Editorial | The FinCEN Files: an important conversation

But while law enforcement agencies have to up their game, the fight against financial crime also requires political will to fix legal loopholes and address failures in cross-border cooperation

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The latest leak of financial information to be published by the International Consortium of Investigative Journalists (ICIJ), called the FinCEN Files, opens up an important conversation on the banking sector and its role in illicit money flows.

It is not a new conversation. Other similar leaks in the not so distant past – Lux Leaks, Panama Papers, Swiss Leaks and Paradise Papers – prompted serious debates on how banking institutions, financial services practitioners, friendly tax regimes and other players facilitated the movement of dirty money through legitimate channels.

There are perfectly legitimate reasons why companies and individuals may need to shift assets and cash from one jurisdiction to another and set up offshore companies.

But the primary concern is not about those who operate within the boundaries of legitimacy but those who stretch these boundaries to further illegality.

The latest leak of suspicious transaction reports (STRs) filed by financial institutions with the American Financial Crimes Enforcement Network (FinCEN) recasts the spotlight on the topic of financial crime.

This is not to say that STRs are in themselves a sign of wrongdoing by the flagged party. But they are a vital part of the early warning system to weed out criminal activity.

And while banks and other financial institutions have a legal and moral duty to combat money laundering by denying criminals access to legitimate channels, the FinCEN Files also cast a spotlight on the failures of regulatory authorities to crack down in an efficient manner.

This leader has flagged on numerous occasions the problems experienced domestically in recent years when rapid economic expansion was not matched by an equally robust increase in resources for law enforcement and regulatory agencies.

It now seems that is not just a Maltese problem.

Keeping up with vast volumes of cash flowing through legal channels is not easy and requires constant surveillance, investment in human and technological resources and cross-border knowledge-sharing.

Keeping up with criminal activity is many times a catch-up game but the situation need not be so.

In the late 1980s and 1990s, Italian prosecutors going after mafia bosses realised that by following the money trail they would be hitting directly at the heart of the multi-million criminal operations.

It was this method that sought to cut off the money lifeline of mafia organisations by going after the practitioners who aided and abetted the legal façade that led to some of the biggest successes.

Two brave magistrates – Giovanni Falcone and Paolo Borsellino – paid with their lives for the new methods they adopted to weed out the higher echelons of the mafia.

The same rings true for today’s more sophisticated methods of cashing in on illegal activity adopted by money launderers.

But while law enforcement agencies have to up their game, the fight against financial crime also requires political will to fix legal loopholes and address failures in cross-border cooperation.

Having said this, the fight against financial crime will always remain a struggle between going after criminals and not stifling the legitimate channels; between snooping on dirty money trails and protecting the privacy of individuals.

However, it would be misguided to believe that this is just a fight for the authorities. Part of the burden must be shouldered by the actual private institutions and banks that facilitate the flow of money.

They must not be party to this dirt, which not only undermines the rule of law but threatens the very basis of an open society that champions the free market.

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