Exclusive: Big U.S. banks to push for easing of money laundering rules

Thu Feb 16, 2017 10:49am EST
 
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By Joel Schectman, Karen Freifeld and Brett Wolf

WASHINGTON/NEW YORK (Reuters) - America's largest banks are to propose a complete 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: Quote), Bank of America (BAC.N: Quote) and Citigroup C.N, has long raised concerns about the effectiveness of the current rules, but 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 wants 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. (tmsnrt.rs/2lRbO6Z)

Complying with anti-money laundering rules, including the manpower needed to file suspicious activity reports, costs U.S. companies as much as $8 billion a year, the Heritage Foundation estimated in a report last year.   Continued...

 
FILE PHOTO -  FILE PHOTO --  People walk beneath a Citibank branch logo in the financial district of San Francisco, California, U.S. on July 17, 2009. REUTERS/Robert Galbraith/File Photo