FinCEN Files Puts Focus on Banks, Obscures Larger Problem: Sources

By Daniel Bethencourt

In more than a dozen articles this week, journalists with BuzzFeed News and other outlets argued that the FinCEN Files, a leaked cache of 2,100 suspicious activity reports, shows the eagerness of banks to do business with criminals while only technically meeting regulatory requirements.

But three federal investigators and three compliance officers told ACAMS that they have come to a different conclusion after reviewing the allegations. Namely, that banks investigated and reported a wide range of potentially illicit activity that U.S. law enforcement and the Financial Crimes Enforcement Network never properly pursued.

Don Semesky, former chief of financial operations for the Drug Enforcement Administration, estimated that federal investigators have become so overwhelmed with financial intelligence and potential leads that they only managed to review a very small percentage of the reports.

“To say that banks found the transactions suspicious but allowed them to go through anyway is very ill-informed and knee-jerk reporting,” Semeksy wrote in an email. “These articles point out the naivete of just about everyone with the enormity and velocity of the financial system, the enormity of the money laundering problem … the near-impossible job the banks have.”

Sources interviewed by said they anticipated that banks would file a glut of defensively minded SARs in response to the FinCEN Files and eventually sever ties with certain high-risk customers to avoid the appearance of enabling criminal conduct.

But federal investigators appear to already have far more SARs than they can review. A survey of 19 financial institutions by the Clearing House, a New York-based industry group, found that most received feedback from law enforcement on only 5 percent of the SARs they submitted.

In light of that deficit, the FinCEN Files represents yet another “deflection to the big bad bank, and there’s a total disregard of the fact that the government had all this information,” a compliance officer for an Asian lender’s branch in New York said.

“They had all these filings, and what did they do about it?” the compliance officer said on condition of anonymity. “Everyone in the industry is asking: Why has FinCEN sat on this?”

The Government Accountability Office’s survey of more than 5,200 employees at six agencies—the FBI, Drug Enforcement Administration, Homeland Security Investigations, Secret Service, IRS Criminal Investigation and the Justice Department—offers a snapshot of how FinCEN’s data circulates.

“Law enforcement agencies with direct access conducted searches for approximately 133,000 cases in 2018—a 31 percent increase from approximately 102,000 cases in 2014,” the GAO found.

Half of the 5,200 employees found SARs to be “almost always” or “frequently” helpful but usage varied widely from agency to agency. Nearly all IRS CI agents used SARs to open or advance investigations, but that figure dropped to 58 percent among FBI staff and 54 percent at HSI.

The vast majority of U.S. fraud, money-laundering and drug-trafficking cases relied on SARs in some fashion from 2015 to 2018, the period covered by the GAO’s survey, but only 27 percent of human-trafficking cases, 14 percent of weapons-proliferation cases, and roughly one-third of terrorism, tax crimes and corruption investigations did.

Grant Rabenn, a federal prosecutor in Sacramento, said the FinCEN Files show that rather than faulting FinCEN, which acts as a regulator as well as a financial intelligence unit, the U.S. government should allocate more resources to interagency investigations of suspected money laundering.

We need to continue to build a coherent national strategy across all of the major law enforcement agencies because it’s hard to expect a random [Justice Department] district to pull all that together,” said Rabenn, who previously supervised investigations into money laundering at the Central California Financial Crimes Task Force, which included IRS CI and HSI agents.

FinCEN’s own view of financial crime and anti-money laundering may already be in flux.

On Sept. 16, the bureau pitched a proposal that would confer a new expectation that banks build “effective and reasonably designed” AML programs to assist law enforcement, rather than programs primarily intended to achieve technical compliance with federal standards.

As part of the approach, FinCEN would outline a series of national priorities against financial crime every two years, if not more often, and expect financial institutions to conduct their risk assessments and gear their AML programs towards meeting those goals.

The proposal did not specify whether those priorities would be accompanied by the type of broader analysis of SARs and their usefulness that FinCEN previously provided in “The SAR Activity Review,” a roughly semi-annual report that the bureau last published in May 2013.

As a result of the FinCEN leak, federal regulators may increase the frequency and size of enforcement actions to demonstrate their resolve, according to Luis Cifuentes, New York-based chief compliance officer for Brazilian lender Banco Bradesco.

“It’s embarrassing,” Cifuentes said in reference to the FinCEN Files. “They are putting a lot of pressure on the banks to keep filing SARs but they are not using the information.”

FinCEN emphasized in a Sept. 1 statement in advance of the articles that disclosure of SARs is illegal and that the bureau had referred the leaks to federal prosecutors.

Contact Daniel Bethencourt at

Topics : Anti-money laundering , Counterterrorist Financing , Know Your Customer
Source: U.S.: FinCEN , Nonprofits/Private Organizations
Document Date: September 25, 2020