I used to do this for a living (evaluate flagged transactions and write SARs). The general idea here is partly right and partly wrong.
The part that's right: some of the people banks employ are absolutely willing to make a dollar no matter what it takes, and they will happily look the other way when suspicious activity is pointed out to them. I found this attitude particularly prevalent among some of the salespeople.
The part that's wrong: these are not mostly easy or obvious decisions. Banks don't just know that a transaction is indicative of illegal activity. A regular part of my job was debating with my coworkers about whether we should be concerned by some transactional pattern. More than once I followed bank policy and flagged activity conducted by wealthy people that turned out to be completely legal. The reality is that while some cases are cut and dry, most of them fall into some grey area and require thoughtful judgment.
What makes it even worse is that preventing transactions may not even be the best course of action when suspicious activity is identified. A classic example is Paul Manafort's activity with the Bank of Cyprus. BoC compliance officers questioned Manafort about some of his activity, at which point he immediately stopped transacting through the bank. This is obviously anathema to law enforcement, who would prefer not to alert their targets.
All of this is to say: AML policy in the U.S. is a big mess, and even though it's meaningful work, I'm glad I got out of it. Until there is some kind of rational regime, bank officers are damned if they do and damned if they don't.
Right, and the expected course of action isn't to freeze the customer’s funds
Worst case is to end a banking relationship because the bank doesnt know what to do with them and just give them their money in a check. The transaction will still happen, multiple transactions in fact.
The average case is just making the SAR and spamming the regulator.
Its a dumb regime, like you said.
The US should just get out of the business of spending resources on this. Which it partially seems like the regulator is trying to do :)
The argument of the article is that the journalists involved further investigated the transactions and determined that a lot were shady and that the regulators were failing to do their job ... or the banks were defying the regulators when the regulators were complaining. There was no claim of "every FinCEN proves a dirty deed" - it's explicit in the article.
The article makes a lot of bold claims that assume the truth of various unproven allegations. Journalists - who are paid to come up with dramatic sounding stories - are the exact opposite of the arbiters of truth when it comes to crime. Examples:
"people and companies tied to the massive looting of public funds in Malaysia"
Tied to? Tied by whom?
"more than $2 million for a young energy mogul’s company that has been accused of cheating"
Accused of? Accused by whom?
"amid a swirl of money laundering and corruption allegations spawning from his work with a pro-Russian political party in Ukraine."
A swirl of allegations? Alleged by whom? Additionally the article is filled with deceptive writing.
"In some cases the banks kept moving illicit funds even after U.S. officials warned them they’d face criminal prosecutions if they didn’t stop doing business with mobsters, fraudsters or corrupt regimes."
This sounds like the warnings were about specific mobsters/etc but it's carefully phrased to avoid claiming that. Yes, the USG tells banks to fight crime, everyone who ever opened a bank account knows that, this is not news.
"Suspicious activity reports reflect the concerns of watchdogs within banks and are not necessarily evidence of criminal conduct or other wrongdoing. Though a vast amount, the $2 trillion in suspicious transactions identified within this set of documents is just a drop in a far larger flood of dirty money"
One sentence after admitting that SARS aren't actual findings of criminal activity, they literally say that all those transactions are a part of "a flood of dirty money". They know that's not true! It's kind of sad, really. Journalism has reached the point where my first reaction to investigative journalists writing about leaked files is, "how are these liars going to BS me today?". It's a long way from the heydey of the Snowden leaks.
The “policy take-away” from the article seems to be that governments let it happen. I wonder if anyone on this board understands whether government inaction is due to incompetence, complacency or corruption. I guess like many issues these days it’s a bit of all 3, but I say that on the basis of my priors rather than domain experience.
You also need to consider the possibility that it's in the government's interest to allow a certain amount of otherwise-unlawful activity to occur, and make the perpetrators think it's going unnoticed, to trace a broader pattern/catch a bigger fish.
Have you watched the Netflix Dirty Money episode about this? You might find it interesting. One of the things it claimed about what HSBC was doing was that they were simply failing to even acknowledge the flagged transactions and had a huge backlog of reports that were not only for very suspicious amounts but also transfers to/from entities that were on federal sanctions lists, and the blacklist was stupidly implemented so it could be bypassed by replacing e.g. XYZCO with XYZ-CO or XYZ.CO. Some AGs told them they had to get off their asses and start processing these reports, and they responded by hiring a sweatshop of inexperienced accountants and told them to just go through the backlog and close the reports without investigation.
The show is called Dirty Money, and the episode is "Cartel Bank" from season 1.
Isn't part of this not just the gray area of knowledge, that you don't know if a given pattern of activity is necessarily illegal, but the gray area of law and even more, the gray area of legal and regulatory decisions, that the banker might not know if a given sort of activity would be considered worth prosecuting by given authorities according to their interests and priorities. And that bankers might indeed know that some flagrantly illegal activity might well be entirely ignored by authorities based on said authorities interests and the actors connections.
I find this all hilarious. I had to help my mom with her internet bank. She had to send a selfie and fill in a bunch of paperwork for a savings account with €6000 on it.
Meanwhile these Russians are laundering €6000000000 and I doubt any Russian billionaire was asked to take a picture of themselves.
The part that's right: some of the people banks employ are absolutely willing to make a dollar no matter what it takes, and they will happily look the other way when suspicious activity is pointed out to them. I found this attitude particularly prevalent among some of the salespeople.
The part that's wrong: these are not mostly easy or obvious decisions. Banks don't just know that a transaction is indicative of illegal activity. A regular part of my job was debating with my coworkers about whether we should be concerned by some transactional pattern. More than once I followed bank policy and flagged activity conducted by wealthy people that turned out to be completely legal. The reality is that while some cases are cut and dry, most of them fall into some grey area and require thoughtful judgment.
What makes it even worse is that preventing transactions may not even be the best course of action when suspicious activity is identified. A classic example is Paul Manafort's activity with the Bank of Cyprus. BoC compliance officers questioned Manafort about some of his activity, at which point he immediately stopped transacting through the bank. This is obviously anathema to law enforcement, who would prefer not to alert their targets.
All of this is to say: AML policy in the U.S. is a big mess, and even though it's meaningful work, I'm glad I got out of it. Until there is some kind of rational regime, bank officers are damned if they do and damned if they don't.