Markets
JPM

Bank Stocks Fall After Report on Industry's Failure to Address Money Laundering

A report from BuzzFeed alleging that several of the most prominent banks in the world have not been doing enough to prevent money laundering sent shares of bank stocks tumbling Monday morning.

The list of banks named in the report include JPMorgan Chase (NYSE: JPM), HSBC (NYSE: HSBC), Standard Chartered (OTCMKTS: SCBFY), Deutsche Bank (NYSE: DB), and Bank of New York Mellon (NYSE: BK), among others.

The report centers around a trove of suspicious activity reports (SARs) obtained by BuzzFeed and then shared with other investigative journalists. The documents show how money flowed through these banks to fund Ponzi schemes, terrorist organizations, and criminals.

Ben Franklin's face superimposed over a spread of U.S. currency.

Image Source: Getty

Banks must file SARs when they notice some type of suspicious activity in a customer's account that may be trying to mask illegal activity. The goal is to prevent customers from participating in money laundering, tax evasion, insider trading, fraud, or the funding of a terrorist organization, among other illegal activities. 

SARs must be filed on all transactions over $10,000 and sent to the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department. There were more than 2 million SARs filed in 2019, according to BuzzFeed.

While obtaining the normally private SARs sheds new light on the issue, banks have come under pressure for not doing enough to enforce anti-money laundering and Bank Secrecy Act laws established in the past.

JPMorgan never filed a SAR on Bernie Madoff, and Deutsche Bank has been reprimanded by the Federal Reserve and other regulators several times in the last few years for its inability to improve its internal anti-money laundering controls.

Ultimately, the report suggested that SARs may not be an effective tool for rooting out money laundering because banks have previously filed numerous SARs on customers and continued to do business with them.

The report also suggested the easiest way to correct some of these issues is to arrest the executives responsible for the violations, a common call during the Great Recession.

The BuzzFeed report comes as the banking industry has largely been improving its reputation during the coronavirus pandemic and ensuing recession.

Banks have not been at the root of what led to this recession like they were during the Great Recession in 2008. They have also seen deposits surge in recent months and helped many small businesses keep their doors open through their role in the Paycheck Protection Program.

10 stocks we like better than JPMorgan Chase
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and JPMorgan Chase wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of August 1, 2020

 

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

JPM BK HSBC DB

Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More