‘FinCEN Files’ Highlight Ongoing Risks of SAR Filing Practices

By Daniel Bethencourt

A leak of more than 2,100 suspicious activity reports from the U.S. Treasury Department’s Financial Crimes Enforcement Network could prompt more “defensive filings” to law enforcement as banks and others review their compliance practices, sources told ACAMS

In a series of stories called “The FinCEN Files” first published Sunday, BuzzFeed and The International Consortium of Investigative Journalists revealed that they had obtained, reviewed and analyzed a trove of suspicious activity reports, or SARs, which together flagged more than $2 trillion in payments over a nearly 20-year period ending in 2017.

BuzzFeed and the ICIJ shared the data with more than 100 news outlets in 88 countries and said that additional stories based on the SARs would emerge in the coming days. The ICIJ also created a database for users to search a selection of SARs that together cover more than 18,000 transactions totaling $35 billion.

Many of the records were compiled in response to U.S. congressional requests following investigations into Russian interference in the 2016 U.S. presidential election. Deutsche Bank ranks as the most frequent filer in the SAR records obtained by BuzzFeed, with flagged payments totaling $1.3 trillion, followed by JPMorgan Chase with $514 million.

Of the 2,100 SARs obtained by BuzzFeed, 130 flag batches of transactions that each total more than $1 billion. The largest SAR in terms of value was filed by JPMorgan Chase filed in August 2014 on an unspecified precious-metals firm that transferred $335 billion.

The records showed that JPMorgan Chase allowed more than $6.9 million in payments to Paul Manafort, President Donald Trump’s former campaign chairman, for at least 14 months following his resignation from the campaign in August 2016, the ICIJ found. The decision followed news reports about Manafort’s work for a Russia-backed Ukrainian leader.

They also showed that from September 2013 to September 2014, Standard Chartered processed 2,055 transactions collectively worth more than $24 million for Arab Bank, a Jordanian lender accused in a U.S. lawsuit of enabling payments that led to a 2003 bus bombing in Jerusalem, among other terror attacks.

Standard Chartered continued its relationship with Arab Bank into February 2016, even after a federal jury ruled against the lender, processing another $12 million in payments that referred to “charities” or “gifts” while flagging those transfers as potential terror finance risks, according to the ICIJ.

Other SARs showed that JP Morgan Chase transferred at least $1.2 billion for Malaysian financier Jho Low between 2013 and 2016, the years in which he allegedly siphoned money from the sovereign wealth fund 1MDB.

BuzzFeed and the ICIJ cited the FinCEN Files to argue that banks knowingly continue to process criminal payments, and file SARs partly in an effort to absolve themselves of potential liability—a claim that obscures the purpose and the value of the intelligence database, according to a compliance officer at a midsized bank on the East Coast.

Hundreds of accounts at the East Coast lender are currently open due to requests from law enforcement, and those efforts are not reflected in the articles, the person said on condition of anonymity. The leak could spur some banks to be more careful about what they include in suspicious activity reports, the compliance officer added.

“We will continue to file SARs and continue to proactively reach out to law enforcement,” the person said. “For every article like this, there are literally thousands of instances where our SARs result in criminal convictions or civil asset seizures. Unfortunately, because of federal law, we can’t market or celebrate those victories publicly.”

The FinCEN Files were published four days after the bureau announced plans to determine whether financial institutions have an “effective and reasonably designed” anti-money laundering program that meaningfully helps law enforcement, rather than one focused more on technical compliance.

As part of the new approach, FinCEN would publish its own guidance on national financial-crime threats every two years and task financial institutions with incorporating those priorities into their compliance programs.

The timing of FinCEN’s proposed rule should be viewed as a response to any issues raised by Sunday’s leak, even though the proposals themselves had been in the works for several months, according to Jeff Ross, a former Treasury official and former AML compliance officer for Green Dot, a California-based prepaid-card provider.

“The final rulemaking might be heading off suggestions that the whole system is flawed,” Ross said. “I don’t think the system is broken—I think from day one it was understood there was a tradeoff [to filing], and that law enforcement would not be able to look at every single SAR.”

The leak will also likely lead to some banks filing more SARs in a defensive manner and de-risking themselves from high-risk jurisdictions and politically exposed persons to avoid being associated with similar media coverage, according to Ross.

FinCEN responded to the leak weeks beforehand in a Sept. 1 statement, emphasizing potential criminal consequences for disclosing SARs and warning that the bureau had referred the issue to federal prosecutors.

The leak highlights that many banks should be proactively closing accounts more often, but many prefer to file multiple SARs without taking action towards the customer, according to a New York-based compliance officer for an Asian lender.

“My bank actually files defensive SARs,” the person said. “Some [are] maybe too defensive … BSA [Bank Secrecy Act] investigators see things and we file SARs showing that some relationships are obviously risky, but banks decide to keep the accounts. … I’ve seen banks file 20 SARs on a client and not close the account.”

Contact Daniel Bethencourt at

Topics : Anti-money laundering , Counterterrorist Financing , Know Your Customer
Source: U.S.: FinCEN , Nonprofits/Private Organizations
Document Date: September 21, 2020