Ivor Ichikowitz recoils at the arms industry‟s “reputation for being very cloak-

and-dagger.”

“We are not in the destroying-anything business,” the 53-year-old founder of

South African arms company Paramount Group told CNBC a few years ago.
“We‟re in the protecting business.”

His bankers at Barclays, the global financial group based in the United
Kingdom, have been happy to have his business, profitably moving hundreds
of millions for Ichikowitz and his companies.

But in recent years in-house watchdogs at Barclays have sounded alarms

about corruption allegations involving Ichikowitz, raising questions about
whether he engaged in the kind of secretive maneuvers he bristled about in
public. They flagged more than $430 million in transactions, which moved
through the bank for more than five years beginning in August 2011 as
suspect, according to closely guarded suspicious activity reports, known as
SARs, that were obtained by BuzzFeed News and reviewed by
the International Consortium of Investigative Journalists.

After firing off several warnings to the U.S. Treasury Department‟s Financial
Crimes Enforcement Network, known as FinCEN, Barclays hired an outside
private intelligence firm co-headed by former British spy Christopher Steele to
dig deeper. The resulting brief raised even more red flags, citing sources who
said Ichikowitz had parlayed political donations into military contracts in
South Africa, according to a report Barclays sent to FinCEN.

Banks are required to exercise greater care when serving politically-connected

clients who are viewed as more vulnerable to bribery or corruption because of
their senior positions, the countries they reside in or their industries.
Sometimes, banks flag their money movements, not necessarily because the
transactions are suspicious, but rather because of general concerns about
clients and their businesses.
Barclays in New York “remains concerned with Ichikowitz and his companies‟
source of wealth and Ichikowitz‟s possible involvement in bribery and
corruption,” compliance officers wrote in the December 2017 SAR.

The documents, part of a larger leak known as the FinCEN Files, offer an
unparalleled view into how controls within large global banks intended to
keep tainted money from moving around the globe collide with their
overriding imperative to churn out bigger and bigger profits. The reports also
point to a regulatory regime unequal to the task of policing banks‟ profit-
driven movement of illicit cash.

“Bankers are wired to make money. They don‟t want to say no,” said Paul
Pelletier, a former senior U.S. Justice Department official and financial crimes
prosecutor. “In order to get banks to behave, there has to be sure and swift
enforcement against bad actors. And that is not what is happening on the
ground.”

The suspicious activity reports shed rare light on apparent conflict within a
global bank about how to treat notable high-profile clients linked to
corruption scandals, but never formally charged with wrongdoing. The
tensions often pit bank compliance officers, who are charged with alerting
authorities about suspicious money flows against private bankers who trophy-
hunt for wealthy clients.

The frictions can even result in divergent approaches to the same client within
different parts of a bank.

In 2017, even as Ichikowitz‟s and Paramount Group‟s money continued to

course through Barclays, its corporate division moved to sever ties to a
company linked to Ichikowitz because it was “outside of [its] risk appetite”,
according to the suspicious activity report.

Moving suspect money for politically-exposed persons, known as PEPs, can

lead to fines or worse. Just two years before, in November 2015, a U.K.
regulator fined Barclays $109 million for failing to properly vet some of its
risky, politically-connected clients, going to “unacceptable lengths to
accommodate” them.
SARs reflect the concerns of compliance officers and are not necessarily
indicative of criminal conduct or other wrongdoing.

The reports describing money flows from Ichikowitz‟s businesses were

included in a batch of more than 2,100 suspicious activity reports requested by
the U.S. Congress as part of the investigation into Russian interference in the
2016 election.

Concierges to the global wealth set

The FinCEN Files pull back the veil on the discreet world of private banking,
which consulting giant McKinsey & Co. in 2019 described as “the most
profitable sector in the global banking industry,” attracting the likes of some of
the biggest banks in the world, including Barclays, and some smaller players
such as Swiss-based Julius Baer.

Unlike investment bankers, who are charged with selling stock or engineering
game-changing merger deals, private bankers are tasked with trawling for
wealthy clients, luring their riches to the bank.

Ever since the 2008 financial crisis, private bankers — who compete to
manage about $200 trillion in global personal wealth — have become more
important to banks. In 2018, private banking contributed “a sizable 5 to 6
percent of profits,” McKinsey said.

Private bankers go to extraordinary lengths to pander to rich clients. They

serve as personal concierges to the global wealth set, scoring hard-to-get
tickets to sporting events and concerts. For the super-elite, they can go even
further. The five-star treatment provided by one bank has included stays at a
magnificent vacation property in Uruguay‟s seaside resort town Punta del
Este.

More important, they lavish on clients an array of financial perks and services
— including access to hot initial public offerings of stock and attractive loans
such as Donald Trump extracted from his private bankers at Deutsche Bank.

Such attention to clients can pay off — and bring risk.

Nine billionaires who have appeared on the Forbes list of richest people in the
last decade moved money through Barclays between 2009 and 2017 that was
later flagged as suspicious, the FinCEN Files show.

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An enduring challenge even for banks trying to follow money trails is

grappling with an entire industry set up to cover tracks. The wealthy and well-
connected can easily set up companies in offshore jurisdictions where secrecy
is a selling point. They are helped by an army of enablers; among them,
private bankers who connect clients to firms that create trusts or offshore
companies.

“The real growth of the global financial secrecy industry worldwide has been
powered by the premier first-world banks,” said James S. Henry, former chief
economist at McKinsey & Co. and now a global justice fellow at Yale
University.

Henry, drawing on new data from the Organisation for Economic Cooperation
and Development, together with information from the United States,
estimated that as of the end of 2019 roughly $50 trillion of financial wealth
was invested offshore and virtually tax free through more than 100 secrecy
jurisdictions.

Of course, financial institutions declare that they have safeguards designed to

check illicit money flows.

“Financial crime weakens financial institutions and we have a shared interest,

in addition to our legal obligations, to prevent it,” Barclays said in a written
statement to ICIJ. “Financial crime is, by its nature, complex and difficult to
detect.”

Barclays declined to answer questions about specific clients and transactions,

citing the confidential nature of suspicious activity reports.
Barclays said it continues to investigate and monitor account activity after
SARs are filed, working at times with law enforcement. In most cases,
accounts are not closed after SARs are filed, the bank noted.

“If we conclude we have financial crime concerns we take appropriate action

and have done so in numerous cases over the years,” Barclays said.
Terminating client relationships only happens “after careful and objective
investigation and analysis of the evidence, balancing potential financial crime
suspicions with the risk of „de-banking‟ an innocent customer.”

Barclays added that it has “complied with all our legal and regulatory
obligations including in relation to U.S. sanctions.”

Bankers versus compliance

An imbalance of power works in favor of private bankers, those well-rewarded
servants of the very rich, and against the banks‟ lower-paid compliance
officers, who are often disparaged within firms as back-office bureaucrats.

The gulf is particularly stark in Europe. Before the 2008 financial crisis,
compliance was a backwater profession attracting people with lesser
qualifications, said Andrew Samuels, who worked for Barclays in London from
2015 to 2016 as a program manager for whistleblowing and investigations.
The job Samuels held is common in banks and involves investigators fielding
tips from employees and assessing the risks some clients and transactions can
pose.

Samuels is now chief executive of WisIPort, which helps companies with

whistleblowing and compliance initiatives. He said there‟s a lot of tension
between “the new sheriffs — the more visible, more professional compliance
officers” — and the private bankers, interested in acquiring more clients and
assets.

The bankers‟ resistance to following the rules is encouraged by the weakness

of the Financial Conduct Authority (FCA), the United Kingdom‟s primary
overseer of banks such as Barclays. Since 2007, financial institutions including
Barclays, Deutsche Bank and Standard Chartered Bank have paid a little more
than $500 million in fines in the U.K. for money laundering violations— a
pittance compared with the billions of dollars in profits most global banks
generate in a year.