Wire Transfer Record Plan Seen Hurting the Industry

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WASHINGTON -- Regulators' plan to thwart money laundering by requiring banks and money-services businesses to keep records of more, and possibly all, wire transfers would be costly and could even drive customers away, industry representatives said.

"It seems to me like an unnecessary burden," said Robert Serino, a lawyer with Buckley Kolar LLP. "You might find one or two cases" of laundering. "But is that enough to justify a significant burden on the industry? I'm not sure of the cost benefit."

Representatives of the American Bankers Association, America's Community Bankers, and the Independent Community Bankers of America warned that small banks in particular are not equipped technologically to keep records on more transfers.

"We understand the benefits to law enforcement of having more information, but we also have to recognize that the changes will result in real costs to banks," said Steve Kenneally, the ICBA's director of payments and technology policy. "Many banks do not have the automated resources" to keep the additional records.

On Friday the Financial Crimes Enforcement Network and the Federal Reserve Board proposed requiring banks and MSBs to record all wire transfers of $1,000 or more. Currently the threshold for keeping records is $3,000.

Regulators also asked for feedback on the impact of requiring record keeping for all transfers. The public has until mid-August to comment.

Industry sources said Monday that they are concerned the agencies could take the plan a step further and require banks and MSBs to report -- not simply record -- the additional transfer information to Fincen.

"It would become very problematic if it would shift to a reporting mechanism," said Robert Rowe, a regulatory counsel with the Independent Community Bankers. "For a lot of banks, that would mean the purchase of software, which doesn't come cheap these days."

The proposal was issued as an advance notice of proposed rulemaking, or ANPR, so the adoption of a rule is not imminent. Advance notices are followed by proposed rulemakings, which get another comment period.

The two agencies said the changes are necessary because launderers have become adept at dividing sums into small chunks to get around the $3,000 recording trigger.

Government officials studying ways to prevent terror financing after the Sept. 11 attacks recommended lowering the recording threshold in October 2001. …