Financial Sector Hit Hard Amid Allegations of Illicit Dealings

Strategic Insights -

The financial sector was dealt a significant blow on Monday as a report by the International Consortium of Investigative Journalists (ICIJ) revealed that several major banks, including JPMorgan, HSBC, and Deutsche Bank, allegedly continued to profit from illicit dealings with disreputable individuals and criminal networks despite previous warnings from regulators. The report, which was based on leaked government documents obtained by BuzzFeed News, alleges that these banks moved millions of dollars in payments for individuals and companies tied to massive looting of public funds in Malaysia, Venezuela, and Ukraine.

Key Takeaways:

  • The ICIJ investigation found that over $2 trillion in transactions between 1999 and 2017 were flagged by financial institutions' internal compliance officers as possible money laundering or other criminal activity, with $1.3 trillion of that activity taking place at Deutsche Bank.
  • JPMorgan allegedly moved money for individuals and companies tied to the massive looting of public funds in Malaysia, Venezuela, and Ukraine, and processed over $50 million in payments over a decade for Paul Manafort, the former campaign manager for President Donald Trump.
  • Deutsche Bank has been under scrutiny for years, with the bank agreeing to pay the state of New York $150 million to settle claims that it broke compliance rules in its dealings with the sex offender Jeffrey Epstein.
  • HSBC acknowledged in 2012 that it had laundered at least $881 million for Latin American drug cartels, but continued to manage money for shady clients, including suspected Russian money launderers and a Ponzi scheme under investigation in multiple countries.
  • Shares of JPMorgan, Deutsche Bank, and HSBC all fell significantly on Monday, with JPMorgan closing 3% lower, Deutsche Bank dropping 8.3%, and HSBC shedding 5.5% on Wall Street.

Statistics:

  • $2 trillion: Estimated value of transactions flagged by financial institutions' internal compliance officers as possible money laundering or other criminal activity between 1999 and 2017.
  • $1.3 trillion: Estimated value of transactions flagged by financial institutions' internal compliance officers as possible money laundering or other criminal activity at Deutsche Bank between 1999 and 2017.
  • $50 million: Estimated value of payments processed by JPMorgan for Paul Manafort over a decade.
  • $881 million: Estimated value of money laundered by HSBC for Latin American drug cartels in 2012.
  • 8.3%: Percentage decline in shares of Deutsche Bank on Monday.
  • 5.5%: Percentage decline in shares of HSBC on Wall Street on Monday.

Sources:

  • International Consortium of Investigative Journalists (ICIJ)
  • BuzzFeed News
  • Associated Press