After FinCEN leak, banks want more help from regulators

OpRisk Europe: Suspicious activity reports are going into a “black hole”, banks complain

Banks are asking regulators to share more of the information they glean from suspicious activity reports (SARs), to aid them in the fight against money laundering and other financial crimes.

SARs are filed with regulators and law enforcement agencies whenever unusual transactions are detected. Compliance officers at banks say they receive little feedback on these reports, despite filing thousands every year.

“I think at the moment there is definitely a view that it’s a bit of a black hole, and a bit more transparency from regulators could only be a good thing,” said Richard Snookes, chief compliance officer at Sberbank CIB.

Lester Joseph, a manager in the global financial crimes intelligence group at Wells Fargo, echoed that view: “We file all these reports and very seldom do we hear back.”

Snookes and Lester were speaking at the OpRisk Europe virtual conference on October 8.

Last month saw the leak of more than 2,100 SARs filed with the Financial Crimes Enforcement Network (FinCEN), covering roughly $2 trillion of suspicious transactions between 1999 and 2017. The reports revealed large global banks had processed several illicit payments over that period.

FinCEN is the US Treasury’s anti-money laundering unit. Banks file similar reports on suspicious transactions with other law enforcement agencies and regulators, including the UK’s Financial Conduct Authority and National Crime Agency.

Snookes said this information could be put to better use. “I would like to see some sort of regular kind of updates [on the reports],” he said. “If they’re seeing SARs being reported across all banks and all kind of sectors of the financial community they surely must be able to see certain patterns developing in the retail market or certain patterns developing and new typologies arising.”

The FCA and the US Treasury did not respond to a request for comment in time for publication.

The FinCEN leaks also highlighted the scale of the task facing law enforcement agencies that must analyse millions of SARs to determine whether crimes have been committed.

Joseph said banks may be able to help. “FinCEN in the US, our financial intelligence agency, has about 350 people, and of course we have a lot of law enforcement agents, but Wells Fargo has about 500 very experienced financial investigators who do great work,” he said. “If we can partner more with the government, I think we could really make a big contribution.”

I think at the moment there is definitely a view that it’s a bit of a black hole, and a bit more transparency from regulators could only be a good thing

Richard Snookes, Sberbank CIB

Igor Sumkovski, a senior manager in financial crime compliance advisory at Santander, said banks should also have a bigger role in shaping anti-money laundering rules. “What I would like to see more of is more interaction between regulators and banks. That is really helpful in particular when there is a change in the regulation,” he said. “That is a much better approach, rather than acting post-event.”

A series of articles on the FinCEN leaks published by Buzzfeed News and the International Consortium of Investigative Journalists also linked several suspicious transactions to offshore tax havens, such as the British Virgin Islands.

Joseph said the use of shell companies made it difficult for banks to identify the parties involved in suspicious transactions. He called on governments and regulators to tackle the problem.

“Corporate formation is something that the US has a problem with,” Joseph said. “In the UK, you have the same issue with some of their jurisdictions. So this is a huge problem that is aiding financial crime and money laundering.

“Until governments get serious about that, the banks are just trying to plug the holes but not getting at the real problems,” he added.

Santander’s Sumkovski also suggested banks had been the target of some unfair criticism following the FinCEN leak. “I think certainly there are gaps that are highlighted and the banks will need to work harder to fix the issues that are identified. But equally I think the compliance functions are not getting the deserved credit really for their hard work,” he said.