In February, here’s what Jennifer Shasky Calvery said in testimony before a House Subcommittee.
These staggering amounts of money in the hands of some of the worst criminal elements create a terrifyingly vicious cycle – money enables [the crooks] to corrupt the economic and political systems in which they operate, thereby allowing them to consolidate and expand their power and influence, which gives rise to more opportunity to commit crime and generate revenue.
Mind you, I’m cherry picking a quote from testimony about Transnational Crime Organizations. But it shows the blindness DOJ (and the Administration generally) have had as they try to repurpose their counter-terrorism tools to combat transnational crime: to some extent, what’s true of drug cartels is also true of the banks that have escaped prosecution even while doing as much damage as the drug cartels.
And yet we never get around to prosecuting our own transnational criminal organizations, the banks.
It’s worth keeping in mind, now that Shasky Calvery takes over at Treasury’s FinCEN, the part of the Agency that makes sure corporations are complying with reporting requirements of suspected financial crimes.
The other day, I noted how–days after his department reported that suspected bankster crimes are growing quickly and terrorist financing crimes are going down–Treasury Department fired FinCEN head, Jim Freis. Given some of the reporting describing the firing, which explained that Treasury wanted to focus on things like terrorist financing whereas Fries had been focusing on things like mortgage fraud, I wondered whether Treasury fired Freis, in part, for showing that the emphasis on terrorism resulted in the neglect of bankster crimes.
Today, FinCEN sent out notice of a survey to determine how useful that report and another yearly report–on Tips and Trends–they produce are (note, the email notice says an invitation to the survey is here, but as of 8:15 it is not).
As a subscriber to e-mail updates from the United States Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), FinCEN invites you to participate in a survey assessing the value of two of our recurring publications: The SAR Activity Review-Trends, Tips & Issues and The SAR Activity Review-By the Numbers. This invitation has been sent to you in follow up to FinCEN’s prior e-mail notification. A copy of that notice and this invitation can be found on FinCEN’s official website at http://www.fincen.gov/hotTopics.html
To participate in this completely voluntary survey, please click on the following link: https://svy.cfigroup.com/cgi-bin/qwebcorporate.dll?idx=HWGKEN Please note that this link will direct you to a website hosted by the CFI Group, which FinCEN has commissioned to conduct this survey. FinCEN has obtained permission from the Office of Management and Budget through control number 1090-0007 to conduct this survey in accordance with the Paperwork Reduction Act (44 U.S.C. § 3501-3520) and its implementing regulations (5 C.F.R. Part 1320).
Through the survey, we hope to learn more about your needs and identify opportunities to improve these products. The results of the survey will be reported to FinCEN only in the aggregate; individual responses will be grouped anonymously along with those of other FinCEN customers.
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).
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.
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.
Two weeks ago, Treasury fired the guy in charge of FinCEN (the part of Treasury that enforces and tracks Suspicious Activities Reports), Jim Freis, reportedly (pay wall) because he wanted to focus on law enforcement and financial crimes, rather than a more focused counterterrorism focus.
The issue wasn’t Fincen’s speed or personality conflicts, but more about control. To put it simply, Treasury wants more oversight of Fincen’s activities, including additional focus on international areas such as terrorist financing. “Fincen ought to be better integrated and tethered to the policy issues that relate to money laundering, terrorist financing and economic sanctions on behalf of the U.S. government. It’s not as well integrated as it should be,” said a senior administration official who spoke on condition of anonymity.
Freis saw Fincen’s role as more independent, and was primarily concerned with the agency’s role in supporting law enforcement agencies as well as tackling other financial crimes such as mortgage fraud.
And if that isn’t enough to make you wonder about this Administration’s commitment to making banks obey the law, consider that the apparent leading candidate to replace Freis is JP Morgan’s anti-money laundering VP, William Langford.
In December 2009, when JPMC extended a $2.9 million loan to the Islamic Republic of Iran Shipping lines, in violation of WMD sanctions, Langford was the VP at JPMC in charge of money laundering. He was there, too, when JPMC decided not to self-disclose the loan until they had almost been repaid.
In the months before March 2011, when JPMC repeatedly claimed it didn’t have 20 documents relating to a wire transfer with Khartoum? Langford was at JPMC for that too.
The 9 wire transfers since April 2006 in violation of a range of sanctions? He was there for most of those.
And he was probably at JPM–though just barely–when JPMC transferred $20M in gold bullion–a ton of gold!–for an Iranian bank?
Now, presumably all this money laundering and sanctions violating happened in remote corners of JPMC, far from Langford’s views (though you would think his office would be involved in the non-responsive answers about the Khartoum documents and decisions about when and whether to self-disclose some of these violations). There is no reason to believe Langford facilitated any of this money laundering and sanctions violating.
Still, even aside from the whole revolving door problem, from the centrality of JPMC in both the MF Global and JPMC’s won Fail Whale investigations, it seems like Treasury might hire someone who couldn’t keep one bank in line, much less all of them.