Money laundering rules to be toughened

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The U.S. regulator of national banks is weighing changes to make it easier to eject from the industry bankers who knowingly skirt money-laundering rules.

When bank regulators issued a record fine against HSBC Holdings in December, some lawmakers and consumer groups complained that individual bankers weren't held accountable by the government for allowing terrorists and drug cartels access to the global financial system.

Comptroller of the Currency Thomas Curry says his agency is now exploring ways to make it easier to expel officials who knowingly violate the Bank Secrecy Act.

"We are exploring the possibility of regulatory changes that would enhance our ability to take removal and prohibition actions against bank officers, directors, and employees that engage in violations of the BSA," Mr. Curry said in testimony prepared for a U.S. Senate Banking Committee hearing.

Mr. Curry said in a speech last week that HSBC drew the highest penalty a banking regulator has ever assessed -- a $500 million Bank Secrecy Act penalty, part of a wider $1.9 billion settlement. When considered with recent actions against JPMorgan Chase & Co., the biggest U.S. bank by assets, and Citigroup Inc., he said the largest firms are revealing weaknesses in the system.

In his testimony, Mr. Curry also argued for improving the information shared between the government and financial institutions and called for legislation to expand what can be swapped between the firms themselves.

"Banks are much farther along than they were," said James Freis, a former chief of Treasury's Financial Crimes Enforcement Network who is now a partner at Cleary Gottlieb Steen & Hamilton LLP in Washington. "Compliance in the past was considered to be kind of a back-office issue."

The Bank Secrecy Act was meant to curtail criminals from injecting the proceeds of their crimes into the legitimate financial system. It has since been used as a tool to combat international drug cartels and terrorist groups.

Nine federal agencies monitor the act, said Heather Lowe, counsel and government affairs director at Global Financial Integrity, a Washington-based group advocating tighter controls on the flow of illicit money.

All those agencies leave a lot of potential gaps in communication, she said.

"I do wonder whether there's wa political will to actually crack down on this," she said. Ms. Lowe said the dirty money is helping capitalize the financial system, and she said she wonders if its economic value slows down enforcement.

"Banks are trying really hard, but we need feedback from law enforcement," said Robert Rowe, vice president and senior counsel at the American Bankers Association. Banks have filed more than 5.6 million reports of possible suspicious activity that are now collected in a federal database, and Mr. Rowe said they would welcome more guidance.

"Which ones are good? Which ones aren't quite so good? Which ones need improvement? No one can say."

Senators Sherrod Brown, an Ohio Democrat, and Chuck Grassley, a Republican from Iowa, sent the Justice Department a letter on Jan. 29 asking whether the federal government avoids prosecuting banks that they described as "too big to jail," citing HSBC as an example.



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