Shares of major banks sank on Monday after a report detailed
more than $2 trillion in flows marked as possible money laundering or criminal
transactions.
An investigation by the International Consortium of
Investigative Journalists and BuzzFeed News published Sunday alleged that firms
including JPMorgan, Deutsche Bank, and HSBC "kept profiting from powerful
and dangerous players" after US authorities fined them for failing to
combat dirty transactions. More than 2,100 suspicious-activity reports the
outlets obtained detailed the transactions, including $514 billion flowing
through JPMorgan and $1.3 trillion through Deutsche Bank.
JPMorgan fell as much as 3.9% on the news and contributed to
major indexes' Monday losses. Deutsche Bank and HSBC tumbled 8.5% and 5.9%.
Government authorities have ordered major banks to improve
their processes to catch such flows, but various fines and threats of criminal
charges haven't worked, the ICIJ said. Transactions in the documents showed
banks moving cash through accounts for people they couldn't identify and
failing to report possible money-laundering transactions "until years
after the fact," the report said.
The obtained documents — which cover flows from 1999 to 2017
— scratch the surface of what could be a much larger pattern of wrongdoing. The
files cover less than 0.02% of the more than 12 million suspicious-activity
reports filed with the Treasury Department's Financial Crimes Enforcement
Network from 2011 to 2017, the ICIJ said.
Banks named in the report highlighted their work to clamp
down on such activity. HSBC told the consortium in a statement that it
"embarked on a multi-year journey" to update projections against
financial crime after admitting to laundering at least $881 million in 2012.
JPMorgan told the reporters it had taken a "leadership
role" in investigating criminal activity and developing "innovative
techniques to help combat financial crime."
In an online statement responding to the ICIJ's report,
Deutsche Bank said it had "devoted significant resources to strengthening
our controls" and meeting obligations. The "historic issues"
raised in the report "have already been investigated and led to regulatory
resolutions in which the bank's cooperation and remediation was publicly
recognized," the bank added.
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