US policymakers seize on FinCEN leaks to press for stepped up money-laundering fight

Advocates of legislation to beef up the US fight against money laundering made a fresh push on Monday to get Congress to act, after new revelations that some leading global banks have been processing payments linked to alleged illicit funds.

A broad, bipartisan group of US lawmakers already support the proposed law, which would rework how financial firms keep an eye out for illegal activity. Banks, law enforcement groups and human rights advocates support it as well.

But the legislation has stalled in Congress amid other priorities.

A series of articles called the “FinCEN Files,” launched on Sunday by Buzzfeed News and the International Consortium of Investigative Journalists (ICIJ), detailed how several global banks moved large sums of allegedly illicit funds for decades despite red flags. The series sent bank stocks tumbling on Monday and prompted new calls for legislative reform.

"The Buzzfeed story makes clear we need to strengthen, reform and update our nation's anti-money laundering laws," Senator Sherrod Brown, the top Democrat on the Senate Banking Committee, said in a statement. "This action is long overdue."

Policymakers, regulators and banks have long acknowledged fundamental flaws in the anti-money laundering system, which relies on banks to file suspicious activity reports, or SARs, when they notice something unusual in a transaction. Those SARs are sent to the US Treasury Department's Financial Crimes Enforcement Network, or FinCEN.

However, the rules around what is deemed "suspicious" can be vague, which leads some banks to send too many reports and others to send too few. And the enforcement group is understaffed to handle the millions of SARs that need to be analyzed to determine whether a crime has been committed.

The proposed legislation would make it easier for banks to share information to identify bad actors, let them use technology to help detect suspicious activity more efficiently without breaching privacy laws and require companies to disclose who actually owns them.

The House of Representatives already approved one such bill, another version of which enjoys broad support in the Senate.

Proponents hope the FinCEN Files will spur Congress to pass something before the end of the year.

"This story is a major boost in ensuring that people understand how critical it is that we get to the bottom of who's behind these anonymous shell companies and who's laundering money through our financial system," said Clark Gascoigne, the interim executive director of the Financial Accountability and Corporate Transparency (FACT) Coalition, a liberal tax activist group.

Widespread criticism of anti-money laundering rules first kicked off in 2016, after another set of leaked documents known as the Panama Papers came to light.

Since then, bank regulators have tried to streamline their own systems and penalized banks that were not doing enough to comply with existing rules. Banks have said they spent billions of dollars improving technology and scouring customer lists to remove potential risks.

In recent months, regulators also issued industry guidance about monitoring. For example, a group of regulators told banks in August that they would typically face penalties if they are found to have pervasive issues monitoring money laundering, rather than for isolated or technical errors.

The guidance came after industry complaints that existing rules create a heavy workload and expense without much to show for it. The Bank Policy Institute, which represents larger banks, found that only four per cent of SARs filed in 2017 merited follow-up from law enforcement.

"There has long been a shared view... that the (anti-money laundering) framework needs to be modernized," said Mike Lee, BPI's chief lobbyist.