The “FinCEN Files” leak has presented all of us with an opportunity to change. It informed the public of something we all knew: Anti-money laundering (AML) efforts are failing. Anyone who perceives otherwise is in denial, and that will hinder the implementation of much-needed improvements.
When I examined some of the leaked SARs, I was struck by the lack of suspicion of a crime presented within the narrative and the failure to ask the customer to explain the unusual nature of some transactions. It was evident to me there remains a misunderstanding with “tipping off” a customer or third party regarding the filing of SARs.
In the week since the bombshell report was published by BuzzFeed News, some commentators have suggested the journalists reporting on the leaks do not understand how money laundering investigations work and, consequently, their reporting may have been distorted, inaccurate, and misleading. On their behalf, I concede some of them may not be experienced money laundering investigators, which is why they engaged with and solicited support from experts, including myself, legendary investigator Bob Mazur, and Paul Radu and his colleagues at the Organized Crime & Corruption Reporting Project. We advised the journalists, and they in turn utilized our insight in their assessment of the suspicious activity reports (SARs) they obtained.
But I digress. It’s important we understand with the “FinCEN Files” that the enemy is not a journalist, a regulator, or a banker. The enemy is the money launderer, and this is where we need to focus our thinking and resources. All of this needs to be balanced alongside the rights of our legitimate customers, who equally want to see money launderers deterred, detected, and defeated.
When I examined some of the leaked SARs, I was struck by the lack of suspicion of a crime presented within the narrative and the failure to ask the customer to explain the unusual nature of some transactions. It was evident to me there remains a misunderstanding with “tipping off” a customer or third party regarding the filing of SARs.
This is impacted by timing and sequencing, as well as uncertainty. In the United Kingdom the authorities state, “You should not discuss the fact of making a SAR with anyone if this risks prejudicing an investigation.” While this is not actually a legal obligation, it does represent sound advice. Bankers are not prevented from asking customers questions about unusual transactions, which may not at that time be suspicious. In other countries it may be an offense to tell a third party a SAR has been filed, but this too does not prevent questions about unusual transactions being posed to customers.
If an AML officer makes inquiries with a relationship banker about a customer’s activity, and the relationship banker subsequently tips off his/her customer, it is the relationship banker who commits the offense, not the AML officer.
There are times when, having exhausted all other lines of inquiry, the only person with the answer to an unusual transaction is the customer—be that a legitimate customer or a money launderer. Both should be given an opportunity to provide an explanation, and all being well the legitimate customer will help to ensure any concerns about a transaction evaporate away. When questioning the money launderer, suspicion may crystalize.
Talking to customers, relationship managers, and others is often a logical and important element of an AML investigation. And so, the diverse and opposing points of view articulated by so many AML and financial crime professionals around the “FinCEN Files” should also be welcome. Debate and dialogue are healthy, and this bears testimony to a vibrant and engaged community.
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