WASHINGTON (Reuters) - An independent federal “gatekeeper” should be created to help detect money laundering and other suspicious financial activity and to also protect banks from soaring compliance costs, the American Bankers Association said on Thursday.
The bank industry group also called for law enforcement agencies to focus on penalizing criminals, not banks trying to comply with confusing and complicated federal reporting obligations.
“Improving the effectiveness of our efforts against financial crime needs to be a key part of the next president’s regulatory reform agenda,” said ABA President Edward Yingling.
Banks, credit unions and gambling casinos are required to establish effective anti-money laundering programs under the Bank Secrecy Act (BSA) passed in 1970. The law calls for banks to file federal reports for transactions over $10,000. The law was amended by the Patriot Act of 2001 to also stop money flowing to terrorist groups.
Oversight of the federal anti-money laundering effort needs to be streamlined, the ABA said. It recommended appointing an independent gatekeeper to coordinate the efforts of regulatory, law enforcement and national security agencies.
The reporting obligations of banks to the federal government should be streamlined to ensure the most useful information about transactions and suspicious activity is given to the police, the ABA said.
According to a KPMG report last year, industry costs to comply with anti-money laundering regulations rose 66 percent between 2001 and 2004 and another 71 percent between 2004 and 2007.
Also, bank regulators should be responsible for making sure that banks comply with their reporting obligations, the industry group said.
In 2006, BankAtlantic Bancorp Inc agreed to forfeit $10 million to avoid criminal charges that it allowed millions of dollars in suspected drug money to be laundered through its accounts. In 2005, Riggs Bank agreed to pay $16 million related to a felony charge of failing to report suspicious transactions involving foreigners, including former Chilean dictator Augusto Pinochet.
Money laundering generally involves making certain financial transactions to hide the flow of illegal funds.
Reporting by Karey Wutkowski; Editing by Andre Grenon