Correspondent banks' huge financial flow challenges money laundering, asset recovery efforts, experts say

Banks are increasing their anticorruption due diligence, but the huge volume of transactions flowing through the US financial system makes foreign money-laundering investigations and asset recovery efforts significantly challenging, former Federal Bureau of Investigation agents said.

For instance, the time lag between the first transactions of a corrupt scheme could lead to the dissipation of the illegally derived money, making recovery of the money and its repatriation to its home country difficult, Karen Greenaway, a former FBI agent who pursued money laundered from Ukraine, said at an event in Washington.

In one $400 million money laundering case, Greenaway said, the money moved through at least 10,000 transactions.

She said her counterparts at the US Financial Crimes Enforcement Network told her the search for transactions with tainted, foreign origins is complicated by the fact that trillions of dollars flow through correspondent banking accounts.

Greenaway said the US has been at the forefront of recovering assets in money-laundering cases but that it could be more proactive.

Bryan Earl, another former FBI agent, told MLex that banks are turning to Big Data mining and artificial intelligence techniques to improve their anti-money-laundering procedures.

Earl initiated the US corruption investigation of former Ukrainian Prime Minister Pavlo Lazarenko.

Lazarenko was convicted and jailed in the US on money-laundering and related charges in 2009 and a civil forfeiture against $450 million in assets is pending against him in US District Court.

Earl said that after the collapse of the Soviet Union, law enforcement placed an emphasis on chasing funds looted from the USSR's former territories. But with the Sept. 11, 2001, terrorist attacks on US targets, antiterrorism became a much higher priority, and Earl said some people asked him why he was still pursuing dirty money from former autocrats.

"Now the issue is back," he said.

— Repatriation of money —

Even if US authorities recover the proceeds of crimes laundered into the jurisdictions, a serious question remains about how to repatriate the funds back to the host country, the panelists said. Repatriation laws in the US and elsewhere require that the monies be returned for the benefit of the original nation's people.

But a major concern is that if the money is returned to a country with a system and culture of kleptocracy, it would probably be stolen or corruptly used again, the panelists said.

The US and Uzbekistan are still negotiating the terms of returning about $800 million derived from a scheme that exchanged wireless telecommunications licenses in exchange for bribes. The funds came from penalties and disgorgements made by Vimpelcom, now called VEON, and other telecommunication companies that settled bribery charges with multiple jurisdictions.

Kristian Lasslett, a criminology professor from Ulster University in the UK, said concrete procedures need to be established and written into international law to guide repatriation of the funds to benefit the people who have been deprived of them through bribery and other corrupt means.

Lasslett said there have been good diplomatic protocols established recently, but they have tended to be aspirational. He said they should be fleshed out into an internationally recognized framework outlining what to do from "day one" of a repatriation process.