Blame politicians, not banks, for the FinCEN mess

Oliver Bullough


Hello, and welcome to Oligarchy. You’re receiving this email a day earlier than normal because the release of the FinCEN Files, a global investigation conducted by more than 400 journalists, is the stuff this newsletter is made for.


If you’re the kind of person who reads this newsletter, you’ll probably have already read about the FinCEN Files stories, based on the leaking of 2,100 or so Suspicious Activity Reports (SARs) from within the U.S. Financial Crimes Enforcement Network (FinCEN), and no doubt have strong views on the culpability of major financial institutions that move dirty money around, without raising a finger to stop it. 

In case you’re coming to this cold, FinCEN is the repository for all the secret reports that bankers and other professionals make on their clients’ dodgy businesses. It’s a giant clearing house for America’s financial snitches. Among other things, the reports reveal how some of the giants of Western finance helped oligarchs, terrorists and drug smugglers wash the dirt out of trillions of dollars.

The outrage is justified: money laundering is the underlying support industry that makes evil possible. Without it, mobsters, drug cartels, modern slavers, and tax evaders would struggle to operate, and the world would be a much better place. 

But I want to make an unfashionable observation – these leaks are evidence the banks were doing what we ask of them. Our fury should not be directed at them, but at the idiocy of the system they are operating within. And ultimately, therefore, the blame lies with the politicians.

Different countries have different systems, but when it comes to SARs, they all work in more or less the same way. If a financial institution has suspicions about an activity it is asked to engage in, it has to report its suspicion to a Financial Intelligence Unit. SARs were born in the United States, which essentially deputized financial institutions as quasi-law enforcement bodies, and then the idea spread all over the world. 

  • It’s a good idea: bankers can see dodgy financial transactions hidden from the rest of us and, if we can force them to report their suspicions, society gets to benefit from those insights.
  • But it’s not a perfect idea: bankers are still bankers, are in the business of making a profit, and might be tempted to keep suspicions to themselves, if the price is right. 
  • So, to force bankers to comply, they get huge fines if they fail to be suspicious enough.

This is where the problem comes in. The bankers’ primary motivation is not to fight financial crime but to avoid being fined for failing to comply with FinCEN’s regulations, so what is the logical thing for them to do?

  • Bankers report anything that might conceivably be deemed suspicious in a tsunami of financial spam that crashes over our hopelessly under-resourced regulators every day of the year. When in doubt, file a SAR.

This is not a new problem. FinCEN started complaining about what it calls “defensive SARs” at least as long ago as 2004, and back then the annual total was still in six figures. Last year, FinCEN received 2.3 million SARs, which is more than 44,000 a week, and the number climbs all the time. In 2018, it was 2.17 million; more than in 2017, when it was 2.03 million; which was more than in 2016, when it was 1.98 million and so on.

  • “I can’t remember the last time I tried to catch a bad guy; I spend all my time filing reports with regulators,” said one compliance officer, quoted here.

Despite the fact that the regulators are totally swamped, politicians, apparently mistaking this frenzy of box-ticking for actually doing something to stop money being laundered, are demanding more SARs all the time. 

The picture is the same in the United Kingdom, where the number of SARs filed annually is approaching half a million a year, which all pile onto  a computer system (rather endearingly called ELMER) originally designed for just 20,000. Britain’s equivalent of FinCEN, the UKFIU, which sits within the National Crime Agency (NCA) employs just 118 people, who are each therefore expected to deal with 4,000 SARs – 11 reports each for every single day of the year.

  • “The failure of ELMER has made the SARs system a futile and impotent weapon in the global fight against money laundering and corruption,” reported the parliamentary committee responsible for overseeing policing back in 2016. Since then, nothing has happened, except a consultation and various commitments, plus hundreds of thousands more SARs.

Graham Barrow, an anti-money laundering guru who helped the International Consortium of Investigative Journalists in analyzing the leaked SARs, was characteristically pithy in his assessment of what the real scandal is here. 

  • “400+ journalists from around 100 countries spent a year sifting through a little over 2,000 SARs working out what the story was. Imagine what life is like then, for the 118 people at the NCA who received around 500,000 every year. Or in the U.S. where it’s considerably more. Or the FIU in just about any country with a developed financial services industry.”

It costs financial institutions billions of dollars each year to comply with the requirements imposed on them. Yet often, ironically enough, the only people they can find qualified to file the SARs they are expected to file have to be poached from enforcement agencies, which thus no longer have enough people to read the SARs being filed. 

Ironically, the FinCEN Files stories are likely to bounce banks into being even more risk averse in their SARs filing decisions, which will swamp regulators yet more.

If the latest stories show us anything, it is that money laundering continues to be as serious a problem as ever. Hundreds of billions of dollars are stolen from the world’s poorest countries, and moved through financial institutions, then spent in major Western cities every year. The lives of billions of people are blighted by this corruption, and millions die unnecessarily.

By all means we can get angry with banks for moving this money, but that seems a fruitless activity to me. The people to blame are the politicians who have shifted the cost of fighting financial crime onto private institutions, which have no interest in doing this job. It is time to properly resource our investigators, so they can act on these SARs that are being filed, and start putting crooks in prison, and taking kleptocrats’ money away. That is how to fight money laundering.


There’s much hyper-ventilation in the U.K. about the fact FinCEN has labeled Britain a “higher risk jurisdiction,”, and compared it to Cyprus, which only shows quite how remarkably Brits’ idea of their homeland diverges from everyone else’s. British shell companies have been used in all the biggest money laundering scandals of recent times, from Danske Bank downwards, so this outrage is a bit like the Vatican City being irate about getting labeled Catholic.

But at least last week the British government finally committed to doing something to clean up its disastrously mismanaged corporate registry, although even that was hedged around with various qualifications like, “the government will bring forward legislation to enact the reforms to the register when parliamentary time allows,” which doesn’t exactly fill me with confidence. 

Still, it’s better than nothing. Let’s hope it’s a sign this government at least is finally recognizing that it cannot rely on banks alone to clean the system up.


I was a bit exhausted at the weekend, so I re-read John Le Carré’s magnificent The Night Manager, which dives deeply into the complicity between Western financial institutions, lawyers, businessmen, intelligence operatives, aristocrats, politicians and regulators, and how they’re complicit in the looting of the world. Here’s a little monologue, spoken by an idealistic investigator, early on in the tale.

“When I get to run the world, I’m going to hold the Nuremberg Trials Part Two. I’m going to get all the arms dealers and shit-scientists, and all the smooth salesmen who push the crazies one step further than they thought of going because it’s good for business, and all the lying politicians and the lawyers and accountants and bankers, and I’m going to put them in the dock to answer for their lives. And you know what they’ll have to say? ‘If we hadn’t done it someone else would have.’ And you know what I’ll say? I’ll say, ‘Oh, I see. And if you hadn’t raped the girl some other fellow would have raped her. And that’s your justification for rape. Noted.’ Then I’ll napalm the lot of them. Fizz.”

I don’t want to napalm anyone, obviously, but sometimes reading a bit of righteous rage is good for the soul, even though (spoiler alert) the investigator in question does obviously go on to spectacularly lose.

See you next Wednesday,