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The FinCen leak is a call to action

Gaurav Bedekar
November 13, 2020

The US Treasury’s Financial Crime Enforcement Network (FinCen) monitors some of the largest banks in the world and one of the largest volumes of financial transactions globally.

Recently, a set of leaked records from the FinCen revealed details of suspicious activity reports (SAR) filed by an array of banks between 2011 and 2017. The total value of potentially suspicious transactions covered in these SARs is around $2 trillion. The leak revealed that some of the world’s leading financial institutions supported the transfers of large funds on transactions that had been flagged as suspicious and SARs were filed by their respective compliance departments.

Over the years, there have been questions raised on the efficacy of the compliance monitoring programs in the banking industry with no consolidated data in the public domain. The international and domestic AML (anti-money laundering) regulations require banks need to file SARs within a stipulated timeline after the detection of reportable transactions.

The FinCen leak indicates a need to revisit the financial crimes regulatory environment more holistically by regulators but also a significant control deficiency at many banks and underscores the need to ensure that banks do not abdicate their responsibilities after completing the required submissions under the AML regulations.

It is vital that banks put in place a robust internal controls mechanism which couple the SARs submitted to the regulators with the required and proportionate internal actions. A holistic system of strong and effective internal controls with continuous monitoring is critical to ensure the bank’s financial health, business efficiency, and sustainability. This would ensure that banks abide with not only the letter but also the spirit of the law are spared the onerous burden of potentially significant fines and penalties and damage caused to the reputation of the bank with respect to future stakeholders and consumers.


The FinCen leak is proving to be a catalyst in the continuous initiative by global regulators to ensure strong preventative controls and restrictions against global transfer of criminal proceeds and terrorist financing. Effective controls across the AML lifecycle particularly the controls following the filing of SARs have often been the weakest link in the chain.

There is now renewed activity from global regulators to effect the new mandates. It is expected that the regulatory changes would result in increased scrutiny and oversight across the banking transaction lifecycle.

In the past few weeks, an advanced notice of proposed rule-making was published where the Federal Register is soliciting industry suggestions on proposed regulatory improvements to enhance the effectiveness of AML programs. There are also similar initiatives in Europe with the European Commission seeking to establish a single rulebook, supporting the implementation of an effective and consistent risk-based AML and counter-terrorist financing (CFT) regime for all member states.

There is also a greater need for the top management and the board at banking institutions to be held more accountable and to ensure that a strong compliance culture is adopted and disseminated top down.

It is imperative that global banks and financial institutions redesign their AML compliance architecture with a dynamic risk-based controls framework, which ensure a continuous and consistent execution of the regulatory mandate with a 360° view of organizational due-diligence and management oversight.

The FinCen leak should serve as a wakeup call for the banking industry. While there are expected to be long-term changes in the regulatory environment, banks should also take immediate action in the meantime to identify key gaps in the controls framework and undertake suitable remediation including:

  • Deep-dive analysis on the compliance controls framework to identify process gaps, actionable insights, flaws in the controls tracking and gaps in regulatory and management oversight
  • Conduct analysis of existing SARs that might require further control actions
  • Put machine learning in place to ensure consistency and automation for commonly addressed use cases
  • Ensure a technology and data-driven regulatory program for anti-money laundering and compliance infrastructure across the banking and financial services regulatory ecosystem

Next-generation compliance technology could prove to be a long-term game changer in this regard enabling the acceleration of the efforts of banks and regulators to stem the tide of money laundering in the international banking arena.

While banks are increasingly investing in their financial crime architecture including leveraging the advancements in compliance technology, there is an immediate need to synchronize the key initiatives including the following:

  • Optimize control automation, systematized automated reporting and ensure transactional adaptability and transparency to combat the increasing transactional volumes and growing sophistication of financial crimes.
  • Leverage next-gen technology innovations such as transaction pattern recognition, machine learning, and artificial intelligence (AI) to improve detection, controls, and remediation.
  • Employ unambiguous identity verification and bank-client interaction biometrics, combined with deep learning, OCR, and distributed ledger technology.
  • Embed analytics across process lifecycle to ensure greater efficiency, integrity as disaggregated controls and metrics are found to be key to failures and regulatory fines.
  • Enhance synergies and reduce costs by leveraging centralized financial crime processes, systems, teams, and data integration with the transactional ecosystem.
  • Build a highly adaptable and flexible ecosystem to meet the needs of the dynamic market and changing regulatory environment.

We believe that the time is ripe for banks and financial institutions to rearchitect and optimize their compliance environment to reaffirm the trust and confidence of their customers and stakeholders and ensure that they contribute to ensuring the safety and sanctity of the international financial ecosystem.


Kavita Nar

Principal, Invent Banking

Capgemini Invent