Laundry list

The leak of the so-called FinCEN papers has put money laundering back on the business pages for the first time in a while. It has also taken a heavy toll on the shares of some of the world's biggest banks, including Deutsche Bank and HSBC. That's a little odd, inasmuch as these 2500-plus documents are mainly "SARs", or Suspicious Activity Reports. Rather than evidence of wrongdoing by the banks, these reports are proof that they have been reporting such transactions to the monetary authorities, which is exactly what they are supposed to do.   

Detection and prevention of money laundering was a pervasive concern during my thirty years in the banking business, particularly when I moved from Canada to London just before the millennium. There were regular (and very tedious) sessions aimed at teaching staff members how to identify transactions that might constitute money laundering. Everyone was trained in the importance of KYC -- Know Your Client. The Compliance Department grew larger, more powerful and more intrusive year by year.

What was my takeaway from all this?  Sadly, it was that you can never quite keep up with the launderers. Every major bank in the world is just about certain that it is laundering money every day -- it just can't effectively identify every single suspect client and every single suspect transaction. Neither can the financial authorities.  That hasn't changed over the years, and it is unlikely that it ever will.