Did Treasury Fire Jim Freis for Showing that Banksters Are a Bigger Problem than Terrorists?

As I noted earlier, a few weeks ago Treasury fired the head of FinCEN, Jim Freis. (FinCEN makes sure that financial institutions report whatever evidence of potential crimes they’re seeing.)

American Banker reported that Treasury wanted “additional focus on international areas such as terrorist financing,” and less focus on “other financial crimes such as mortgage fraud.”

Three days before he was fired, FinCEN released this report, showing in aggregate what all of last year’s Suspicious Activity Reports revealed. It shows that among the SARs from depository institutions (which make up over half of all SARs), reports of terrorist financing and hacking (computer intrusion) are going down, while reports of behavior targeting consumers–mortgage and consumer loan fraud–are going up (though it notes the mortgage loan fraud reports are inflated because some date from years ago).

  • Reports of Terrorist Financing declined 14%, from 711 instances in 2010 to 609 for the same period in 2011.
  • The number of depository institution SARs identifying Mortgage Loan Fraud as a Characterization of Suspicious Activity continued to rise (up 30.6% in calendar year 2011). Quite markedly, Mortgage Loan Fraud is the only summary characterization that has experienced an increase every year since 1996, with the past two years (2010 and 2011) accounting for nearly 37% of all noted instances of this specific activity for the last decade. Note that depository institutions may submit Mortgage Loan Fraud SARs well past the actual date of the activity. This upward spike in mortgage fraud counts is in predominant part attributable to mortgage repurchase demands and special filings generated by several institutions.4
  • Of the eleven reportable suspicious activities that experienced decreases, none saw greater than Computer Intrusion, falling 21% in 2011 as compared to those filed in 2010. For the second year in a row, this drop is amongst the largest of any of the defined summary characterizations.
  • Though having experienced decreases in 2009 and 2010, the number of reports indicating Consumer Loan Fraud (in whole or part) significantly rose in 2011, up 127% from the prior year.

Such trends are similar to what the report shows in the securities and futures industries, with an even bigger drop in terrorist financing and big gains in futures fraud, embezzlement, and insider trading.

  • Embezzlement/Theft saw the second largest gain of any of the suspicious activities reported in SAR-SF filings, rising 38% in CY2011. However, of the 21 Types of Suspicious Activity listed, Futures Fraud saw the biggest rise (up 85%) for the same year, increasing from 20 instances in 2010 to 37 instances in 2011.
  • Likewise, Insider Trading (+34%) and Forgery (+19%) also experienced double-digit growth, making them the only two distinct activities that have continued to rise every year since 2003.
  • Of those activity types showing a decrease, Bribery/Gratuity (down 74%) and Terrorist Financing (down 59%) both saw a sizeable drop between 2010 and 2011, with the former down from 69 reported instances last year to just 18 in 2011 and the latter falling from 46 instances in 2010 to a low of 19 twelve months later.

Remember, SARs are not a reflection of what Freis demands (nevermind the fact he’s been on the job when things like terrorist financing were higher). Rather, this is what banks and securities firms self report, as mandated by law, about what they’re seeing in their own records.

Jim Freis showed that terrorism is getting better and bankster crimes are getting worse. And then Treasury fired him.

And the report from American Banker suggests that by replacing Freis, Treasury may intend to have FinCEN dictate what financial institutions prioritize. Which will mean terrorism–and not the crimes of banksters–will once again be the focus.

Fincen is likely to take a higher profile when it receives new leadership. In the immediate aftermath of the Sept. 11 attacks, Fincen was very active in dealing with bank regulatory matters, including helping to shape policy on anti-money laundering requirements. But the financial crisis largely pushed Fincen to the side and the agency focused on many of its other responsibilities. Treasury appears to want Fincen to take a larger role in terrorist financing activities and possibly reassert itself in the bank regulatory sphere. In past few years, banks have not had to focus on what Fincen’s agenda was. A more assertive Fincen changes the equation.

FinCEN offers one objective read of the relative prevalence of various forms of financial crime. And last year, it showed that banksters were a growing problem and terrorists a shrinking one.

And that message was so dangerous to the powers that be, it appears, Treasury decided to kill the messenger.

Marcy has been blogging full time since 2007. She’s known for her live-blogging of the Scooter Libby trial, her discovery of the number of times Khalid Sheikh Mohammed was waterboarded, and generally for her weedy analysis of document dumps.

Marcy Wheeler is an independent journalist writing about national security and civil liberties. She writes as emptywheel at her eponymous blog, publishes at outlets including the Guardian, Salon, and the Progressive, and appears frequently on television and radio. She is the author of Anatomy of Deceit, a primer on the CIA leak investigation, and liveblogged the Scooter Libby trial.

Marcy has a PhD from the University of Michigan, where she researched the “feuilleton,” a short conversational newspaper form that has proven important in times of heightened censorship. Before and after her time in academics, Marcy provided documentation consulting for corporations in the auto, tech, and energy industries. She lives with her spouse and dog in Grand Rapids, MI.

17 replies
  1. Phil Perspective says:

    And to add, the banksters have been a growing problem since the days of JFK. And it will only get worse unless someone has the guts, not “Turbo Tax” Timmeh obviously, to put the screws to them.

  2. earlofhuntingdon says:

    @emptywheel: Yep. Treasure Islands is excellent, including Shaxson’s suggestions for further reading.

    One takeaway I haven’t seen much in print is that the US vies with London’s financial district as the greatest venue for laundering money. Seemingly, the US markets its ability to launder money from non-US customers. One would think it wouldn’t take many cutouts for a US-based wealth merchant to take advantage of those attractions.

    The money isn’t so much as hidden (much of it is, especially through English law-derived trusts), as untaxed, by tacit agreement with the countries who thereby lose the revenue. Principal sources of money to hide come from purportedly illegal trade in arms, drugs, people and money.

    Another takeaway is the more traditional one, again little talked about. That is, the loss to third-world countries when privileged political and business elites monopolize the extraction of domestic resources, then “hide” their revenues and profits offshore to escape tax, which drives those countries deeper into debt and thralldom to foreign banks, corporations and “development” agencies. That business model, once reserved for the Congo, seems to be coming to an American theater near you.

  3. jo6pac says:

    Remember back when king gwb the lesser went to England? The potus wanted to drive his traffic stopping car train through the heart of London. The answer from the $$$$ gods you’ll drive around if you know what good for you and the potus did.

  4. Phil Perspective says:

    @emptywheel: It’s very good!! I missed Yves’ recommendation. I saw Matt Stoller Tweet about it. And my local library had it, of all things. What’s even more interesting is how London, and Jersey(a British Crown Dependency), play a huge role in the power of the banksters.

  5. Phil Perspective says:

    @earlofhuntingdon: Not only that, but remember Tony Montana? Remember where he first put his money? Do you really think the big banks turn down the opportunity to handle money like that, even from illicit sources? Of course they don’t!! After all, JP Morgan was dealing with Iran even though they knew it would get them in trouble(which they got a slap on the wrist for).

  6. joanneleon says:

    @P J Evans: And I think the UK, on the whole, was never too fond of the Shrub. Certainly after Iraq they weren’t. Probably didn’t feel like dealing with the public outcry for inconveniencing the people for his whim.

  7. MadDog says:

    Totally OT – Via the NYT’s David Sanger, another White House-driven Team Obama 2012 narrative of the foreign policy tough guy personally taking out Iranian centrifuges:

    Obama Order Sped Up Wave of Cyberattacks Against Iran

    “From his first months in office, President Obama secretly ordered increasingly sophisticated attacks on the computer systems that run Iran’s main nuclear enrichment facilities, significantly expanding America’s first sustained use of cyberweapons, according to participants in the program…

    …This account of the American and Israeli effort to undermine the Iranian nuclear program is based on interviews over the past 18 months with current and former American, European and Israeli officials involved in the program, as well as a range of outside experts. None would allow their names to be used because the effort remains highly classified, and parts of it continue to this day…”

    The only thing spinning faster than those Iranian centrifuges is the Team Obama 2012 campaign staff hyping Obama’s foreign policy chops.

  8. klynn says:

    “And that message was so dangerous to the powers that be, it appears, Treasury decided to kill the messenger.”


    Great work yet again EW.

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