Bank Stocks Sold Off on Money-Laundering Concerns.

[tacobell fan]

Bank investors just got another gut punch.

Amid Monday's already brutal sell-off, banks fared even worse following a series of reports, detailing $2 trillion in suspicious transactions carried out by some of the world's largest lenders between 1999 and 2017. The transactions were uncovered by a leak of 2,100 suspicious activity reports, or SARs, the lenders themselves filed with the U.S. Treasury's Financial Crimes Enforcement Unit.

BuzzFeed News reported on the transactions in collaboration with the International Consortium of Investigative Journalists.

Bank investors fled the sector as the reports gave investors one more reason not to own stock in lenders. Investors had already been skittish about the likelihood that interest rates will remain lower, for longer, given the economy's uncertain prospects. Lower rates tend to cut into the margins banks earn on lending money.

The KBW Bank Index (ticker: BKX) shed 3.9% in Monday's trading while the S&P 500 was off by 1.2%.

"Banks remain a piata and a punching bag," Mike Mayo, senior analyst at Wells Fargo Securities, told Barron's.

But it is difficult to know what will come next for the banks. The activity was made public by a leak of suspicious-transaction reports the banks themselves filed with regulators, not activity that was uncovered by the authorities. Also, some of the reports predate measures banks have since taken to improve their risk controls.

In Monday's trading, investors appeared to be concerned about details that emerged in the reporting: that some banks continued to do business with entities they were concerned about, or failed to report questionable transactions in a timely manner.

Citing experts, BuzzFeed News wrote that some banks file the reports as a "get-out-of-jail-free card," implying they report the transactions without doing anything to prevent future suspicious dealings. In a statement Monday, the Bank Policy Institute said there may be instances where banks have been asked by law enforcement to keep accounts open so that more evidence could be gathered "to support an arrest and conviction."

The suspicious transactions flagged by Deutsche Bank (ticker: DB) totaled $1.3 trillion, the highest among the banks identified. They were followed by JPMorgan Chase (JPM), with $538 billion. Standard Chartered (UK:STAN) had $166 billion of flagged transactions, and Bank of New York Mellon(BK) had $64 billion.

All four banks told BuzzFeed News that they take seriously their obligation to fight financial crime.

Analysts didn't come down on the banks particularly harshly. Some noted that the reports by BuzzFeed and ICIJ didn't make it clear where a bank's obligations end and regulators' duties begin.

"Think about this: if I thought my neighbor was running a drug operation out of his basement, my obligation would be to report it to the authorities and not go bust it up myself with a baseball bat and my weed whacker," Glenn Schorr, analyst at Evercore ISI, said in a note Monday. "Point is, IF the banks have been reporting their SARs regularly and accurately, more of this article's ire should be pointed towards enforcement versus reporting."

Also complicating matters for investors is the fact that banks are legally prohibited from discussing the SARs and that filing them is not necessarily a bad act.

"Suspicious activity reports (SARs) are good things -- not bad, and reporting suspicious activities doesn't mean banks are knowingly allowing customers to commit criminal acts. Indeed, when banks report SARS, this can aid criminal investigations," Mayo said in a note Monday.

"We report suspicious activity to the government so that law enforcement can combat financial crime, and have thousands of people and hundreds of millions of dollars dedicated to this important work," JPMorgan said in an emailed statement.

"At Deutsche Bank we have devoted significant resources to strengthening our controls and we are very focused on meeting our responsibilities and obligations," Deutsche Bank said.

Standard Chartered and Bank of New York Mellon didn't immediately respond to Barron's requests to comment.

While analysts were willing to offer some support to the banks, they acknowledged that given the volume of transactions banks handle, it is unlikely that they will be error free.

"With that said, banks can and should continue to improve and tighten controls, and it's reasonable to hold banks and their management teams to this expectation and prosecute those who knowingly break the law," Mayo wrote.

Tell that to investors, who simply preferred to turn away.

[tom bhayya]

thaatha teamm members ey anta ga aa transactions majority

[tacobell fan]

Just now, tom bhayya said:

thaatha teamm members ey anta ga aa transactions majority

@Peddayana undi unna pedda surprise emi ledu

[tom bhayya]

26 minutes ago, tacobell fan said:

@Peddayana undi unna pedda surprise emi ledu

Banks first flagged the activity of Donald Trump's former political strategist Paul Manafort as suspicious in 2012, according to leaked Financial Crimes Enforcement Network (FinCEN) documents.

The documents, known as the FinCEN files, revealed how big banks have for years engaged with dirty money. The files, leaked to hundreds of journalists, show how $2 trillion worth of transactions were flagged as potentially criminal to FinCEN, controlled by the Department of the Treasury.

Banks began filing "suspicious activity reports" on transactions linked to Manafort in 2012, and JP Morgan processed more than $50 million in payments for Manafort — who was convicted of fraud in 2018 — that were included in the leaked documents, according to the International Consortium of Investigative Journalists (ICIJ).

The Guardian also reported that in 2017, JP Morgan filed a report on wire transfers worth more than $300m that involved shell companies in Cyprus that had dealt with Manafort.

 

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The ICIJ said Manafort's lawyer did not respond to an invitation to comment.

Manafort led Donald Trump's 2016 presidential campaign election for several months, but stepped down as political strategist in August 2016 after it emerged he had worked as a top consultant for the former Ukrainian president, Viktor Yanukovych, between 2014 and 2015. 

JP Morgan processed at least $6.9 million in transactions in the 14 months after his resignation from the Trump campaign, the FinCEN files showed.

In 2018, Manafort was convicted on five counts of tax fraud, two counts of bank fraud, and one count of failure to report foreign bank accounts, receiving a seven-and-a-half-year prison sentence. He was released early from federal prison in May over COVID-19 concerns, due to his frail health.

 

 

 

[tacobell fan]

9 hours ago, tom bhayya said:

The files, leaked to hundreds of journalists, show how $2 trillion worth of transactions were flagged as potentially criminal to FinCEN, controlled by the Department of the Treasury.

nice

[veerigadu]

Niceeee.