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US Banks Claim Pesky Money Laundering Rules Interfere With Their Bottom Lines

Think of the poor shareholders

This post first appeared on Russia Insider

U.S. banks love to launder drug money. It's their second favorite thing to do, after bundling toxic debt and selling it with AAA ratings to your volunteer fire department's pension fund.

The problem is that there are now "rules" which sometimes interfere with day-to-day money laundering operations. This bureaucratic red tape is sucking profits from the shareholders.

<figcaption>But what about the shareholders?</figcaption>
But what about the shareholders?

Thankfully the U.S. banking industry has a team of all-star lobbyists who know how to get things done!

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), Bank of America (BAC.N) and Citigroup (C.N), has long raised concerns about the effectiveness of the current [money laundering] rules, but this will be the first time the group has publicly called for them to be revamped.


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.

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.

$8 billion shared between dozens of U.S. banks and investment houses? That comes to what — $5/day for each company?

So what's the best way for banks to not have to report suspicious transactions? The proposed solution is simple yet elegant:

The Clearing House will propose a new system under which banks do not investigate and report every transaction that could possibly raise a red flag, according to people involved in the effort.

Instead, banks would focus on investigating and reporting transactions based on specific concerns relayed to them by law enforcement. Under this approach, banks could shift their focus, as law enforcement priorities change.

Because if there's one thing that U.S. banks are good at, it's self-regulation and investigating themselves for possible misconduct.

The current  rules may not be effective, but if you really want to combat money laundering, break up the big banks, the CIA, and then the U.S. government.

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