerful to account and protecting those who expose the truth,” says Daniel Eriksson, managing director of Transparency International.

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