Compliance Blog

Written by Bernadette Clair, Regulatory Compliance Counsel

Last week, U.S. Senators Dianne Feinstein (D-Calif.) and Chuck Grassley (R-Iowa), co-chairs of the Senate Caucus on International Narcotics Control, released a report on strengthening anti-money laundering (AML) practices in the U.S. The report, entitled The Buck Stops Here: Improving U.S. Anti-Money Laundering Practices, is intended to “outline the scope of the problem, describe the U.S. anti-money laundering framework and its main gaps and propose solutions for how we can best strengthen our anti-money laundering laws.”

A press release on the report highlights several recommendations:

• Stronger enforcement of anti-money laundering laws by the Justice Department, particularly in cases where banks are accused of improperly monitoring billions of dollars in illicit proceeds;

• Making pre-paid cards (known as stored value) subject to cross-border reporting requirements;

• Closing a loophole that makes armored cash carriers exempt from reporting requirements;

• Passage of the Incorporation Transparency and Law Enforcement Assistance Act to make it more difficult for criminal organizations to hide behind shell companies;

• Passage of the Combating Money Laundering, Terrorist Financing and Counterfeiting Act to close gaps in anti-money laundering laws; and

• Enforcement of the 2007 National Money Laundering Strategy, including the requirement that all money service businesses register with the Treasury Department’s Financial Crimes Enforcement Network.

In addition to pushing for additional action on the legislative and regulatory fronts, the report urges stronger enforcement of current laws by the Department of Justice, so that penalties for noncompliance with BSA requirements will not be viewed simply as a cost of doing business.  From the report:

"STRONGER DEPARTMENT OF JUSTICE ENFORCEMENT

 1. Finding: On December 11, 2012, HSBC, one of the largest banking and financial services institutions in the world, agreed to pay a $1.92 billion settlement to federal and state authorities for charges that they failed to maintain an effective anti-money laundering program. U.S. authorities charged that HSBC had allowed over $200 trillion in wire transfers to enter the United States unmonitored, including $670 billion in wire transfers from Mexico and at least $881 million laundered by Mexican and Columbian drug traffickers. In addition, over $9.4 billion in physical money entered the United States from Mexico unmonitored. Similarly, in 2010, Wachovia agreed to pay $160 million to settle charges that its weak anti-money laundering compliance program enabled more than $373 billion to enter the bank unmonitored as required by law, $110 million of which was shown to be  Mexican drug money.1 In both cases, no individuals were criminally prosecuted by the Department of Justice.

Recommendation: The Caucus calls on the Department of Justice to fully enforce existing criminal sanctions against both the financial institutions and the individuals knowingly and intentionally responsible for the criminal activity more forcefully in major money laundering cases involving foreign and domestic financial institutions. Without serious consequences for those who break the law, financial institutions will continue to avoid compliance with U.S. anti-money laundering rules and regulations. Strong enforcement of federal law against financial institutions and employees who knowingly and  intentionally engage in money laundering activities will ensure that the risk of working with criminals is far greater than the illicit profits those criminal activities produce. Without tough and appropriate penalties, sanctions will simply remain the cost of doing business for financial institutions." (emphasis added)

The report makes for an interesting read and can be found here.