US Banks Escape Strictest Anti-Money Laundering Rules

by Leroy Baker, Tax-News.com, New York

30 October 2001

Although the Senate passed the new anti-money laundering bill placing new regulatory restrictions and responsibilities on banks based in the United States by a 98-1 vote last Thursday, it is becoming increasingly clear that as a result of pressure from lobbyists, some of the more powerful rules have been watered down or amended significantly.

The provisions of the original bill, for example, ordered US banks to trace the origins of assets in all accounts handled on behalf of foreign banks. However, protest from the banking sector caused this to be amended to dealings with foreign banks which the Treasury department believes to be suspect.

Another watered-down proposal saw enhanced due diligence on all correspondent banking relationships reduced to increased monitoring of correspodent accounts held in 11 countries which the Treasury Department has designated high risk areas for money laundering.

However, according to Alvin James, a former Treasury investigator, and current head of Ernst & Young LLP's money laundering advisory unit, these changes have effectively rendered the provision toothless, as the amount of business that US banks undertake with organisations in 'suspect' countries is negligible.

James believes that as a result of changes in the anti-money laundering legislation, the onus will be on foreign banks doing business in the US, and on non-banking institutions which handle large sums of money, and that US banks will not, in fact, have to make too many changes. 'For the time being, I think banks have succeeded in holding off complete regulation here,' he observed Friday.

Representatives of the banking industry understandably see the changes as a triumph, but argue that they will not result in lower standards or less vigilence on the part of the banks: 'We were already subject to some very extensive rules. The bigger changes are outside the banking institutions,' explained Edward Yingling, leading lobbyist for the powerful American Bankers Association.

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