America’s largest banks are to propose overhaul of how financial institutions investigate and report potential criminal activity, arguing that rules imposed in the years after the Sept. 11, 2001 attacks and strengthened during the Obama administration are “onerous and ineffective”, sources said.
The Clearing House, a trade association representing the largest U.S. banks including JPMorgan Chase & Co (JPM.N), Bank of America (BAC.N) and Citigroup (C.N), has long raised concerns about the effectiveness of the current
rules.
However, this will be the first time the group has publicly called for them to be revamped.
The proposal which could be published as soon as Thursday will set the stage for an intensive
lobbying effort targeting bank regulators and members of the Senate and House of Representatives Finance Committees.
President Donald Trump has said he wanted to cut costly regulations for Wall Street.
To keep drug traffickers and terrorists from laundering money through the U.S. financial system, federal law mandates that bank employees file a Suspicious Activity Report (SAR) with authorities if they suspect transactions could be part of a crime.
Faced with record penalties in recent years over failures to alert authorities to criminal activities,
banks say they now over-report, filing hundreds of thousands of SARs out of fear of later falling foul
of regulators.
“Now we tell banks to file a report on everything that might be criminal,” said Gary Shiffman, CEO
of compliance software maker Giant Oak.
“But when everything is a priority nothing ends up being a priority.”
The number of suspicious activity reports rose from 669,000 in 2013 to almost a million in 2016, according to U.S. Treasury’s Financial Crimes Enforcement Network (FINCEN) which enforces anti-money laundering rules and collects data on suspicious transactions from banks around the country.
Complying with anti-money laundering rules, including the manpower needed to file suspicious activity reports, costs U.S. companies as much as eight billion dollars a year, the Heritage Foundation estimated in a report last year.
The Clearing House will propose a new system under which banks do not investigate and report every transaction that could possibly raise a red flag, according to people involved in the effort.
Instead, banks would focus on investigating and reporting transactions based on specific concerns relayed to them by law enforcement.
Under this approach, banks could shift their focus as law enforcement priorities change.
Institutions in different parts of the country may also watch out for certain types of criminal
transactions based on information from authorities.
For example, law enforcement could warn banks in the southwest of the United States to look out for drug traffickers moving funds to Mexico, according to people involved in drafting the proposal.
The Clearing House will also call for the creation of an information-sharing platform that would
allow banks to share data among themselves about possible criminal transactions. (NAN/Reuters)
UDO/DA
Editing by Udochuckwu Ifionu/Dele Akinsola