Global Financial Integrity


Taking stock of 2018’s money laundering scandals: When is enough enough? (Part 1)


If ever there was the need to showcase the extent to which there is an endemic problem surrounding money laundering at large banks, look no further than 2018. While the release of the Panama Papers in 2016 exposed the scale through which elites benefited from the offshore world, the number of bank scandals in 2018 helped us understand the extent to which some large financial institutions have acted as key enablers of illicit financial flows worldwide.

In some cases, such as with the Baltic states, the banking system has shown to be based on a business model that is purposely built to launder the proceeds of crime from Russian oligarchs. For others, particularly in the so-called “too big to fail” banks, significant failures in anti-money laundering (AML) controls have raised serious doubts about the ability and willingness of these institutions to act as the gatekeepers against dirty money.

I have selected a list of the top (or bottom) ten cases in 2018 that illustrate these trends.  The worst offenders will be profiled in the second part of this blog.

10. UBS
In December 2018, UBS was fined a mere US$15 million by US law enforcement for several failings within its AML programs. According to the Securities and Exchange Commission (SEC), a UBS branch in San Diego allegedly failed to file suspicious activity reports and did not have a reasonably designed AML program to monitor high-risk accounts belonging to non-US residents. From 2011 to 2013, the branch moved more than US$9 billion for some 6,000 non-resident accounts located primarily in Mexico, Venezuela, and Panama. The SEC also found that the firm’s surveillance analysts were allegedly clearing alerts even though transactions raised red flags and may have required further investigation.
9. Rabobank
In February 2018, Dutch bank Rabobank agreed to pay the US government US$369 million after pleading guilty to a charge of impairing, impeding, and obstructing US regulators by trying to conceal weaknesses in its AML compliance program.

The bank allowed hundreds of millions in untraceable cash – predominantly from Mexico – to be deposited in US dollars into its branches in California, which then transferred the funds without adequate monitoring and reporting of the suspicious transactions to federal regulators. It is unclear who was depositing the cash into the California branches or where they were transferred to, but US regulators confirmed that Rabobank chose to “look the other way” when it learned that a significant amount of transactions showed links to international drug trafficking, organized crime, and money laundering.

Not only did Rabobank admit that at certain times it employed only three employees to investigate more than 2,300 alerts each month, it also created a “Verified List” of high risk customers requiring no investigation so as to clear large numbers of alerts with a minimal investment in staff.

Despite such clear failings, the bank escaped actual criminal charges and entered into a deferred prosecutions agreement. Perhaps even more surprising was the fact that Rabobank’s plea deal did not include violations related to the offence of laundering illicit funds, unlike settlements involving other banks for similar links to Mexican drug cartels.
8. Commonwealth Bank of Australia
In June 2018, Australia’s biggest bank, Commonwealth Bank of Australia (CBA), agreed to pay US$534 million to settle civil proceedings relating to more than 50,000 breaches of anti-money laundering and counter-terrorism financing (AML/CFT) laws between 2012 and 2015. The breaches related to the bank’s use of intelligent deposit machines (IDMs). Introduced in 2012, IDMs allowed depositors to instantly and anonymously credit cash deposits to their accounts without any limits on the number of transactions. In addition, CBA had failed to report amounts over $10,000 to Australia’s financial intelligence unit, AUSTRAC, as required by law. Within two years, IDMs had been co-opted by at least four organized crime syndicates and used to launder at least US$75 million, according to Australian regulators. CBA received the largest civil penalty in Australia’s corporate history.
7. US Bancorp
In February 2018, US Bancorp agreed to pay US$613 million in fines to settle two criminal charges for failing to safeguard against money laundering risks. In the case of US Bancorp, US authorities found that the bank was only investigating a very limited number of suspicious transactions, with the US Department of Justice alleging that as much as 80% of the bank’s suspicious transactions should have been examined. Instead of making any changes in the size and funding of the bank’s AML team, US Bancorp knowingly ignored the red flags.
6. ING
In September 2018, Dutch regulators fined ING Bank US$900 million for inadequate client on-boarding requirements and for failing to prevent money laundering and corrupt practices during the period 2010-2016. Although no specific dollar amount was given to how much money was laundered through ING accounts, the lead prosecutor acknowledged that “hundreds of millions” were involved.

The investigation was launched following allegations of wrongdoing at four companies that had accounts at ING, including US$55 million in bribes paid to the daughter of Uzbekistan’s president by a unit of Russian mobile operator VimpelCom. The other ING clients it investigated included a Curacao-based women’s underwear company, a Suriname one-man building materials company, and a fruit and vegetable importation front company.

It is not the first time that ING has faced regulatory action for similar deficiencies. As recently as 2012, ING was ordered to pay a penalty of US$619 million for facilitating billions of dollars’ worth of payments through the US banking system on behalf of Cuban and Iranian clients.


For part two of this blog, visit Taking stock of 2018’s money laundering scandals: When is enough enough? (Part 2)