A Guide to Anti-Money Laundering for Crypto Firms
In September 2020, BuzzFeed News and the International Consortium of Investigative Journalists released over 2,500 documents — including over 2,100 suspicious activity reports (SARs) — that had been leaked from the US Treasury’s Financial Crimes Enforcement Network (FinCEN). These documents reveal the widespread failure of financial institutions and FinCEN to address over 200,000 suspicious transactions totaling over $2 trillion that flowed through the system from 1999 to 2017.
The findings of the investigation, which lasted two years and involved 108 news organizations across 88 countries, have reverberated throughout the global financial system and have sparked a long-overdue conversation about the need to fix what many would call a broken system.
ComplyAdvantage’s COO & CFO, Vatsa Narasimha, recently sat down with BuzzFeed News’ Jason Leopold, the Emmy-nominated senior investigative reporter behind the story to get the behind-the-scenes scoop about how the story came about, what it was like to investigate it and his thoughts on how we move forward from here.
The FinCEN Files consisted of more than 2,500 documents, most of which were files that banks sent to US authorities between 2000–2017. These files raised concerns about what some institutional clients might be doing or who they were affiliated with. Jason, when did you first hear about these files, and under what context?
I’m an investigative journalist, and I depend on sources. I depend on whistleblowers. I depend on a number of different people to provide me with information. It is my duty to protect those individuals when they are revealing waste, fraud and abuse. So, I can speak generally about when we first learned about what became the FinCEN Files. In 2017, I had just started at BuzzFeed News on the investigations team. At that time, Donald Trump had just been inaugurated as president.
There were a number of different investigations that were taking place into alleged election interference involving Russia, and there had been a number of different investigations by Congress into Donald Trump’s financial dealings and anyone who may have dealt with Trump over the years. That investigation expanded to include many different people whose names — honestly, I cannot explain why these names and these entities surfaced. But the Senate Intelligence Committee and a number of different committees within Congress had requested records from the Financial Crimes Enforcement Network (FinCEN).
They were interested in finding out what this relationship was. My work started early on with looking at individuals like Paul Manafort, Rick Gates and a number of different people who entered into that orbit and looking at their financial dealings. My job was to follow the money and to gain an understanding as to what Congress was doing, one, but also what happens when FinCEN receives these so-called suspicious activity reports?
Without getting into the details, because I can’t, we received a number of these suspicious activity reports. What we found was, on one hand, it had nothing to do, in some instances, with anything related to election interference or Russia. But it did show that banks, major banks, were doing business with some very suspicious characters, and that, essentially, they had been flagging accounts that were suspicious and sending these suspicious activity reports to FinCEN. And that’s pretty much it.
Congress wasn’t interested in this, and that was fascinating to me. They were not interested in these records. They were only interested in one thing: What role did Russia play? What role did these individuals play in financing that? What we found, what was sitting right in front of them, was something that was far more urgent and nefarious. And that was individuals who could be defined as drug traffickers and oligarchs that were moving suspicious funds into banks, banks flagging it, sending reports to Congress, and that was it. Let me give you an example about the first story that we worked on. That involves Paul Manafort.
As everyone is aware, Paul Manafort was convicted of a number of financial crimes. He’s been pardoned, but banks like JPMorgan had been filing these suspicious activity reports on Paul Manafort for years. We’re not talking about flagging suspicious transactions involving a couple of $100,000. We’re talking about tens of millions of dollars of money that they felt were ill-gotten gains that they could not explain. They didn’t know who the beneficial owners were of some companies. Paul Manafort could essentially do business in any way he wanted. HSBC was involved in that.
What we found was that this went back a decade, and they just kept filing these suspicious activity reports. Now, I want to make it very clear that the compliance officers and, in many instances, the banks follow the law. This is what they are required to do.
FinCEN, however, in some cases, didn’t follow up. Maybe they launched an investigation and shelved it. What we found was that there was something way, way bigger here. It was really fascinating to see how easy it was to move funds through banks, and all the banks had to do if they thought it was suspicious was file a suspicious activity report — and in some instances, maybe hope that FinCEN would ask for additional information, and that sometimes didn’t happen. And that was it.
So, we set out to tell this story, to tell a story about getting into this world of money laundering and, essentially, how easy it is in some cases to move suspicious funds.
And something here, what we exposed, is clearly broken. My mission was to help explain how this has been happening. Without these records, we obviously would not have been able to do so. What stands out from stories about money laundering, alleged money laundering and financial malfeasance over the years is that there’s a lack of disclosure from the government in order to see what the US government or other governments are actually doing.
We’ve seen the Panama Papers. We’ve seen the records that come from the law firms and how individuals and entities are hiding money in tax havens. This is different because these are records from the US government.
Unlike the Panama Papers and others that were published before, these files aren’t from a single institution. This is more from an aggregation of transactions across a lot of the major banks and across geographies because the payment or the transaction is either initiated or it’s going to different geographies. From a process perspective, when did ICIJ get involved? I’ve read that about 400 journalists across 88 countries formed a part of that investigative story. Can you talk a little bit about that process?
At BuzzFeed News, we had a team scrutinizing these records, scrutinizing the data. We knew we had something here. We would see in the data, in the narratives that were prepared, that this was something very, very big. One noteworthy element of this is that the US dollar is the lifeblood of economies, and everyone wants to work with it.
These records, these transactions involved entities around the globe, individuals located all around the world in various countries. We realized that we had something very special here. It was at a journalism data conference that one of my colleagues had met someone from ICIJ and very covertly mentioned, “What would you do if you had this data, and how would you explain it?” That led to some intrigue, and that intrigue led to a conversation. After that, it was just, “Maybe we could partner up and tell a bigger story.”
That was in 2019, I think. We all met secretly in Hamburg for a little conference to go through these records. We realized that this would have far more impact if we worked collaboratively. It’s the largest journalism collaboration ever. What’s very, very, very important here is that the number of journalists who worked on this surpassed the number of people who work at FinCEN.
Originally published June 25, 2021, updated November 30, 2021
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