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FinCEN - time for a ban on transactions with anonymous companies

Thursday, September 24, 2020

Fair Fin, a leading partner in Fair Finance Guide Belgium, call for greater oversight and regulation in the wake of the FinCEN leaks.

The FinCEN scandal shows that thousands of billions of criminal money pass undisturbed through banks, also in Belgium. Banks are given too much free rein in tackling money laundering practices. If you compare FFG Belgium's Bankwijzer evaluation of corruption with the new information, you will see that banks themselves do not stop shady money flows. There is a need for mandatory regulations and a ban on transactions with anonymous companies.

More than 400 investigative journalists around the world investigated leaked reports from the US anti-money laundering unit FinCEN for 16 months. It concerns more than 2,100 reports of suspicious money flows that banks made to the American anti-money laundering unit FinCEN. The amounts defy all imagination: totaling an astronomical sum of more than 2 trillion or more than 2,000 billion dollars between 2011 and 2017. These documents are among the deepest secrets of the international banking system. These 2,100 leaked reports are just the tip of the iceberg, as FinCEN received more than 12 million reports over this period. 

Banks do not stop criminal money.

Anyone who wants to use money from criminal practices must know how to launder it. “Dirty” money is deposited into the account with a respected bank via detours, without being linked to its criminal origin. Often the owners of the money use mailbox companies or other constructions to hide their identity. Most transactions mainly go through the British Virgin Islands, but also Switzerland, Cyprus, the United Arab Emirates and Hong Kong. 

Banks are supposed to act against this. This can be done by checking who the customers are and blocking transactions if it is not possible to find out who is carrying out a transaction.

The British bank HSBC allowed fraudsters to move millions of dollars in stolen money around the world, even after learning from US investigators that the scheme was a scam. US bank JP Morgan allowed a company to move more than $ 1 billion through a London account without knowing who owned it. The bank later found that the company may have been owned by someone on the FBI's 10 Most Wanted list. 

The four major banks in Belgium, BNP Paribas, ING, KBC and Belfius, are also involved in the scandal. Of the 2,100 reports, 365 are in which Belgium is mentioned. It concerns both small and large amounts. One report concerns a transaction of no less than half a billion dollars, from a Belgian bank account. It was not clear who was behind it and where the money came from.

"Why do banks allow transactions if they don't know who is behind it? If they refuse transactions with anonymous companies, much of these money laundering operations cannot take place." Frank Vanaerschot

Belgium's Bankwijzer has been monitoring banks' policies on many social issues for years, including corruption and tax evasion. They also check whether banks know their customers. Since the evaluation made in 2017, these four banks say in their policies that they know the identities of their customers and the beneficial owners of transactions. The 2019 annual reports show that BNP Paribas and ING have offices in Switzerland, the United Arab Emirates and Hong Kong. BNP Paribas also has a branch in the Virgin Islands that the bank is in the process of liquidating. 

The leaked documents show that banks often see that there is a problem, but only pass on suspicious transactions after they have taken place, the money has long been gone, or only when the customer is discredited.

Frank Vanaerschot , researcher at FairFin: “The FinCEN file consists of suspicious transactions that the banks themselves have reported. Why do banks allow transactions if they don't know who is behind it? If they refuse transactions with anonymous companies, a large part of these money laundering operations cannot take place. ”

The government does not stop the banks.

The four major banks take over the majority of the Belgian banking sector. Moreover, the Belgian state is the largest or the only shareholder of BNP Paribas and Belfius. 

Frank Vanaerschot says“We cannot leave this in the hands of the management of the banks. If we want to stop the criminal money supply, we must clearly establish that transactions with anonymous companies are prohibited. Moreover, the government should use its shareholding in BNP Paribas and Belfius to exercise more public control. ” 

This is a translation of an article featured by Fair Fin, a leading partner in Fair Finance Guide Belgium.

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