The links between corrupt politicians, certain business leaders and greedy financiers have been known to exist for a long time. What was not so clear was the extent of the corrupt practices that characterised this perverse alliance.
The International Consortium of Investigative Journalists, which counts Times of Malta among its members, has started to publish a series of articles based on a leak of over 2,000 suspicious activity reports relating to €2 trillion worth of transactions flagged by international banks. The leak consisted of thousands of secret documents, called FinCEN, held by the US government.
These banking transactions oiled the flow of dirty money around the world on behalf of corrupt politicians and their business cronies. What is shocking is that after these major banks flagged these suspicious transactions, they then did very little to root out the criminals that engaged in money laundering and terrorist financing.
It is so easy to pin all the blame of this criminal behaviour on corrupt politicians. Banking giants HSBC, Barclays Bank, JPMorgan, Deutsche Bank, Standard Chartered and Bank of New York Mellon allegedly focussed on boosting their profits rather than act on the suspicions linked to specific activities of their corrupt clients.
When the international media confronted the top brass of these banks, they invariably reacted either by denying the allegations or confirming that the incidents revealed in the FinCEN papers are “historical” and that now proper anti-money laundering controls have been beefed up.
Transparency International UK said: “The leak shows how UK banks continually fail to address suspicious activity and instead offered their services to those with money to hide.”
The worrying reality is that not only were banking and anti-financial crime regulators unable to identify these corrupt practices by criminals usually wearing smart suits in the control rooms of their political or business offices, but were oblivious of the lax controls in the international banking system.
These revelations are a damning indictment of the ineffectiveness of regulators to ensure that financial centres do not become havens for dirty money.
The FinCEN documents also include some details of a former minority stakeholder in the notorious Electrogas power station project. It appears that €647 million worth of suspicious transactions were flagged by a US bank in 2014. Hopefully, no Maltese bank was involved in this alleged suspicious activity.
Some may want to engage in schadenfreude and argue that the criminal behaviour of global banks shows how the allegations about Malta’s tolerance of money laundering is, after all, not so exceptional. This would indeed be a cynical justification of the abusive practices of money laundering in the past few years that have caused so much harm to Malta’s reputation.
International financial centres, including Malta, need to acknowledge that they have often failed to meet their responsibilities, in the name of turning a profit – however dirty.
To stop banks from considering regulatory fines for proven anti-money laundering failure as just another operational cost will only encourage them to take more risks if the promised rewards are high enough.
Sanctimonious statements by senior banking executives that they take their anti-financial crime obligations seriously are not enough.
Banks and their regulators should be held criminally responsible for money laundering as much as corrupt politicians and business people if it is proven that they failed to stop kleptocrats from laundering their illicit loot.