By Anna Yukhananov and Aruna Viswanatha
WASHINGTON, March 7 Bank executives who violate
anti-money laundering laws may soon face harsher punishment in
the United States as regulators consider ways to step up the
fight against illicit money flows.
New rules are being weighed that will hold individuals
specifically liable, and older rules - rarely used to take
action against executives - will also be explored, top officials
from the Office of the Comptroller of Currency and the Treasury
Department's illicit finance unit told lawmakers on Thursday.
Regulators and law enforcement authorities have recently
settled with top banks, including HSBC Holdings Plc,
which in December agreed to pay a record $1.9 billion to resolve
charges it laundered a river of drug money from Mexico. It
entered into a deferred prosecution agreement, and no bank
employees were charged in connection with the case.
Senators on Thursday focused on that discrepancy and
attacked regulators for what they described as lax enforcement.
"If you're caught with an ounce of cocaine, the chances are
good you're going to jail. ... But evidently, if you launder
nearly a billion dollars for drug cartels and violate
international sanctions, your company pays a fine and you go
home and sleep in your own bed at night... I think that's
fundamentally wrong," said Elizabeth Warren, freshman Democratic
senator from Massachusetts.
Comptroller of the Currency Thomas Curry and the Treasury
Department's David Cohen, who is undersecretary for terrorism
and financial intelligence, told the Senate Banking Committee
they were taking steps to address the issue.
"One area we've not been sufficiently aggressive in is going
after individuals ... who are responsible for the conduct that
has resulted in fines and penalties against the institution
itself," Cohen said.
FinCEN, a unit within the Treasury Department that focuses
on money-laundering issues, can obtain injunctions and civil
penalties against individuals that violate the law. But it has
employed these tools only occasionally in the past, usually
against individuals affiliated with smaller money transmitters.
"In the future FinCEN will look for more opportunities to
impose these types of remedies in appropriate cases," Cohen said
in his testimony to the committee.
The OCC is also exploring regulatory changes to improve its
ability to bar bank officers, directors, and employees that
violate the Bank Secrecy Act, or BSA, Curry said.
"TOO BIG TO JAIL"
Lawmakers have stepped up pressure on regulators and the
Justice Department in recent months over their resolutions
involving bank misconduct, questioning whether some institutions
had become too big to prosecute.
On Wednesday, Attorney General Eric Holder told another
Senate panel that it was difficult to prosecute some large
institutions because it would "have a negative impact on the
national economy, perhaps even the world economy."
On Thursday, regulators appeared defensive and largely
shifted the blame to the Justice Department over decisions not
to take more aggressive action against HSBC.
"We do civil enforcement, and in the case of HSBC, we gave
the statutory maximum in terms of money penalties. We did what
we had the legal authority to do," said Federal Reserve Board
Governor Jerome Powell. "The Justice Department has total
authority ... to decide who gets prosecuted for what."
When Warren repeatedly asked whether regulators could
identify a line beyond which a bank should face losing a
license, Cohen struggled to respond before saying: "The actions
that we took in the HSBC case we thought were appropriate in
Senator Joe Manchin of West Virginia said the Department of
Justice should testify about why they haven't prosecuted
individuals. The committee did not invite a DOJ representative
to testify at the Thursday hearing, according to a committee
In a statement, the Justice Department said it is "committed
to aggressively investigating allegations of wrongdoing at
financial institutions and, along with our law enforcement
partners, holding individuals and corporations responsible for
At the hearing, Senator Tim Johnson, a South Dakota Democrat
who chairs the Senate committee, urged regulators to consider
the "full range of remedies" in similar cases, including
injunctions, industry bars, and suspending specific business
lines in response to violations.