Secret U.S. government documents reveal that JPMorgan Chase, HSBC and other big banks have defied money laundering crackdowns by moving staggering sums of illicit cash for shadowy characters and criminal networks that have spread chaos and undermined democracy around the world.
The records show that five global banks — JPMorgan, HSBC, Standard Chartered Bank, Deutsche Bank and Bank of New York Mellon — kept profiting from powerful and dangerous players even after U.S. authorities fined these financial institutions for earlier failures to stem flows of dirty money.
U.S. agencies responsible for enforcing money-laundering laws rarely prosecute megabanks that break the law, and the actions authorities do take barely ripple the flood of plundered money that washes through the international financial system.
In some cases the banks kept moving illicit funds even after U.S. officials warned them they’d face criminal prosecutions if they didn’t stop doing business with mobsters, fraudsters or corrupt regimes.
JPMorgan, the largest bank based in the United States, moved money for people and companies tied to the massive looting of public funds in Malaysia, Venezuela and Ukraine, the leaked documents reveal.
The bank moved more than $1 billion for the fugitive financier behind Malaysia’s 1MDB scandal, the records show, and more than $2 million for a young energy mogul’s company that has been accused of cheating Venezuela’s government and helping cause electrical blackouts that crippled large parts of the country.
JPMorgan also processed more than $50 million in payments over a decade, the records show, for Paul Manafort, the former campaign manager for President Donald Trump. The bank shuttled at least $6.9 million in Manafort transactions in the 14 months after he resigned from the campaign amid a swirl of money laundering and corruption allegations spawning from his work with a pro-Russian political party in Ukraine.
The FinCEN Files offer unprecedented insight into a secret world of international banking, anonymous clients and, in many cases, financial crime.
They show banks blindly moving cash through their accounts for people they can’t identify, failing to report transactions with all the hallmarks of money laundering until years after the fact, even doing business with clients enmeshed in financial frauds and public corruption scandals.
Authorities in the U.S., who play a leading role in the global battle against money laundering, have ordered big banks to reform their practices, fined them hundreds of millions and even billions of dollars, and held threats of criminal charges over them as part of so-called deferred prosecution agreements.
A 16-month investigation by ICIJ and its reporting partners shows that these headline-making tactics haven’t worked. Big banks continue to play a central role in moving money tied to corruption, fraud, organized crime and terrorism.
“By utterly failing to prevent large-scale corrupt transactions, financial institutions have abandoned their roles as front-line defenses against money laundering,” Paul Pelletier, a former senior U.S. Justice Department official and financial crimes prosecutor, told ICIJ.
He said banks know that “they operate in a system that is largely toothless.”
Five of the banks that appear most often in the FinCEN Files — Deutsche Bank, Bank of New York Mellon, Standard Chartered, JPMorgan and HSBC — repeatedly violated their official promises of good behavior, the secret records show.
In 2012, London-based HSBC, the largest bank in Europe, signed a deferred prosecution deal and admitted it had laundered at least $881 million for Latin American drug cartels. Narcotraffickers used specially shaped boxes that fit HSBC’s teller windows to drop off the huge amounts of drug money they were pushing through the financial system.
Under the deal with prosecutors, HSBC paid $1.9 billion and the government agreed to put criminal charges against the bank on hold and dismiss them after five years if HSBC kept its pledge to aggressively fight the flow of dirty money.
During that five-year probationary period, the FinCEN Files show, HSBC continued to move money for questionable characters, including suspected Russian money launderers and a Ponzi scheme under investigation in multiple countries.
Yet the government allowed HSBC to announce in December 2017 that it had “lived up to all of its commitments” under its deferred prosecution pact — and that prosecutors were dismissing the criminal charges for good.
In a statement to ICIJ, HSBC declined to answer questions about specific customers or transactions. HSBC said ICIJ’s information is “historic and predates” the end of its five-year deferred prosecution deal. During that time, the bank said, it “embarked on a multi-year journey to overhaul its ability to combat financial crime. . . . HSBC is a much safer institution than it was in 2012.”
HSBC noted that in deciding to release the bank from the threat of criminal charges, the government had access to reports from a monitor who reviewed the bank’s reforms and practices.
The Department of Justice declined to answer specific questions. In a statement, a spokesperson for the department’s criminal division said:
“The Department of Justice stands by its work, and remains committed to aggressively investigating and prosecuting financial crime — including money laundering — wherever we find it.”
‘Everyone is doing badly’: Dirty money swamps bureaucrats
Money laundering isn’t a victimless crime.
The free flow of dirty cash helps sustain criminal gangs and destabilize nations. And it is a driver of global economic inequality. Laundered funds are often shunted between accounts owned by obscure shell companies registered in secretive offshore tax havens, allowing elites to hide massive sums from law enforcement and tax authorities.
An ICIJ analysis found that banks in the FinCEN files regularly processed transactions to companies registered in so-called secrecy jurisdictions and did so without knowing the ultimate owner of the account. At least 20% of the reports contained a client with an address in one of the world’s top offshore financial havens, the British Virgin Islands, while many others provided addresses in the U.K., the U.S., Cyprus, Hong Kong, the United Arab Emirates, Russia and Switzerland.
ICIJ’s analysis found that in half of the reports banks didn’t have information about one or more entities behind the transactions. In 160 reports, banks sought more information about corporate vehicles, only to be met with no response.
Estimates by the United Nations Office on Drugs and Crime indicate that $2.4 trillion in illicit funds are laundered each year — the equivalent of nearly 2.7% of all goods and services produced annually in the world. But the agency estimates that authorities detect less than 1% of the world’s dirty money.
“Everyone is doing badly,” David Lewis, executive secretary of the Paris-based Financial Action Task Force, a partnership of governments around the world that sets anti-money laundering standards, acknowledged in an interview with ICIJ.
His organization’s country-evaluation reports — which dig into how well banks and government agencies meet anti-money-laundering laws and regulations — show lots of box-checking but little practical progress. Many countries seem more concerned with looking good on paper than actually cracking down on money laundering, he said.
Even an association of the world’s biggest banks complained last year that regulators focus on “technical compliance” rather than whether systems “are really making a difference in the fight against financial crime.”
Rewards and risks
Why do banks move suspect money? Because it’s profitable.
Banks can pad their bottom lines with the fees they collect as money spins through the webs of accounts often maintained by corrupt users of the financial system. JPMorgan, for example, scored an estimated half a billion dollars in revenues by serving as the chief banker to Bernie Madoff, according to filings in the bankruptcy case spawned by the collapse of his multi-billion-dollar Ponzi scheme.
Dealing with shady customers does carry risks.
JPMorgan paid $88.3 million in 2011 to settle regulators’ claims that it had violated economic sanctions against Iran and other countries under U.S. embargoes. Treasury officials hit the bank with a “cease and desist” order in 2013 that described “systemic deficiencies” in its anti-money-laundering efforts, noting the bank had “failed to identify significant volumes of suspicious activity.”
Then, in January 2014, the bank paid $2.6 billion to U.S. agencies to settle investigations over its role in Madoff’s scheme. JPMorgan posted profits of more than double that amount in just that quarter on its way to nearly $22 billion in profits for the year. Madoff pleaded guilty and is serving a 150-year sentence in federal prison.
JPMorgan continued, after those enforcement actions, to move money for people involved in alleged financial crimes, the FinCEN Files show.
Among them: Jho Low, a financier accused by authorities in multiple countries of being the mastermind behind the embezzlement of more than $4.5 billion from a Malaysian economic development fund, called 1Malaysia Development Berhad, or 1MDB. He moved just over $1.2 billion through JPMorgan from 2013 to 2016, the records show.
Low first gained notoriety for partying with Paris Hilton, Leonardo DiCaprio and other celebrities. One night at a club on the French Riviera, he got into a bidding war over a cache of Cristal champagne — winning the contest with a final bid of 2 million euros, according to “Billion Dollar Whale,” a bestselling book about the 1MDB swindle.
He was first outed by media reports in early 2015 as a key figure in the 1MDB scandal, the so-called “heist of the century.” Singapore issued a warrant for his arrest in April 2016. Authorities in the U.S., Malaysia and Singapore are seeking his capture.https://projects.icij.org/investigations/fincen-files/confidential-clients/#/en/low-taek-jho/?enableFooter=false
JPMorgan also moved money for companies and people tied to corruption scandals in Venezuela that have helped create one of the world’s worst humanitarian crises. One in three Venezuelans is not getting enough to eat, the UN reported this year, and millions have fled the country.
One of the Venezuelans who got help from JPMorgan was Alejandro “Piojo” Isturiz, a former government official who has been charged by U.S. authorities as a player in an international money laundering scheme. Prosecutors allege that between 2011 and 2013 Isturiz and others solicited bribes to rig government energy contracts. The bank moved more than $63 million for companies linked to Isturiz and the money laundering scheme between 2012 and 2016, the FinCEN Files show.
Isturiz could not be reached for comment.
The secret records show that JPMorgan also provided banking services to Derwick Associates, an energy firm that won billions of dollars in no-bid contracts to repair Venezuela’s failing electricity grid. A 2018 analysis by the Venezuelan chapter of the nonprofit group Transparency International concluded that Derwick Associates failed to deliver the power capacity expected — and overbilled the Venezuelan government by at least $2.9 billion.
Alejandro Betancourt was in his 20s when he co-founded Derwick with a younger cousin.
News articles and Internet postings from 2011 raised allegations about Derwick. The company later filed a lawsuit that claimed it was the victim of a smear campaign that falsely accused it of being part of a “criminal group.” The suit was settled on undisclosed terms.
The FinCEN Files show that Derwick used accounts at JPMorgan to move at least $2.1 million in 2011 and 2012 and that the bank processed other transactions of undisclosed amounts for Derwick and its managers at least into 2013.
In 2018, the U.S. Justice Department charged a senior Derwick executive, Francisco Convit Guruceaga, in an alleged $1.2 billion bribery and money-laundering scheme. Betancourt was cited in the criminal complaint as an unnamed co-conspirator, the Miami Herald, an ICIJ partner, later reported.
A lawyer for Betancourt said: “My client denies any wrongdoing.” Convit’s attorney declined to comment.
In a general statement, JPMorgan noted that it had acknowledged in 2014 that it needed to improve its anti-money-laundering controls and that since then it has invested heavily toward this effort.
“Today, thousands of employees and hundreds of millions of dollars are devoted to helping support law enforcement and national security efforts,” the bank said.
‘Boss of bosses’
Often, the secret files show, banks handling cross-border transactions have little idea who they’re dealing with — even when they’re shifting hundreds of millions of dollars.
Take the case of a mysterious shell company called ABSI Enterprises. ABSI sent and received more than $1 billion in transactions through JPMorgan between January 2010 and July 2015, the FinCEN Files show.
This amount included transactions through a direct bank account with JPMorgan, which ABSI closed in 2013, and through so-called correspondent banking arrangements, in which a bank with significant U.S. operations, such as JPMorgan, allows foreign banks to process U.S. dollar transactions through its own accounts.
Compliance watchdogs based at the bank’s Columbus, Ohio, operations hub decided to try to figure out ABSI’s actual owner in 2015 after a Russian news site reported that a similarly-named shell company — which JPMorgan’s records indicated was the parent of ABSI — was linked to an underworld figure named Semion Mogilevich.
Mogilevich has been described as the “Boss of Bosses” of Russia mafia groups. When the FBI put him on its Top Ten Most Wanted list in 2009, it said his criminal network was involved in weapons and drug trafficking, extortion and contract murders. The chain-smoking, beefy Ukrainian’s signature method of neutralizing an enemy, The Guardian once reported, is the car bomb.
The records show the compliance officers searched in vain through their files on the shell company, unable to determine who was behind the firm or what its true purpose was.
While those details still remain unclear, JPMorgan had plenty of reasons to examine ABSI years earlier: it operated as a shell company in Cyprus, considered a major money laundering center at the time, and it was directing hundreds of millions of dollars through JPMorgan.
Mogilevich is featured in “World’s Most Wanted,” a Netflix documentary series released in August.
Through a spokesperson, Mogilevich said he had no knowledge of ABSI.
He has previously said: “I am not a leader or an active participant of any criminal group.”
The mighty dollar
BuzzFeed News used the cache of suspicious activity reports in 2018 to publish stories revealing secret payments to shell companies controlled by Manafort, who is now serving a federal prison sentence in home confinement in a case based largely on these transactions.
A former U.S. Treasury Department official, Natalie Mayflower Sours Edwards, pleaded guilty in January to conspiring to unlawfully disclose FinCEN documents to BuzzFeed News.
BuzzFeed News has not commented on its source.
FinCEN and other U.S. agencies play an outsized role in anti-money-laundering efforts around the world, largely because money launderers and other criminals share the same goal as many bank customers who operate across borders: moving U.S. dollars, the de facto global currency, between account holders in different countries.
An elite group of mostly U.S. and European banks with large operations in New York pocket fees for performing this trick, drawing on their privileged access to the U.S. Federal Reserve. These banks’ U.S. operations can also help turn local money into U.S. dollars, another key money laundering goal.
American law entrusts banks with frontline responsibility to prevent money laundering, even though their financial incentives run entirely in the direction of keeping money — dirty or clean — moving. While banks are empowered to stop a transaction if it appears to be shady, they’re not necessarily required to do so. They simply have to file a suspicious activity report with FinCEN.
FinCEN, which has roughly 270 employees, collects and sifts through more than two million new suspicious activity reports each year from banks and other financial firms. It shares information with U.S. law enforcement agencies and with financial intelligence units in other countries.
Inside big banks, systems for sniffing out illicit cash flows rely on overworked, under-resourced staffers, who typically work in back offices far from headquarters and have little clout within their organizations. Documents in the FinCEN Files show compliance workers at major banks often resort to basic Google searches to try to learn who’s behind transfers involving hundreds of millions of dollars.
As a result, the secret documents show, banks frequently file suspicious activity reports only after a transaction or customer becomes the subject of a negative news article or a government inquiry — usually after the money is long gone.
In interviews with ICIJ and BuzzFeed, more than a dozen former compliance officers at HSBC called into question the effectiveness of the bank’s anti-money-laundering programs. Some said the bank didn’t give them enough time to do much beyond cursory looks at large flows of cash — and that when they requested information about who was behind big transactions, HSBC branches outside the U.S. often ignored them.
“They would say: ‘Sure, we’ll get back to you.’ But they’d never get back,” recalls Alexis Grullon, who monitored international suspicious activity for HSBC in New York from 2012 to 2014.
At Standard Chartered Bank, a lawsuit filed in December 2019 in federal court in New York claims, employees who objected to illegal transactions weren’t ignored — they were threatened, harassed and fired.
Julian Knight and Anshuman Chandra claim in the suit that they were forced out of management jobs at the bank after it learned they had cooperated with an FBI probe into transfers of money that Standard Chartered had pushed through for U.S.-sanctioned entities from Iran, Libya, Sudan and Myanmar.
Standard Chartered, the suit claims, engaged in a “highly sophisticated money laundering scheme,” altering the names of parties subject to U.S. sanctions on transaction documents and creating a technological workaround that allowed illegal transactions to slip through the U.S. Federal Reserve Bank undetected.
Chandra, who worked in the bank’s Dubai branch from 2011 to 2016, concluded that the sanctions busting helped bankroll terror attacks “that killed and wounded soldiers serving in the U.S.-led coalition, as well as many innocent civilians.”
The suit says the scheme allowed the bank to profit from the “high premium” that Iran and its operatives were willing to pay to convert Iranian rials — the country’s sanctions-depressed currency — into dollars.
“You can run a show like this probably for a few months without being caught if it’s a small group running it within the bank,” Chandra said in an interview with ICIJ partner BuzzFeed News. “But something like this happening over a period of years and coming into billions of dollars — someone at the top should have asked the question: How are we making this money?”
Chandra and Knight claim that the bank acknowledged only a fraction of its violations and lied about when illegal transactions had stopped when it came forward and admitted sanctions violations as part of its 2012 deferred prosecution deal with U.S. authorities.
The agency extended the bank’s probationary period again and again over several years. Then, in 2019, the bank paid $1.1 billion more for continuing violations of sanctions against Iran and other countries and agreed to extend its deferred prosecution pact for two more years.
In court papers, Standard Chartered says the ex-employees’ allegations are implausible and meritless. In a statement to ICIJ, the bank said: “These false allegations have been thoroughly discredited by the U.S. authorities who undertook a comprehensive investigation into the claims.”
The bank noted that a U.S. judge had dismissed a related lawsuit in July. In that case, U.S. prosecutors said in a legal filing that federal agencies couldn’t find evidence to support Knight’s claim that Standard Chartered had continued violating sanctions on behalf Iranian clients after 2007.
‘I am dying’: Ukraine, JPMorgan and the kleptocrats
Twenty-one-year-old Olesia Zhukovska took a bullet in the fight against corruption in Ukraine.
She’d been working as a nurse in western Ukraine in late 2013 when protests broke out in the heart of Kyiv, the capital. During the regime of President Viktor Yanukovych, billions of dollars were being smuggled out of the country — channeled through far-off accounts at some of the world’s biggest banks.
Demonstrators protested their leaders’ tilt toward Russia and the high-level corruption that was wrecking the country’s economy, its schools, its health system. Ukrainians were dying, patient advocates said, because money intended for life-saving medicines and equipment was being stolen by insiders.
Zhukovska says she couldn’t afford the $3,000 bribe it would take to get a job in an urban hospital. She worked instead at a rural health center with no heat, no medicines. “Nothing,” she says. The structure “looked like an old ruin.”
In December 2013, she joined growing anti-government rallies in Kyiv, volunteering to treat demonstrators beaten by baton-swinging government forces.
She was sorting bandages on Feb. 20, 2014, when a sniper’s bullet tore into her neck. It hit less than an inch, she says, from her carotid artery.
As an ambulance rushed her to the hospital, she tweeted: “I am dying.”https://platform.twitter.com/embed/Tweet.html?creatorScreenName=icijorg&dnt=false&embedId=twitter-widget-0&features=eyJ0ZndfZXhwZXJpbWVudHNfY29va2llX2V4cGlyYXRpb24iOnsiYnVja2V0IjoxMjA5NjAwLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X2hvcml6b25fdHdlZXRfZW1iZWRfOTU1NSI6eyJidWNrZXQiOiJodGUiLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X3NwYWNlX2NhcmQiOnsiYnVja2V0Ijoib2ZmIiwidmVyc2lvbiI6bnVsbH19&frame=false&hideCard=false&hideThread=false&id=436436294483591168&lang=en&origin=https%3A%2F%2Fwww.icij.org%2Finvestigations%2Ffincen-files%2Fglobal-banks-defy-u-s-crackdowns-by-serving-oligarchs-criminals-and-terrorists%2F&sessionId=8c3da976b4151e9a341d184d1728d80bba2c869a&siteScreenName=icijorg&theme=dark&widgetsVersion=0a8eea3%3A1643743420422&width=550px
It was the day of what became known as the “Snipers’ Massacre.” When the day ended, Zhukovska had survived, but dozens of others had been killed by rooftop police snipers who rained fire on protesters.
Zhukovska’s tale of struggle and pain is similar to the stories of average people around the world who suffer as corrupt politicians and their cronies — in Ukraine and beyond — enrich themselves with the help of name-brand banks with global footprints.
As the young nurse was still healing in a hospital in early 2014, Yanukovych fled the country. So did his closest adviser, Chief of Staff Andriy Klyuyev, who had emerged as a despised face of the crackdown.
Both ended up in exile in Russia. Both are wanted by Ukrainian authorities and under U.S. sanctions that accuse them of embezzling public funds and subverting Ukrainian democracy.
An investigation later found that a solar energy group run by Klyuyev’s family, Activ Solar, made off with hundreds of millions of dollars in what were purportedly loans from government-owned banks. Its assets were funneled into a network of offshore companies controlled by Klyuyev family members, according to a report by Ukraine’s Financial Intelligence Unit as part of a multinational investigation into the Yanukovych regime.
The Activ Solar affair was part of an orgy of corruption under Yanukovych that included a network of companies linked to Klyuyev’s brother, Serhiy, buying Ukraine’s presidential palace, the Mezhyhirya estate, where Yanukovych lived, for a rock-bottom price. The palace — with a zoo complete with ostriches and a replica of a Spanish galleon for cruises on the Dnieper River — became a symbol of the regime’s decadence.
As always, corrupt proceeds need a place to hide. On the way, most pass through Lower Manhattan.
Lingerie and knee Boots
In January 2010, the same time Yanukovych was winning the first round of Ukraine’s presidential election, someone incorporated a new company at the U.K.’s corporate registry, Companies House, a government office long criticized for granting legitimacy to companies with secret owners.
The new company, NoviRex Sales LLP, claimed to be in the “domestic appliances” business, but its paperwork suggested something else was going on.
It listed its official address as a small shop in Cardiff, Wales. Recently occupied by a nail salon, the same address was used by hundreds of other companies registered at Companies House.
NoviRex’s listed owners were two other companies, both incorporated in the British Virgin Islands and also without visible owners. The same two BVI companies were listed as “owners” of thousands more companies at Companies House — many registered to the same shop in Cardiff.
Records show that the two companies that owned NoviRex also owned companies linked in news reports to suspected bid-rigging and other corrupt acts, much of it centering on Ukraine.
The FinCEN Files show NoviRex soon began firing off payments of astonishing size and frequency. For a domestic appliances business, some of the reasons NoviRex gave for the payments were strange: $200,000 for “lingerie” from a British Virgin Islands company … $34,000 for “keyboard stickers” from a Hong Kong firm … almost $400,000 on “knee-boots” from another Hong Kong company.