The International Consortium of Investigative Journalists collaborates with hundreds of members across the world. Each of these journalists is among the best in his or her country and many have won national and global awards. Our monthly series, Meet the Investigators, highlights the work of these tireless journalists.
This month, we have a special edition featuring three ICIJ reporters who worked on our latest investigation, the FinCEN Files.
Karrie Kehoe, Spencer Woodman and Ben Hallman were part of a team of more than 400 journalists working on the 16-month investigation that exposed how giants of Western banking enriched themselves while facilitating the movement of money for oligarchs, terrorists, drug traffickers and fraudsters. The investigation was based on thousands of secret United States Treasury documents obtained by BuzzFeed News and shared with more than 100 media partners from all around the world.
Karrie, Spencer and Ben take us behind the scenes of the investigation, revealing what it was like to work on the cache of confidential files and how reporters methodically searched the data for the stories buried within.
Amy Wilson-Chapman: Welcome back to another Meet the Investigators podcast with ICIJ. I’m Amy Wilson-Chapman, and this month we have a special episode about our latest investigation – the FinCEN Files.
I’m going to chat with a few of the ICIJ staff behind the investigation. It’s hard to believe, but a year ago – today – we were in Hamburg hanging out with 200-plus reporters from around the world … one of them was celebrating a birthday and happens to be here again today!
[Reporters in Hamburg chanting: Happy Birthday dear Spencer and Harry]
That is Spencer Woodman, who is based in North Carolina in the U.S. G’day Spencer!
Spencer Woodman: Hi!
Amy: We also have our – very patient – data journalist Karrie Kehoe, who is based in Dublin.
And Ben Hallman, who was an editor on the investigation, based in Alabama in the U.S.
Karrie Kehoe: Hi
Ben Hallman: Hello
Amy: So let’s kick off. We get asked this a lot – so, Ben, how would you explain the FinCEN Files to a school child?
Ben: Well, it so happens that I have an elementary school child who lives in my house and in fact, I have tried to explain this project to her with, I think, some success.
But basically, here’s how it goes:
The FinCEN Files refer to the Financial Crimes Enforcement Network that is the agency within the U.S. Treasury Department that monitors banks for compliance with money laundering and financial crime rules.
The global banks are in a unique position to see the flow of illicit money around the world because so much of it goes through their accounts. They are required under U.S. law, as a condition of doing business in the U.S., to tell authorities what they are seeing, if they think it has evidence of criminal activity or money laundering or other types of crime.
What BuzzFeed News obtained and shared with ICIJ and our partners are these sort of raw intelligence reports from banks to financial regulators in the U.S., in which the banks are essentially telling on their own clients. And we obtained more than 2,000 of them, and then spent more than a year reporting out what those reports said, talking to people who are named in the reports and following a million threads to see where they went.
And, you know, the big takeaway, after all that effort, is that global banks have been thrust into a position of a watchdog role and yet they are conflicted. They’re both supposed to keep a close eye out for financial crime and yet they also benefit from the flow of illicit or dirty money through their accounts.
Karrie: I think I would say — to a kid anyway — “have you ever been kinda bad, and you have to tell your parents, something that’s kind of bad? But you decide the best way to do it, is to tell them tons and tons of things that aren’t so bad, and just kind of swamp them with information so that they’re so overwhelmed, they don’t really process the really bad thing that you snuck in there?”
I think that’s kind of what the banks have been doing with FinCEN agency.
Amy: So lots of people will be thinking, OK, so big banks, doing bad things … I’ve heard it all before. What’s the point of the FinCEN Files? What do you guys think we as ICIJ and all of our partners across the world can achieve by publishing this investigation?
Ben: What we’re looking at is a view of a world that is cloaked in secrecy, sort of at every level.
The only people who are able to sort of see what’s happening are banks and financial regulators.
What we’re able to do – and keep in mind we’re looking at something like 2,100 suspicious activity reports and so it’s a sliver that we’re examining – but in that sliver, we saw again and again, financial institutions failing to recognize basically who their customers are or who the customers of their customers are, whose money is flowing through their accounts.
Amy: And so have you seen what’s the reaction been so far?
Ben: So we’ve already seen quite a bit of a reaction from the financial community and the regulatory committee.
I think the most substantial statement is something that New York state’s top banking regulator said just the other day, which is and I quote, that the system has allowed money laundering to “metastasize so that it’s endemic in the system and wrapped within the guts of financial institutions.”
And she said that SARs – again these are the suspicious activity reports that banks must file – have become, quote, “a free pass for banks.” So I think these are pretty strong words. And, again, suggest likely a renewed, regulatory push to come.
Amy: How about you, Spencer? What do you hope will come of our investigation?
Spencer: This could be an ‘enough is enough’ type moment when it comes to law enforcement continually, which is – this has become a greater trend over the past few years – continually charging banks with serious crimes related to money laundering but then allowing them to get off with a fine and not prosecuting the banks and essentially dropping the charges as the banks promise to do better in the future. I also think it could raise awareness both with bank investors and people who work inside banks that their compliance staff need to be given better tools and more resources to investigate suspicious transactions.
Amy: And Karrie, how about you? Is there a specific Europe reaction that you’re kind of waiting for or hoping for or …?
Karrie: I mean, I’d hope for more reform, like the EU seem to be very quiet about this. The biggest thing that’s come so far is amazingly a couple of days before we published, Companies House, which is the company register in the U.K., they announced they are overhauling their anti-money laundering program. So, they’re going to bring in a couple of interesting reforms, and this is really because the BBC put these questions as part of the FinCEN Files. So they’re going to start bringing in compulsory identity verification to help trace people who are committing fraud or money laundering.
They’re going to be given greater powers to query, investigate and remove false information, because they accept all the companies’ accounts in good faith.
But you know, it would be great to see some actual overhaul in the U.K. system because the financial system is problematic and there’s tons of dirty money flowing into it in the U.K.
Amy: At the heart of this investigation was a trove of top-secret documents that Buzzfeed News shared with us. We then shared them among our network of investigative reporters, tapping into the local knowledge of journalists from Venezuela to Finland and Australia.
Of the more than 2,100 documents, the majority of these were suspicious activity reports or SARs, that Ben previously mentioned. And these are filed by banks and other financial institutions to the US. Treasury Department’s Financial Crimes Enforcement Network.
So banks want to operate in U.S. dollars, which, as Ben was saying, is the de facto global currency, then they’re expected to alert FinCEN whenever they think something that could be suspicious or if they think that’s criminal activity and that this is the documents that we were looking at.
Ben: It’s probably worth pointing out here that FinCEN has fewer than 300 employees, and in 2019 alone, it got sent within two million suspicious activity reports.
Amy: And I think one of the things that’s come out in the past week is that it literally took more than 400 reporters from across the world who scrutinized these documents for more than a year to dig through and extract the data of the files we had. So imagine how those 300 employees feel.
And, as we all know, after spending 16 months focused on them, they’re not the easiest thing to read. They’re pretty technical. They come in a variety of forms and are full of information about transactions from where the company is located, to who the subject of the transaction is, or sometimes, as we’ll get to in just a little bit, how little the banks actually know.
So I’m intrigued to know, what do you guys remember when you first saw these files?
How about you, Karrie? What did you think?
Karrie: I was astonished. I was so excited, and I had never seen anything like this before.
And it was just a treasure trove. And as excited as I was, very soon afterwards, I was really stressed because the actual SARs themselves are extremely difficult to read. So I kind of realize what an incredible task this is going to be. We had our work cut out for us.
Amy: And what about you Spencer? What did you think?
Spencer: When I first saw these documents, I said, “Good God! I’ve never seen anything like this before.” In our previous financial leak projects, we looked at a lot of data that came to us with a lot of explanations, such as if an offshore service provider had set up a dodgy tax structure offshore for a billionaire, we would generally be able to look at it and have some understanding of what we’re looking at. With this, much of the material we’re working with are just the most raw financial transactions with no explanation or no explanation that was helpful to us. And it was up to us to go in and figure out what was happening with those transactions.
Amy: The five most prevalent banks in the data were JP Morgan, HSBC, Standard Chartered, Deutsche Bank and Bank of New York Mellon. So just because these banks file a report saying a person or a company’s transaction is suspicious, doesn’t mean there’s actually any wrongdoing. But by filing these reports, big banks can collect transfer fees on the potentially suspicious transactions. And if they don’t file the reports, it can expose the banks to fines or penalties. That’s right, Ben?
Ben: Yeah, so, we spent more than a year scouring these records and also doing a lot of math.
So, we found that across these files there were more than $2 trillion worth of suspicious transactions flagged by banks. That’s over more than a decade.
And, you know, as we talked about earlier, we’re looking at a relatively small sliver of the total picture. So you can imagine that the true number is, you know, many, many, many times higher. One thing we really focused on was real-world impact. We were able to track dirty money all around the world and really show how specific people in specific communities were affected.
Amy: So Spencer, you wrote a story about Europe’s largest bank, HSBC. And you showed that despite telling regulators in 2012 that they cleaned up their act and try to enforce better anti-money laundering rules, they didn’t. Can you tell us a bit more about what you found in your reporting?
Spencer: Just by way of a little bit of context, HSBC is also one of the biggest banks in the world.
And it over the past two decades has run into problems with U.S. regulators over and over again, over how it polices money laundering in its foreign branches or its branches outside the United States. In 2012, it promised yet again, that it would clean up its act in a historically large deferred prosecution agreement.
We took a look at what happened after this 2012 promise, which came with the historically large fine of $1.9 billion. We found that HSBC continued to move money for criminal enterprises, for shell companies tied to looting of government funds, for a Ponzi scheme that ripped off thousands of low-income investors around the world, and for an operation accused by U.S. authorities of being a major laundering operation for drug cartels in Central America.
We’ve looked closely at HSBC’s Hong Kong Branch, which is the company’s most profitable and most highly active branch. We analyzed around $1.5 million in transactions that flowed through shell companies that held accounts at HSBC, Hong Kong.
And we found that the SARs at HSBC filed on those shell companies often failed to include fundamental facts about its own customers who are moving huge amounts of money. This included information like who owned the accounts, what countries the owners lived in, and where the money came from.
Amy: I think it’s probably important to note here that all the banks we spoke to, we tried to get comments from and all of them denied any wrongdoing and talked down a lot of the allegations that were made about them.
Many of the banks actually wouldn’t give detailed responses to the suspicious activity reports, because they deemed them to be too confidential, and that they wouldn’t speak about them.
Now, all of that is not to say that suspicious activity reports were the soul of our investigation.
We did spend a lot of time mining them, but altogether, we ended up with more than 17,000 documents that the 400 plus reporters shared across the world. So this included police records from Italy, confidential information from other investigations, court records from all over the world, including the Ukraine, just to name a few.
So one person that’s with us that worked with a lot of public documents is Karrie. She worked very closely with Companies House, which is the U.K.’s business registry. Now Karrie, what did you find on your exploration of Companies House?
Karrie: We found some shell companies. So when we had a look at the FinCEN Files, we saw “LLP” was popping up all over the place, this kind of string of letters, and “LP.” And so what we realized was that these were the names of companies that were U.K., and LLP stands for limited liability partnership, LP is limited partnership.
And these are types of, kind of, companies in the U.K., that are, you know, lots of them are very valid. And there are loads of, like, legal firms that are perfectly fine. But they’re also a great way of setting up shell companies.
We pulled out the names of all these LLPs from the FinCEN Files and then we looked them up on Companies House, and made sure that they were U.K. companies.
And then we went, and we looked up their accounts that are public records. They have to be filed with Companies House, and we compare them to the wire transactions. So how much income versus expenditure they were reporting to the U.K. authorities, versus what we were seeing in the wire transactions. So in the end, we found, I think, $4.5 billion in excess funds that weren’t accounted for. So this, this was pretty surprising for us. And you know, it was kind of this damning evidence that is not all was right.
Amy: I think it’s such a good example of how we took this one set of documents and then added context and reporting to it and showed people a different story of what was really happening.
Karrie: It was a lot of fun to do. I mean, and I loved that it was using public data as well. And that we were able to say, “Look, you know, there’s something really dodgy here.”
Like we’re coming across companies that were receiving, you know, in the wire transactions, millions in a financial year, but they were only reporting something like £8,000 in income. Like there’s a massive mismatch.
Amy: For a lot of our listeners and readers who have followed the ICIJ story from Offshore Leaks through Panama Papers through Luanda Leaks, it speaks to what we found that shell companies really seemed to work against everyone, including the banks who were trying to crack down on illegal activity and stop this dirty money flowing around.
Can you tell me a little bit about secrecy in the U.K., Karrie?
Karrie: When we look at these offshore jurisdictions, you talk about the Cayman Islands and the BVI in places like that, they’re all British overseas territories. And so, the center of all this is London, and this is kind of a culture thing. You know, there’s tons and tons of valid money in London swishing around. And there’s tons of dirty money and it does make up a certain proportion of the economy. Companies House, you know, it’s a little toothless. It kind of accepts accounts from people on trust basis.
You know, it does ask for ultimate beneficial owners, which they call “persons of significant control,” but they never verify any of the details. Now, a couple of days before we published, they said they were all changing this, and that they were going to start verifying identities.
Amy: Spencer, you spent a while trying to locate a mysterious company called, and I’m a bit worried I’m going to say this wrong, Pantheon, but didn’t have much luck. Can you tell us a bit more about this mysterious company?
Spencer: Yeah, so this kind of turned into a case study on offshore secrecy and how little both compliance officers, law enforcement and journalists, and the general public are able to learn about shell companies sometimes moving many millions of dollars.
My interest was originally piqued in Pantheon because there was a SAR file by Standard Chartered Bank in 2017, showing that this kind of mysterious shell company, that Standard Chartered’s own compliance officers just could not figure out much about was moving millions of dollars involving people who had been criminally charged with stealing or selling looted, antiquities, relics, largely from East Asia into the New York and London art markets, to wealthy galleries and museums and stuff like that. And, it, originally looked like investigating this shell company could help move that story forward about how precious relics are alluded from, East Asian, often developing countries and sold for profit in the Western world.
But, you know, it ended up turning into one dead end after another. And I spent weeks trying to track this company down, and ultimately, could not find, a registration for the company anywhere in the world that, frankly, made sense. This was truly a ghost of a shell company that deepened my own understanding of how secretive the offshore world can be.
Amy: So one of the things we really wanted to show with this investigation was the human toll of money laundering and how the unchecked wealth being transferred across the globe was affecting what we like to call everyday people like you and me, and the reporters that we’re talking to here.
So we found examples of Russian parents ripped off by used car dealers in the U.S.
And families who lost their loved ones to drugs, the purchase of which was facilitated by this illicit flow of money. Then there were the sports professionals who were robbed by crooked leaders and people who died because of the suspect money. So what struck you three the most with our investigation findings?
Ben: This is a project for me or a story that’s really about a couple of basic principles, and those are inequality and fairness. What we see again and again in our reporting is that the wealthiest and best connected people in the world were able to move vast amounts of money through the biggest banks long after the financial institutions sort of knew or should have known that the money was tainted. And the simple reason is because they are wealthy and banks want their business. And there’s been very little pressure brought to banks to change their behavior because financial regulators simply haven’t helped them to account. And because this entire system operates in secrecy.
Spencer: I was just continually stunned by how almost helpless these bank compliance officers appeared to be in trying to understand and investigate transactions going through their own banks. And that really points to both the level of international financial secrecy that they contend with. And also, a lack of resources.
Karrie: I think for me, the thing I found the most surprising was some of these banks, they were only reporting the suspicious activities, you know, one, two, three years plus after they happened. And in this case like, they were taking their fee and then they were just kind of running with it and letting this behavior continue even when they knew that, you know, these were most likely shell companies and they are coming from politically exposed persons.
Amy: Yeah it was amazing to read bank compliance officers talking about journalists findings, the Panama Papers, other ICIJ investigations, and then saying, ‘maybe we should be letting you know that this person is actually our client.’
Karrie: And some of them were doing a really bad job of researching their clients. Like it would just say in the SARs: ‘Oh, Internet research says this is, you know, X oligarch.’ Come on! you know better than that.
Like, where’s your proper sources? You’re compliance officers and some of the biggest banks in the world and you’re trying to pretend you don’t have enough resources to know who your clients are.
Amy: So let’s just briefly talk about how this was all done. Here at ICIJ, we led an international team of more than 400 reporters. And it was pretty tough for many of our partners, especially given COVID-19 and the pandemic meant that newsrooms were shutting down. People were unable to live their lives the way they normally would.
You know we’re all talking about this like it was a positive, uplifting experience, but collaboration is tough. For you guys, what are some of the highs and lows from the investigation?
Ben: The material itself was incredibly difficult to penetrate. The documents are not clearly written. We also had the challenge of publishing this project in the midst of a global pandemic that challenged us and our news partners in ways I think that we’ve never been challenged before.
So, some of the same reporters and editors who we’re counting on to help report out FinCEN Files were are all of a sudden being pulled into emergency duty to cover, you know, this public health crisis that was developing around the world and in their own countries
They are constantly pulled into other stories, other coverage, for very understandable reasons, and away from a project that’s about financial crime in money laundering.
And so at ICIJ, our real challenge was to keep focused because we believe this is a vital story that clearly nobody else is telling.
We think it should have incredible resonance right now, because, you know, what we’re talking about is money that could be used to combat global health crisis – crises – for example, that is being instead stolen and routed through major banks, imported into offshore financial centers and basically hidden from the people who it could most help.
We had along the way, we had partners who had to drop out because they were under financial pressure, advertising disappeared.
And yet, despite all that, you know, we’re able to keep 400 people engaged and I say, we were able to keep – they stayed dedicated to the project.
And because of that, we were able to have a successful outcome.
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Amy: So normally at the end of the Meet The Investigators podcast we ask our guests to share with us what they’re currently reading that is of interest so that our listeners can go away and read up on the latest magazine or the academic article.
Given this is a FinCEN Files-focused podcast, what I wanted to know is, what’s the most exciting story that our partners published from across the world that you think our listeners should go away and read?
Karrie: If you can, I really highly recommend getting the Private Eye Magazine. And they have this incredible special report. It’s about four pages, where they dove into Russian money and U.K. politics, and they look at shell companies and Kremlin ties.
And it really is very, very exciting and, you know, crypto coin, Bitcoin, and all sorts. It’s brilliant.
It just shows how, much like, they talk about how much dirty money is in U.K. politics and U.K. society, and what it’s doing to the country. And I just think it’s a phenomenal read.
Spencer: NBC News dove into a series of transactions around a U.S. based technology startup that processes international payments. This startup is called Payoneer, and it’s something of a darling of Silicon Valley and the FinCEN Files led NBC to take a look at something that had just been so under the radar before.
Amy: Awesome. We also have this great story on our website, where you can go, and you can search by country and via the language of your choice. And you can see what our partners wrote about the investigation.
So, it’s so nice to talk to you all. Congratulations on another great investigation. Thank so much guys, it’s been great!
Karrie: Thank you.
Ben: Thanks guys.
Amy: Don’t forget! Make sure you tell your friends, colleagues and the people you run into at the dog park about our podcast. This episode was produced by Scilla Alecci and me, Amy Wilson-Chapman. And if you share it on social media, be sure to use the hashtag, #MeetTheInvestigators.
Until next time!