A cache of leaked documents suggests increased scrutiny on suspect transactions at banks does little to stem the flow of trillions of dollars linked to suspicious activity. Shares of the biggest global lenders fell Monday.
A new investigation by the International Consortium of Investigative Journalists says JPMorgan Chase & Co., Deutsche Bank AG and HSBC Holdings Plc were among the global banks who “kept profiting from powerful and dangerous players” in the past two decades even after the U.S. imposed penalties on these financial institutions.
The documents detailed more than $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, the report said. Almost 90 financial institutions appear in the roughly 2,100 documents obtained, a fraction of the 2 million reports filed annually.
Deutsche Bank dropped as much as 8.6% in Frankfurt, the most since April, while HSBC earlier slumped in Hong Kong trading to its lowest share price in a quarter of a century. JPMorgan shares dropped 3.1% at 9:46 a.m. in New York, as the S&P 500 Financials index fell 2.3%.
Banks moved money for people or entities they couldn’t identify, and in many cases failed to file the required suspicious activity reports until years afterward, according to the investigation released over the weekend. The report, based on leaked documents obtained by BuzzFeed News and shared with the consortium, said that in some cases the banks kept moving illicit funds after receiving warnings from U.S. officials.
The top two banks are Deutsche Bank, which disclosed $1.3 trillion of suspicious money in the files, and JPMorgan, which disclosed $514 billion, the analysis found. Other lenders include HSBC, Standard Chartered Plc and Bank of New York Mellon Corp., it said.
“They need to do a better job of shutting down these accounts once they see repeated reasons for filing suspicious activity reports,” Tom Cardamone, managing director of Global Financial Integrity, a Washington-based organization tracking illegal money flows worldwide, said in a telephone interview. There are “clients so bad that numerous SARs are being filed about them, but no one ever does anything about it.”
The documents revealed Sunday shed light on a faulty system where banks complain about reports that get no follow-up from authorities, while critics say lenders are checking off boxes without taking meaningful steps to stop financial crime. It all risks another black eye for major international banks that paid a total of $20 billion from 2012 through 2015 for having lax controls against money laundering, helping clients evade taxes or violate U.S. sanctions.