Banking Is `Rock Solid': Money Laundering Rules May Need Tightening

By Garver, Rob; Heller, Michele | American Banker, September 17, 2003 | Go to article overview

Banking Is `Rock Solid': Money Laundering Rules May Need Tightening


Garver, Rob, Heller, Michele, American Banker


Leaders of the House Financial Services Committee emerged from a meeting with financial regulators Thursday afternoon to say that terrorist attacks on the World Trade Center and the Pentagon had not significantly disrupted the U.S. banking industry. However, they warned that tighter money-laundering controls might be required to help prevent such attacks in the future.

"The banking industry is solid -- absolutely rock solid," committee Chairman Michael G. Oxley said. The sector has experienced "very little problem" since terrorists slammed two passenger jets into the heart of Wall Street and a third into the headquarters of the U.S. military.

The Ohio Republican said, however, that the violence of the attack and the fact that the perpetrators had required significant financial resources to carry it out could significantly alter the debate about anti-laundering laws and, more generally, his panel's agenda.

"This committee will have many near-term and long-term issues to deal with in insurance, real estate, banking, and securities," Rep. Oxley said. "We have a great deal of pertinent jurisdiction -- namely money laundering and the financial markets."

The privacy concerns that have derailed money-laundering bills in past years may not have as much persuasive power when considered against the human toll of an attack likely fueled by laundered funds.

"Everything has changed since 9-11-01," Rep. Oxley said. "There are a significant number of issues that we have to address as a Congress and as a nation to try to balance the ability of law enforcement to be able to penetrate and hopefully stop these acts before they happen with the individual rights of American citizens. Americans will demand no less, in my estimation."

He predicted that the privacy/security question "will dominate debate in this town for quite some time."

Additionally, on Friday afternoon, Jimmy Gurule, the Treasury Department under secretary for enforcement, announced the establishment of an interagency team "dedicated to the disruption of terrorist fund-raising." The team's purpose will be to identify foreign terrorist groups, assess their sources of funds, and inform law enforcement authorities about how they move their money. The team, which will be known as the Foreign Terrorist Asset Tracking Center, will become a permanent unit of Treasury within the Office of Foreign Asset Control. No others details were given.

Rep. Oxley was not the only observer to note the potential for change in the nation's attitude toward money laundering.

On the day after the attacks, John Byrne, senior counsel for the American Bankers Association, said, "These activities cannot occur without money." The question arises, "are money laundering laws a useful tool to deter them?" he said. "The answer is that in general, they are, and we have to be more aware of that goal."

He said that banks and regulators need to do a better job of explaining to their customers the rationale behind such things as suspicious-activity reports in order to assuage fears that the government is invading their privacy. "Due process should always be a factor in any reporting that we do," he said. "I strongly believe that if you explain the laws and follow them appropriately, the consumers will understand the laws and will not object to the bankers' responsibilities."

Rep. Oxley's remarks followed a briefing of the entire House Financial Services Committee by Federal Reserve Board Vice Chairman Roger W. …

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Banking Is `Rock Solid': Money Laundering Rules May Need Tightening
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