A report from BuzzFeed alleging that several of the most prominent banks in the world have not been doing enough to prevent money laundering sent shares of bank stocks tumbling Monday morning.
The list of banks named in the report include JPMorgan Chase (NYSE: JPM), HSBC (NYSE: HSBC), Standard Chartered (OTCMKTS: SCBFY), Deutsche Bank (NYSE: DB), and Bank of New York Mellon (NYSE: BK), among others.
The report centers around a trove of suspicious activity reports (SARs) obtained by BuzzFeed and then shared with other investigative journalists. The documents show how money flowed through these banks to fund Ponzi schemes, terrorist organizations, and criminals.
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Banks must file SARs when they notice some type of suspicious activity in a customer’s account that may be trying to mask illegal activity. The goal is to prevent customers from participating in money laundering, tax evasion, insider trading, fraud, or the funding of a terrorist organization, among other illegal activities.
SARs must be filed on all transactions over $10,000 and sent to the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department. There were more than 2 million SARs filed in 2019, according to BuzzFeed.
While obtaining the normally private SARs sheds new light on the issue, banks have come under pressure for not doing enough to enforce anti-money laundering and Bank Secrecy Act laws established in the past.
JPMorgan never filed a SAR on Bernie Madoff, and Deutsche Bank has been reprimanded by the Federal Reserve and other regulators several times in the last few years for its inability to improve its internal anti-money laundering controls.
Ultimately, the report suggested that SARs may not be an effective tool for rooting out money laundering because banks have previously filed numerous SARs on customers and continued to do business with them.
The report also suggested the easiest way to correct some of these issues is to arrest the executives responsible for the violations, a common call during the Great Recession.
The BuzzFeed report comes as the banking industry has largely been improving its reputation during the coronavirus pandemic and ensuing recession.
Banks have not been at the root of what led to this recession like they were during the Great Recession in 2008. They have also seen deposits surge in recent months and helped many small businesses keep their doors open through their role in the Paycheck Protection Program.
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