The FinCEN Files: A Follow-Up on Potential Money Laundering and Suspicious Activity

Oct 14, 2020 / Author Vernon Litigation Group
Litigation

We posted an article last month about an important development in the news regarding the FinCEN Files, a leak that contained files linking various banks to over $2 trillion in money laundering activities worldwide. Here are some updates to this sudden development.

(Un)surprisingly Quiet

The magnitude of the FinCEN Files leak is quite significant. $2 trillion is no small number, especially if it is potentially tied to money laundering. Some journalists went so far to call this a “bombshell” report, and rightfully so. Although the FinCEN Files include information dating back to 1997, the $2 trillion amount is still a massive amount of money.

Unsurprisingly, the media has been quiet about this story. Some media outlets report the FinCEN Files only to dismiss them as inconsequential while also putting blame on those who leaked the reports.

The U.S. Treasury issued a statement (link) in response to the leak, stating that “the unauthorized disclosure of SARs is a crime that can impact the national security of the United States.” The Treasury also stated that it is “aware” of articles that media outlets released “based on unlawfully disclosed Suspicious Activity Reports [and] other sensitive government documents.”

Suspicious Activity Reports (SARs)

For the handful of journalists and media companies that are discussing the FinCEN Files, suspicious activity reports (SARs) have been the focus of the investigation. SARs are filed with the Financial Crimes Enforcement Network (FinCEN), a department within the U.S. Treasury. These reports are filed by banks to warn FinCEN of potential criminal activity behind certain transactions.

According to Martin Kenney, a well-known asset recovery lawyer specializing in economic crime and fraud, some banks essentially use SARs as a “get out of jail free card.”

“There is no way that FinCEN or any other agency can be expected to review critically and thoroughly this number of alerts,” Kenney states. “The banks know this, and some are using it to their advantage.”

If this is the case, we would assume that banks would file reports and cease all transactions and relationships with these parties, correct? Well, that may not necessarily be the case: the FinCEN Files may prove otherwise.

Although the FinCEN Files are still under detailed review by journalists, Kenney states that “there appear to be instances where banks have identified adverse issues, reported them via a SAR, but continued to conduct business with the individual or entity that raised their suspicion.”

FinCEN Budgetary Concerns

The evident problem in handling these SARs reports is budget concerns. As Kenney stated, it is quite difficult for FinCEN to critically review these files in detail.

FinCEN has an annual budget of approximately $118 million. Although this sounds fairly large, consider the IRS’s annual budget of nearly $11.5 billion. In comparison, FinCEN’s budget is just one percent of the IRS’s budget. Thus, it is certainly overwhelming for FinCEN to handle the hundreds of thousands of reports that are filed with its department each year.

Responses from Banks

Banks that were named in the FinCEN Files issued statements in response to this story. A common theme in each of the statements indicates that the banks are not allowed to discuss the SARs reports, since any disclosure may violate U.S. law.

Although they did not comment on the reports themselves, the banks still indicated that they take steps to fight financial crime and money laundering. Many banks have shown that they began these crime-fighting initiatives years before this leak occurred. Banks are also emphasizing that SARs reports do not necessarily indicate wrongdoing – in fact, they are required by law to file these reports in certain situations.

Nonetheless, this is an interesting development that may garner more attention if FinCEN finds any suspicious activity within the SARs that were recently leaked. If any more stories emerge from this leak, we will keep you updated.

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