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Leaked documents suggest banking safeguards are weak

A report shows banks failed to prevent thousands of suspicious transactions

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Photo (c) conejota - Getty Images
Several international banks are in the hot seat following the publication of documents showing that terrorists, drug smugglers, and other criminal elements were able to move massive amounts of money through the institutions, despite banks’ own internal warnings.

Critics of the banking industry seized on the report, saying it shows the need for reform of a system they charge has become less responsive to the needs of consumers and legitimate bank customers.

BuzzFeed said it obtained thousands of “suspicious activity reports” (SAR) filed with U.S. government agencies that describe financial transactions bank employees considered suspicious but were processed anyway. BuzzFeed said it shared the information with about 88 publications around the world.

“These documents, compiled by banks, shared with the government, but kept from public view, expose the hollowness of banking safeguards, and the ease with which criminals have exploited them,” BuzzFeed said in its report.

“Profits from deadly drug wars, fortunes embezzled from developing countries, and hard-earned savings stolen in a Ponzi scheme were all allowed to flow into and out of these financial institutions, despite warnings from the banks’ own employees.”

$2 trillion in suspicious transactions

The International Consortium of Investigative Journalists (ICIJ), which worked on the project with BuzzFeed, said the files show more than $2 trillion in financial transactions were flagged in the SARs between 1999 and 2017. While the documents are not proof of wrongdoing, the ICIJ says the leaked documents are only a tiny portion of the reports filed with the U.S. government.

Among the international banks mentioned in the report are HSBC Holdings, JPMorgan Chase, and Bank of New York Mellon. In statements to the media, the banks said they had already instituted reforms and otherwise strengthened their efforts to combat money laundering.

“The findings once again emphasize the need to pursue intelligence-led changes for financial crime risk management - driven by meaningful improvements to public-private sector cooperation and cross-border information sharing, coupled with the use of technology - to enhance the global anti-financial crime framework,” said Tim Adams, CEO of the Institute of International Finance (IIF).

“I hope these findings spur urgent action from policymakers to enact needed reforms," he added.

Adams says the impact of financial crimes, such as money laundering, are felt well beyond the financial sector. He contends it poses “grave threats” to all of society.

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