Breaking News
Get 40% Off 0
👀 Reveal Warren Buffett's stock picks that are beating the S&P 500 by +174.3% Get 40% Off

Global banks seek to contain damage over $2 trillion of suspicious transfers

Published Sep 20, 2020 10:56PM ET Updated Sep 21, 2020 12:56PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: HSBC and Standard Chartered Bank headquarters are seen at the financial Central district in Hong Kong 2/2
 
JPM
-0.39%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
HSBA
-0.28%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
BARC
+3.25%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DBKGn
+1.65%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CBKG
+1.54%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
STAN
+3.48%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Alun John, Sumeet Chatterjee and Lawrence White

HONG KONG/LONDON (Reuters) - Global banks faced a fresh scandal about dirty money on Monday as they sought to limit the fallout from a cache of leaked documents showing they transferred more than $2 trillion in suspect funds over nearly two decades.

Britain-based HSBC Holdings Plc (L:HSBA), Standard Chartered Plc (L:STAN) and Barclays Plc (L:BARC), Germany's Deutsche Bank AG (DE:DBKGn) and Commerzbank AG (DE:CBKG), and U.S.-headquartered JPMorgan Chase & Co (N:JPM) and Bank of New York Mellon Corp (N:BK) were among the lenders named in the report by the International Consortium of Investigative Journalists and based on leaked documents obtained by BuzzFeed News.

The report was based on 2,100 leaked suspicious activity reports (SARs), covering transactions between 1999 and 2017, filed by banks and other financial firms with the U.S. Department of Treasury's Financial Crimes Enforcement Network (FinCen). Banks are required to file an SAR whenever handling funds that cause grounds for suspicion of criminal activity.

While some banks said many of the transactions happened a long time ago, and they had since put robust checks in place, the reports revealed broader problems with the monitoring system at the heart of global policing of money laundering and other criminal activity.

The reports drew calls from some industry groups and activists for reforms. Investors worried about the potential fallout for global banks, many of which have faced hefty fines in the past for lapses in controls and spent billions of dollars to bolster compliance.

"It confirms what we already knew: that there are huge amounts of SARs being filed with relatively low numbers of cases brought through to prosecution,” said Etelka Bogardi, a Hong Kong-based financial services partner at Norton Rose Fulbright.

"It also brings out the point that managing financial crime risk goes beyond making SARs," Bogardi said.

The Institute of International Finance, an industry group, called for reforms. "There is a balance to be struck between managing financial crime risk and ensuring access to the financial system for legitimate customers," the IIF said.

HSBC and StanChart shares touched their lowest level in as much as 25 years, although they fared little worse than their peers amid a wider sell-off in global stocks.

JPMorgan and Bank of New York Mellon, which were also in the top five banks mentioned most frequently in the SARs, fell more than 4% each during midday trading in New York.

Shares of Deutsche Bank, which was involved in the largest number of SARs in BuzzFeed's dossier, were down more than 8% at one point on Monday morning following the reports.

Several analysts, however, played down the scale of problems.

"Unless there are more substantive allegations of fact, we expect that this article will not have lasting impacts on the industry or stock prices," Chris Kotowski, analyst at Oppenheimer, wrote in a note.

Bank shares were also pressured on Monday by other news, including worries about the resurgence of the coronavirus in Europe.

(Graphic: Deutsche Bank shares plunge - https://fingfx.thomsonreuters.com/gfx/mkt/jbyvrmkrepe/deutsche.PNG)

IMPORTANT WORK

Deutsche Bank said the issues raised in the media reports were "historic," while the German Finance Ministry said on Monday that the cases linked to Germany in the reports had already been dealt with.

HSBC also said the information in the reports was historic, while Standard Chartered pointed to recent investments to improve its control procedures.

BNY Mellon said it fully complied with all "all applicable laws and regulations." JPMorgan said it has "thousands of people and hundreds of millions of dollars dedicated to this important work."

Many of the suspicious transactions were linked to companies incorporated in Britain or offshore British territories, prompting calls from action groups for tougher rules.

"If the government cares at all about the UK's reputation globally, it must stop rolling out the red carpet to the criminal and corrupt, and refuse to legitimize their money through our companies and banks,” Global Witness said.

The UK government said it was working on reforms to its corporate registry system that will require more checks on company directors.

(Graphic: HSBC, Standard Chartered lag broader European bank index this year - https://fingfx.thomsonreuters.com/gfx/mkt/ygdvzkdwdpw/Pasted%20image%201600691912490.png)

MAJOR WEALTH HUBS

Global banks in recent years have boosted investments in technology and staff to deal with tighter anti-money laundering and sanctions regulatory requirements across the world.

Thousands of clients were booted out of bank accounts in major wealth hubs including Hong Kong and Singapore after a money laundering scandal in Malaysia, the "Panama Papers" expose, and a global push for tax transparency.

Compliance experts said that part of the problem now was banks were struggling to distinguish between transactions that were and were not suspicious, so were simply filing millions of SARs that enforcement agencies lack the capacity to deal with.

"Lots of banks are struggling with high false positive rates and the backlog (of existing cases). That's why you see that sometimes SARs were raised over 100 days after the transaction," said Cliff Lam, a director at AlixPartners in Hong Kong.

Global banks seek to contain damage over $2 trillion of suspicious transfers
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Jason Bacon
Jason Bacon Sep 21, 2020 2:19PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Gold has essentially no risk... unless you own a gold ETF. With a gold ETF all you have is counter-party risk.
Brill Smith
Brill Smith Sep 21, 2020 11:11AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Bankers, career politicians, S. District of NY personnel, Gates, Soros, Fauci, Pelosi, Feinstein and anyone associated with U.N. should be tried and hung immediately!
Brill Smith
Brill Smith Sep 21, 2020 11:11AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
They along with others like Klaus Schwab- World Economic Forum are trying to destroy America and hurt innocent sovereign people abroad. Time to rise global citizens!
Brill Smith
Brill Smith Sep 21, 2020 11:11AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Climate Change is a tax... it will hurt your children. Please do your homework and research. You will see. Dont go off Govt data. Its all manipulated.
Paul Ladell
Paul Ladell Sep 21, 2020 9:14AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Let me venture a guess. Not one CEO will ever see the inside of a jail. Had they lied about selling any stock in their individual portfolio, for sure they would be sent away, but helping launder trillions of dollars..hey, nothing here, move on. Martha Stewart call your office.
Iam Suleman
YesomiteSam Sep 21, 2020 9:14AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The larger the transfer, the bigger the commission and fees and resulting bonuses. Why would banks care if the funds are illicit.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email