U.S. banks may get power to challenge money laundering exams

Tue Nov 12, 2013 3:39pm EST
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By Brett Wolf and Aruna Viswanatha

WASHINGTON (Reuters) - Wall Street banks could get greater power to fight back against bad report cards on their efforts to combat money laundering under a proposal being discussed by U.S. regulators and the financial industry.

The bank examiner reports can form the basis of multimillion-dollar enforcement actions, and banks complain that they currently have little ability to appeal them.

The proposal, which is in early stages, would create an ombudsman to adjudicate disagreements between financial institutions and regulatory examiners, according to several people familiar with the talks.

The idea was raised by the Treasury's Financial Crimes Enforcement Network, or FinCEN, anti-money laundering arm, to an advisory group of regulators, law enforcement personnel and industry representatives that FinCEN created last year to identify more efficient ways of combating financial crime.

The move could give banks greater power amid a crackdown on how financial institutions vet their customers for illegal drug activity, terrorism or other crimes.

Some of the world's biggest banks have been hit with hundreds of millions of dollars in fines for failing to catch unlawful proceeds moving through their systems and many more have invested comparable sums to improve their compliance efforts.

The largest settlement to date was with HSBC, which paid a record $1.9 billion last year for its failure to stop huge sums of drug money routed through it from Mexico.

It is unclear whether the idea for an independent arbiter will turn into a formal proposal, or how long it would take to adopt such a proposal.   Continued...

The logo of HSBC bank is seen at its office in the Canary Wharf business district of London April 1, 2013. REUTERS/Chris Helgren