By Barancik, Scott
American Banker , Vol. 164, No. 182
Kicking off two days of hearings on alleged Russian money laundering, House Banking Chairman Jim Leach introduced legislation Tuesday that would force U.S. banks to take extra precautions before doing business with foreign customers.
Under the bill, a U.S. bank could not open or maintain an account for a foreign person or company unless the bank identified and kept a record of the account's beneficial, or true, owners.
"It is critically important that banks exercise due diligence in knowing who their customers are," Rep. Leach said.
The bill would also prohibit U.S. banks from hosting correspondent accounts for foreign banks that were not adequately supervised by, or chartered to do business in, their host country. Certain restrictions would also apply to payable-through accounts.
Sen. Charles E. Schumer, D-N.Y., will soon introduce a companion bill in the Senate, his spokeswoman said Tuesday.
The legislation is designed to fill loopholes in the Bank Secrecy Act, shortcomings recently exposed by a broad U.S. investigation into allegations that ill-begotten Russian funds were laundered through the Bank of New York and other institutions. Swiss officials said Tuesday that banks in that country have frozen $16.8 million in accounts as part of the ongoing probe.
Meanwhile, a government letter praising the Republic Bank of New York for its role in the inquiry has surfaced. The Aug. 5 letter, signed by Federal Bureau of Investigation assistant director Lewis D. Shiliro, cited Republic as the primary catalyst for the government's investigation and called the bank's wire transfer monitoring system "highly effective."
One of the Republic executives praised in the FBI's letter, managing director Anne Vitale, will testify Wednesday. Bank of New York chairman Thomas Renyi will also testify.
John J. Byrne, senior counsel at the American Bankers Association, called Rep. Leach's anti-money laundering bill premature. He said lawmakers should have at least waited until the two-day hearing was completed before passing judgement on the adequacy of existing regulations and bank efforts.
"It's way too early to be moving any new laws," Mr. Byrne said.
One likely bone of contention is that the bill would apply to existing accounts, not just new accounts. …