FinCEN revelations: regulators must act as “first line of attack”

Tech vendor says responsibility lies within regulators in enforcing anti-money laundering rules

by | October 5, 2020 | bobsguide

“It's not just banks that are guilty of this. It's professional enablers that are letting them do it,” says Martin Cheek, managing director at Smartsearch.

“The banks are the sort of conduit of the cash from one end to the other, but you've got a whole set of professional enablers – including solicitors, accountants, company formation agents, that are helping these individuals and organisations to do it. It’s not right to place the blame on banks specifically. It’s the role of regulators. The first line of attack is always going to be from the regulators across sectors.”

Recent documents released by the UK’s Financial Crimes Enforcement Network (FinCEN) show that a number of leading banks have carried suspicious worldwide transactions, in which trillions of dollars were moved.

The leak, involving banks such as HSBC, JP Morgan, and Standard Chartered, reveals how regulators failed to enforce anti-money laundering rules and allowed payment transactions coming from dirty money of criminals, according to Cheek.

He still believes banks should stop any transactions they deem suspicious.

Today, money laundering is estimated to account for between two to five percent of global GDP, equivalent to $800bn – $2trn, according to the UN.

“It’s a combination of the criminal acts of corrupt politicians, banks, professional enablers – and the regulators need to clamp down on it more. Unless you get rid of the bad actors, it will still go on,” adds Cheek.

Cheek says technology offers a solution to money laundering, but still needs to be backed by regulations and enforcement to be thoroughly tackled.

The Bank Secrecy Act (BSA), including the Patriot Act amendment, is the main actor for anti-money laundering in the US, but only relates to financial institutions. In the UK, the latest approved regulation is the Money Laundering and Terrorist Financing Regulations (MLR), which implement the EU Fifth Money Laundering Directive in line with the Financial Conduct Authority’s (FCA) standards and recommendations.

But international anti-money laundering requirements differ across the globe – an issue which needs to be raised for regulations to be taken seriously, says Cheek.

“From country to country, and even in certain jurisdictions, they [regulations] have not been adopted in a unified way. Some people, like in the UK, take a sort of gold plate to them. Does this eliminate money laundering? No.

“What you have is a mishmash of laws and regulations on a global scale. That in turns allows sophisticated money launderers to use these weaknesses and exploit them. It’s not just about creating regulations; it’s about strongly enforcing them,” he says.

Above all, each rule depends on the different sector money launderers operate in – meaning financial institutions will face a different type of regulation than a law or accountancy firm would.

Cheek says it will be interesting to see what the regulators will now do following these suspicious activity reports.





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