Banking Giants Laundering Billions Might Turn Against Bitcoin Too
Documents uncovered by an investigation conducted by 110 news organizations appear to show global banking giants moving trillions of dollars for clients allegedly involved in fraud, embezzlement, money laundering, and more, as the banks defend themselves against the allegations. Meanwhile, the crypto community appears to be divided as to whether it spells good news for crypto in general, and bitcoin (BTC) in particular. (Updated at 17:45 UTC: updates in bold.)
The evidence was uncovered by the International Consortium of Investigative Journalists (ICIJ) in a new report. The consortium said that it, together with BuzzFeed News and 108 other media organization, conducted a 16-month, cross-border investigation, and revealed the leaked documents, now known as the FinCenFiles.
The consortium wrote that “secret United States government documents reveal” that global banks “have defied money laundering crackdowns by moving staggering sums of illicit cash for shadowy characters and criminal networks.” The five named banks are JPMorgan, HSBC, Standard Chartered Bank, Deutsche Bank and Bank of New York Mellon.
Furthermore, the leaked documents allegedly “show banks blindly moving cash through their accounts for people they can’t identify, failing to report transactions with all the hallmarks of money laundering until years after the fact, even doing business with clients enmeshed in financial frauds and public corruption scandals.”
These files, the authors said, include more than 2,100 suspicious activity reports (SARs) filed by banks and other financial firms with the United States Department of Treasury’s Financial Crimes Enforcement Network, also known as FinCEN.
“[The] documents identify more than [USD] 2 trillion in transactions between 1999 and 2017 that were flagged by financial institutions’ internal compliance officers as possible money laundering or other criminal activity — including [USD] 514 billion at JPMorgan and [USD] 1.3 trillion at Deutsche Bank. […] The FinCEN Files represent less than 0.02% of the more than 12 million suspicious activity reports that financial institutions filed with FinCEN between 2011 and 2017.”
ICIJ added that United States agencies responsible for enforcing money-laundering laws rarely prosecute megabanks that break the law, “and the actions authorities do take barely ripple the flood of plundered money that washes through the international financial system.”
Per the authors, the data shows that Deutsche Bank is leading by some distance, with JPMorgan in second place.
“Mobsters pushed billions through Deutsche Bank in one of the biggest dirty money scams ever,” tweeted BuzzFeed News, adding that “small businesses were crushed” in the process.
The news outlet further claimed that the bank’s executives “had direct knowledge for years of serious failings that left the bank vulnerable to money launderers.” After a USD 10 billion mirror trading scandal was exposed, “Deutsche Bank blamed it on a few middle-level staffers in its Moscow office, paid a fine, and got back to business,” reported BuzzFeed News.
Crypto as a systemic threat
News of the traditional banking system’s alleged wrongdoings came as little surprise to the crypto community.
And the irony of the situation was not lost on many commentators: While regulators ramp up the pressure on the crypto industry, particularly in the field of anti-money laundering (AML) measures, the banking sector appears to be running roughshod over the very same AML rules.
Commenting on a report on HSBC’s drop to a 25-year low today in the stock market, the CEO of crypto exchange Binance, Changpeng Zhao, tweeted that it “might be a good time for their treasury to buy bitcoin?”
However, Anndy Lian, investor and blockchain adviser, didn’t agree that this was a good idea, writing: “On the contrary, I hope HSBC to stay away from bitcoin. Early stages mess the soup.”
Others, like the Chief Legal Officer of crypto exchange Kraken, Marco Santori, also claimed that this will not help Bitcoin’s cause at all.
“If you think this is good for bitcoin, man you are going to be so disappointed,” he said. “I wonder if this will compel FinCEN to publish more information about the efficacy of its enforcement activity. It would serve to quell many complaints to the tune of “Why do we send all this info to FinCEN – what good has it done?”
Others, like GetLevvel CEO Chris Hart, also chimed in saying that there is a risk that “the answer to a perception of poor enforcement is more enforcement, and ‘more’ isn’t limited to fiat-based transactions.”
Bitcoin educator, author, and entrepreneur Andreas Antonopoulos also stressed that this leak will be used against cryptocurrencies. According to him, the correct analysis of this news is that AML/CTF (counter terrorism financing) and KYC (know your customer) don’t work and the report will be used to increase the use of controls and surveillance.
“That makes crypto-currency a systemic threat, not to the economic nature of national money, but to the control and surveillance system of geopolitical money. Math money doesn’t play politics, which makes it automatically “rogue” money,” he said, estimating that “the war on cash and the war on “illicit” money becomes an all out war on the only money that still works.”
According to him, “the solution is to stop trying to use money (a tool) to fight crime (human nature).”
“But if you think the hypocrites will back down and adopt sensible systems and laws that enable human trade and economic inclusion, you are wrong,” Antonopoulos said.
“BNY Mellon takes its role in protecting the integrity of the global financial system seriously, including filing Suspicious Activity Reports (SARs),” told Cryptonews.com Associate Director for Corporate Communications Sorrel Beynon, adding that they “fully comply with all applicable laws and regulations, and assist authorities in the important work they do.” The bank cannot by law, they claim, “comment on any alleged SAR we may have filed or that may have been illegally disclosed by third parties to the media.”
Deutsche Bank’s Head of UK Media Relations, Charlie Olivier, told Cryptonews.com that the fight against financial crime, money laundering and capital flight has been a priority for both investigating authorities and financial institutions, the latter of which, Deutsche Bank included, have invested “billions of dollars” to more support authorities in this effort. “Naturally, this leads to increased detection levels.”
Olivier stated that “the ICIJ has reported on a number of historic issues,” claiming that “those relating to Deutsche Bank are well known to our regulators.”
“The issues have already been investigated and led to regulatory resolutions in which the bank’s cooperation and remediation was publicly recognized. Where necessary and appropriate, consequence management was applied. To the extent that information referenced by the ICIJ is derived from SARs, it should be noted that this is information that is pro-actively identified and submitted by banks to governments pursuant to the law. SARs are alerts of potential issues, not proven facts,” he said.
Per the statement provided by Standard Chartered Group Media Relations Director, Josephine Wong, to Cryptonews.com, SARs are filed by the banks “when circumstances warrant and that means our screening and monitoring systems are working as intended.” A SAR filing does not mean there has been criminal activity, but that the bank has identified “something suspicious or irregular in a transaction that meets the filing requirements in the local market,” which is then reported to law enforcement “so they can investigate and, if they see fit, take further action.”
“The reality is that there will always be attempts to launder money and evade sanctions; the responsibility of banks is to build effective screening and monitoring programs to protect the global financial system,” said Wong, adding that in 2019 Standard Chartered “monitored more than 1.2 billion transactions for potential suspicious activity and screened more than 157 million for sanctions compliance.”
JPMorgan declined to comment. We contacted HSBC as well, and will update should they reply.
Anndy Lian is an inter-governmental blockchain advisor with more than 15 years of experience in Asia. He has provided advisory across a variety of industries for local, international and public listed companies.