Global bank­ing sys­tem termed a net­work of crim­i­nal­ity


Doc­u­ments from the US Trea­sury's Fi­nan­cial Crimes En­force­ment Net­work, known as FinCEN, ob­tained by Buz­zFeed News and in­ves­ti­gated by the In­ter­na­tional Con­sor­tium of In­ves­tiga­tive Jour­nal­ists, showed that be­tween 1999 and 2017 more than $2 tril­lion in trans­ac­tions were flagged as in­volv­ing pos­si­ble money laun­der­ing or other crim­i­nal ac­tiv­i­ties.

The great 19th cen­tury French writer Honoré de Balzac once noted that be­hind ev­ery great fortune there is a crime. In the 21st cen­tury, one would have to say that be­hind the great for­tunes of the world's ma­jor banks there is a net­work of crim­i­nal­ity. This re­al­ity is doc­u­mented in the rev­e­la­tions pub­lished over the week­end con­cern­ing a small por­tion of the in­ter­na­tional op­er­a­tions of the world's ma­jor banks.

But as the in­ves­ti­ga­tion re­vealed, the $2 tril­lion worth of sus­pi­cious trans­ac­tions was "just a drop in a far larger flood of dirty money gush­ing through banks around the world." The files ex­am­ined in the in­ves­ti­ga­tion "rep­re­sent less than 0.02 per­cent of the more than 12 mil­lion sus­pi­cious ac­tiv­ity re­ports that fi­nan­cial in­sti­tu­tions filed with FinCEN be­tween 2011 and 2017."

The United Na­tions Of­fice on Drugs and Crime es­ti­mates that $2.4 tril­lion in il­licit money is laun­dered through the global bank­ing sys­tem each year, equiv­a­lent to 2.7 per­cent of global out­put, but only 1 per­cent of the il­le­gal traf­fic is de­tected by the au­thor­i­ties. The banks in­volved are some of the big­gest names in the world, in­clud­ing JPMor­gan, HSBC, Stan­dard Char­ter Bank and Bank of New York Mel­lon. In some cases, they con­tin­ued to profit from the dirty money flow even af­ter be­ing pre­vi­ously fined.

Un­der ex­ist­ing laws, banks are re­quired to file sus­pi­cious ac­tiv­ity re­ports (SARs) that point to po­ten­tial crim­i­nal ac­tiv­i­ties. But any con­cep­tion that this is a method of crime pre­ven­tion would be com­pletely mis­taken. In fact, it is a means of crime fa­cil­i­ta­tion. As Buz­zFeed News noted: "Laws that were meant to stop fi­nan­cial crime have in­stead al­lowed it to flour­ish. So long as a bank files a no­tice that it may be fa­cil­i­tat­ing crim­i­nal ac­tiv­ity, it all but im­mu­nizes it­self and its ex­ec­u­tives from crim­i­nal pros­e­cu­tion. The sus­pi­cious ac­tiv­ity alert ef­fec­tively gives them a free pass to keep mov­ing the money and col­lect­ing the fees."

In the rare cases where au­thor­i­ties do de­cide to take ac­tion, it in­volves mak­ing a deal in which the bank agrees to pay a fine. But the fine is not im­posed on the ex­ec­u­tives in­volved. It is paid for by the bank and treated as a mi­nor op­er­at­ing cost, while the bank con­tin­ues to ob­tain fees and prof­its from the dirty money trans­ac­tions.

It would like­wise be a grave mis­take to con­clude that the crim­i­nal money op­er­a­tions are some­how sep­a­rate from the reg­u­lar ac­tiv­i­ties of the global fi­nan­cial and bank­ing sys­tem. In fact, they are an in­te­gral com­po­nent of them. There is no Chi­nese wall sep­a­rat­ing so-called le­git­i­mate ac­tiv­i­ties from il­le­git­i­mate ones.

In 2011, the US Se­nate re­port on the 2008 fi­nan­cial cri­sis re­vealed that ma­jor banks such as Gold­man Sachs and Deutsche Bank were en­gaged in what amounted to out­right crim­i­nal ac­tiv­ity in the lead-up to the cri­sis. This in­cluded sell­ing fi­nan­cial prod­ucts they knew were go­ing to fail, and then mak­ing deals to profit from the fail­ure of the same fi­nan­cial prod­ucts.

No one was even pros­e­cuted, let alone jailed, and in an ex­tra­or­di­nary ad­mis­sion to the Se­nate Ju­di­ciary Com­mit­tee in March 2013, Pres­i­dent Obama's at­tor­ney gen­eral, Eric Holder, re­vealed why, essen­tially ac­knowl­edg­ing that crim­i­nal­ity was not some ex­tra­ne­ous ac­tiv­ity, but was deeply em­bed­ded in the very foun­da­tions of the US and global fi­nan­cial sys­tem.

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