On Sep. 20, 2020, an investigation by BuzzFeed News revealed that global financial and banking institutions knowingly moved around dirty money for bad actors. Those illicit transactions that amounted to about $2 trillion took place between 1999 and 2017.
As per leaked from the U.S. Financial Crimes Enforcement Network (FinCEN), several top banks failed to instantly report more than 2,100 suspicious activity reports (SARs). The bulk of the dirty money (approximately $1.3 trillion) moved through Deutsche Bank.
Other prominent banking institutions, such as JPMorgan, Standard Chartered Bank, and HSBC, also kept processing suspicious transactions from criminal players.
Financial firms are required by law to notify regulators when they identify activities that may be suspicious, such as money laundering.
Unfortunately, the leaked files show that these banks continued to profit from dirty money and only reported the transactions years after the fact.
This disturbing trend persisted even after U.S. authorities fined some of these megabanks for their earlier reluctance to curtail illicit money flows.
Cut Cryptocurrencies Some Slack
Megabanks, which are supposed to halt financial crimes, have instead allowed illicit transactions to thrive. This shocking disclosure highlights the frail nature of banking safeguards and the ease with which bad actors have exploited them.
Ironically, the staggering amounts of dirty money well-regulated banks handle dwarfs the size of reportedly illicit transactions perpetuated through crypto.
A Jan. 2020 report by Chainalysis showed that over $1 trillion worth of crypto transactions took place in 2019. However, a mere 1.1% of those transactions were linked to illicit activity.
Although there is some criminal undergrowth within the crypto space, it is ridiculous to blame the nascent industry for the bulk of illegalities in the world.
The traditional banks’ tendency to continue handling dirty money worsens the misconception that crypto is the main tool for illegal transactions.
The International Consortium of Investigative Journalists (ICIJ) weighed in on the FinCEN exposé. The group heavily criticized regulators for their role in promoting financial crime:
“U.S. agencies responsible for enforcing money laundering laws rarely prosecute megabanks that break the law, and the actions authorities do take barely ripple the flood of plundered money that washes through the international financial system,” the ICIJ report stated.
Could Crypto Be the Victim of Misconception?
Since digital assets came to the public purview, many regulators have expressed concern about their use in the criminal world.
Many critics of Bitcoin even propose a total ban of the asset, citing its anonymity as the main reason criminals prefer to transact with it.
However, in light of the recently leaked FinCEN documents, it is clear that fiat should take even more responsibility for exploding criminality globally.
Moreover, it seems that the crypto sector has done more in the recent past to curtail crime by enforcing stringent Anti Money laundering (AML) procedures.
On the other hand, traditional banks continue to knowingly move around the money of oligarchs, terrorists, and other criminals, with few consequences from financial watchdogs.