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Top 5 Money Laundering Cases of the Last 30 Years

by: (Research and Development Manager) on

Money laundering and, conversely, anti money laundering (AML), continues to be a hot topic, especially within businesses and large corporations, as government agencies – particularly in the US (where an estimated £231 billion is laundered annually) – continue to crack down on money laundering and sanctions violations.

Top 5moneylaundering

 

So I wondered, what are the biggest money laundering cases, not in terms of fines or penalties, but with regards to the amount of money laundered?

With this in mind, I did some research and have compiled a list. So here we go…

 

 5. HSBC - estimated £5.57 billion

Back in 2012, HSBC forfeited £1.2 billion for having inadequate money laundering controls. This followed a report published by the US Senate which alleged, amongst other things, that HSBC had:

  • supplied banking services and American dollars to some banks in Saudi Arabia in spite of their connections to terrorist financing
  • dodged restrictions created to prevent transactions involving Iran, North Korea and other countries subject to international sanctions
  • HSBC US didn’t treat its Mexican counterpart as high risk even though it has a problem with drug trafficking and money laundering.

Control issues like these allowed the laundering of an estimated £5.57 billion over at least seven years.

HSBC was able to enter a five-year deferred prosecution agreement or DPA, which is essentially like being on probation. If the US government had pressed charges against HSBC, it could have lost its US dollar licence. 

4. BCCI - estimated £17.6 billion

From the mid-1980s, BCCI and its customers were apparently committing fraud and money laundering across the world, for an estimated value of £17.6 billion.

This gained BCCI a reputation as a banker to arms smugglers, drug cartels and dictators. In fact, it had relationships with officials in multiple countries from Argentina to Zimbabwe which ranged from questionable to the fully corrupt.

Then, in 1988, a US Senate sub-committee was appointed to investigate claims that BCCI was involved in money laundering. In 1990, the bank pleaded guilty to money laundering and was fined £11.3 million.

An investigation was ordered in 1991 by the Bank of England into BCCI to be conducted by Price Waterhouse. This reported ‘evidence of massive and widespread fraud’ taking place over several years. About one month after this, BCCI was shut down by international regulators whilst still owing over £10 billion to its creditors.

BCCI apparently used a set of complex mechanisms to hide what it was doing; mainly using shell companies and secrecy havens as well as layering its corporate structure. It also entangled itself with kickbacks, bribes and well-placed insiders, who were able to discourage governmental action.

This case is thought to be one of the reasons that Gordon Brown, when he became the UK’s Chancellor of the Exchequer in 1997, transferred banking supervision from the Bank of England to the Financial Services Authority. 

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 3. Nauru - estimated £53.7 billion

Nauru is actually a phosphate rock island northeast of Australia. However, when the phosphate reserves were depleted, the island turned to offshore banking, leading to involvement in the ‘no questions asked’ registration of offshore financial institutions. This resulted in a role as a tax haven in 1993.

In 1998, Russian criminals laundered an estimated £53.7 billion through shell banks in Nauru. They were able to do this as Nauru reportedly allowed its banks to function without verifying the identities of its customers or questioning where deposited money came from.

Because of this, US sanctions were imposed by the US Treasury and Financial Crimes Enforcement Network on Nauru that were harsher than those imposed on Iran. Since 2001, however, Nauru has worked to clean up its act and has accepted aid from Australia in exchange for hosting a detention centre for asylum seekers that were trying to enter Australia illegally.

The sanctions were eventually lifted in 2005 when the Financial Action Task Force (FATF) removed Nauru from its ‘blacklist’ after the island abolished its 400 shell banks.

 

2. Standard Chartered - estimated £191.8 billion

In 2012, the British bank Standard Chartered was accused, by New York's Department of Financial Services (DFS), of helping the Iranian government to circumvent US money laundering regulations to the tune of an estimated £191.8 billion over 10 years.

The bank paid a civil penalty of £262 million in 2012 by the DFS and the US Department of Justice for failures in its anti money laundering controls and for violating US sanctions on Iran, Burma, Libya and Sudan.

It then had to pay a further £232 million in civil penalties in 2014 by the DFS for the bank’s internal controls failing to flag suspicious transactions. This arose from the regulator deeming that the bank had not improved its systems after promises in the 2012 settlement. It was also forced to discontinue certain activities such as exiting certain high-risk customers at its United Arab Emirates branch.

 

1. Wachovia - estimated £292.5 billion

In 2010, one of the biggest banks in America, Wachovia (now part of Wells Fargo), entered into a DPA (which has since expired) after the biggest ever action was brought under the Bank Secrecy Act.

An investigation was started in 2005 by the Drug Enforcement Agency (DEA) in the US. During the course of the investigation, it was discovered that Mexican cartels were smuggling US dollars, gained from selling illegal drugs in America, across the Mexican border.

The money was then given to the money exchangers who deposited it into their Mexican bank accounts. The origin of the money wasn’t investigated by the Mexican banks (as their regulatory requirements weren’t comparable to the US) and this allowed the criminals to place their illegal earnings into the legitimate sector.

These funds were then wired back to Wachovia’s accounts in America, whose origin, again, wasn’t checked. Any remaining bank notes were shipped back to America using Wachovia’s ‘bulk cash service’ provided to their correspondents. By using these two methods provided by Wachovia, the criminals were able to integrate their illegal funds into the financial system and then return the funds back to their starting country.

Wachovia paid federal authorities a total of £123.7 million for willingly failing to establish an adequate AML programme and subsequently allowing, from 2004 to 2007, the transfer of an estimated £292.5 billion into dollar accounts from money exchangers or ‘casas de cambio’ in Mexico that the bank did business with.

This included nearly £10 million that went through correspondent banking accounts at Wachovia to buy aeroplanes to be used in the drugs trade – more than 20,000 kg of cocaine was seized from these planes.

And More Besides?

During my research, I found many more cases of banks/organisations which had been caught up in money laundering or demonstrated poor anti money laundering controls.

So even though money laundering regulations are getting stricter – for example, FATF updated its  Recommendations in June this year, and the concepts of corporate transparency remain as pertinent as ever – I get the feeling we haven’t seen the last of companies becoming embroiled in these types of scandals.

However, whether they will make the Top 5 list remains to be seen.

To find out more about ICA's professional qualifications in anti money laundering, which can be studied all over the world, click here.

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4 Comments :

marwa said...
hi
thank you for your great research is there by any chance you have one of these case studies published in a journal ?
November 1, 2016 08:38
rabia said...
Hello. I am working on my business ethics project about Money Laundering. If anyone could please help me in finding a published article on any of these firms as you have done a lot of research. Please contact me through my email : rabiaali094@gmail.com. Thank you
October 24, 2016 08:30
David Monk said...
Holly - The Bank of New York case was US$8bn (see my LinkedIn profile, I was the investigating officer). Wachovia was big but not that big, speak with Martin Woods the MLRO at the time. I also worked at BNP Paribas and I don't know where Burke Files got his figure from. Their dealing was with Iran, I never came across any with N Korea or Sudan. Best, DJM.
August 1, 2016 11:54
Burke FIles said...
All good cases - but one is missing... the 20 Billion dollars laundered by BNP Paribas for Iran, North Korea, and Sudan. Also good note on BCCI - most people have forgotten about them - nasty little group to say the least.
July 28, 2016 04:14

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