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From Drug Money to FIFA: How Banks Facilitate Illicit Transfers Around the World

Experts say it would have been difficult to move millions in bribes if it weren't for financial institutions turning a blind eye — yet again — to suspicious transactions.

by Samuel Oakford
Jun 5 2015, 6:27pm

Photo by Ennio Leanza/EPA

As a more complete picture emerges of the sensational corruption allegedly carried out by FIFA's aristocracy, experts say it would have been difficult to move millions in bribes if it weren't for financial institutions turning a blind eye — yet again — to transactions that should have raised suspicion.

"The FIFA scandal is not an aberration of how the international financial system works, it's actually a clear illustration," Eric Lecompte, executive director of Jubilee USA, a network of financial justice organizations, told VICE News. "Part of what is clear is that banks are not fully following or complying with existing money laundering laws. They are either avoiding or ignoring red flags."

Last week, American authorities indicted 14 people, including nine FIFA officials on charges that included wire fraud, racketeering, money laundering, and conspiracy. The Justice Department alleges that more than $150 million in bribes and kickbacks changed hands.

"Part of our investigation will look at the conduct of the financial institutions to see whether they were cognizant of the fact they were helping laundering these bribe payments," acting US Attorney Kelly Curry said after announcing the indictments.

Related: The FIFA Net Closes In: Will Sepp Blatter Be Next?

The banks named in the indictment — including HSBC, JPMorgan Chase, Bank of America, and Citigroup — do not currently face charges. But many of them have already paid record fines in recent years, or, like Citibank, are currently negotiating with US authorities over lax enforcement of money laundering safeguards.

In 2012, HSBC paid a $1.9 billion fine as part of an agreement with US authorities over charges that the bank allowed Mexican drug cartels to launder at least $881 million. Last Thursday, in a case unrelated to the FIFA scandal, Swiss authorities levied a $30.9 million fine against HSBC for lacking proper safeguards to avoid criminal transfers. This week, in a court filing, the Department of Justice said it had yet again found deficiencies in the bank's money laundering compliance policies.

Though US investigators have also targeted American FIFA officials, including former CONCACAF chief and unscrupulous Santa Claus lookalike Chuck Blazer, last week's charges brought against individuals from countries including Trinidad and Tobago, Costa Rica, Paraguay, and Brazil were possible because money passed through the American financial system.

One institution, Delta National Bank and Trust company, a small boutique bank that caters to wealthy Latin American clients and has offices in Miami, allegedly played an outsized role in the scandal. Authorities contend that Traffic International, a sports media company based in Brazil, shuffled at least $60 million in bribes and kickbacks to FIFA officials as part of an effort to win broadcast rights to FIFA tournaments and secure sponsorship deals.

Though Traffic also held an account with Citi in Miami, experts say its transfers through Delta should have raised flags, especially given the bank's history of misconduct. In 2003, Delta paid nearly $1 million after it was cited for failing to flag as much as $10 million in transactions tied to Colombian drug traffickers. Brazilian authorities have also launched investigations in the past into other Delta clients.

Related: SwissLeaks: How Banking Giant HSBC Helped 100,000 Rich Clients Dodge Taxes

When banks encounter questionable transactions, they are supposed to file suspicious activity reports. In the eyes of regulators, past scrutiny of a bank's practices should lead to stricter money-laundering measures and more reporting, but it appears that was not the case at Delta. As authorities determine whether charges will eventually be filed against any of the banks named in the indictment, they will likely consider the timespan over which the alleged misconduct occurred. The US says it dates back, in some cases, as long as 25 years.

The US indictment alleges that, among other practices, the accused parties established shell companies, "numbered bank accounts in tax havens and other secret banking jurisdictions," and engaged in "the active concealment of foreign bank accounts."

In the wider context of money laundering, the $150 million tied to FIFA is a small drop in the bucket, said Clark Gascoigne, communications director at Global Financial Integrity (GFI), a group that tracks illicit financial flows around the world. He added, however, that the case exemplified how American banks are used to lubricate illicit transfers out of other countries. GFI estimates that in developing and emerging economies alone, nearly $1 trillion flows out every year through a combination of crime, corruption, tax evasion, and other activity.

Gascoigne said one step that might reverberate among bankers would be to jail some of those proven of ignoring red flags in order to reap profits. "But that pretty much doesn't happen, certainly not with senior level people," he said.