Academic journal article Federal Reserve Bulletin

Statements to the Congress

Academic journal article Federal Reserve Bulletin

Statements to the Congress

Article excerpt

Statement by John P. LaWare, Member, Board of Governors of the Federal Reserve System, before the Committee on Banking, Finance and Urban Affairs, U.S. House of Representatives, May 26, 1993

I am pleased to appear before the Committee on Banking, Finance and Urban Affairs to discuss the Federal Reserve's role in the government's anti-money-laundering efforts. The Federal Reserve places a very high priority on supporting efforts to attack the laundering of proceeds from illegal activities through our nation's financial institutions and, over the past several years, has engaged extensively in anti-money-laundering endeavors.

We believe that the Federal Reserve has an important role to perform in the federal government's efforts to detect and deter money laundering activities within banking organizations, as well as to provide assistance to law enforcement agencies in their efforts to suppress these criminal activities and seize proceeds gained from them. As I will describe in more detail, the Federal Reserve has participated in, and provided assistance to, the federal government's efforts in attempting to eliminate money laundering activities.

Currently, the Board, through the varied functions that it performs on a routine basis, such as examinations of state member banks and the U.S. branches and agencies of foreign banks, as well as through special projects and various other programs, monitors financial institutions in an attempt to stop money laundering activities. We have also devoted significant resources to providing technical assistance and training both to domestic and foreign law enforcement and banking supervisory agencies.

An example of the Federal Reserve's commitment in this area was the creation, in January 1990, of the Federal Reserve System Working Group on Money Laundering Activities. Chairman Greenspan created this senior level Working Group to review the Board's initiatives on money laundering and identify new ways to contribute to the federal government's anti-money-laundering efforts. The Working Group placed special emphasis on providing assistance to domestic and international law enforcement organizations. It also developed internal programs and procedures for Board and Reserve Bank staffs to implement in their normal supervision and regulation of financial institutions and provision of services to banking organizations. The Working Group formed three task forces, in the areas of cash, funds transfer, and supervision. The three task forces focused on identifying areas within the Federal Reserve in which better procedures would detect and deter money laundering activities. Many of the activities that I will address today are the result of the efforts of the Working Group and its task forces.

Federal Reserve Programs for Controlling Money Laundering

During the course of each Federal Reserve examination of a state member bank or U.S. branch or agency of a foreign bank, a Bank Secrecy Act compliance examination is conducted. Such examinations are scheduled to occur every year. When deemed necessary, Federal Reserve examiners may conduct special targeted examinations of financial institutions if there is reason to believe that violations of the Bank Secrecy Act may be occurring or other suspicious activities are identified.

To conduct effective examinations for compliance with the Bank Secrecy Act, all Federal Reserve examiners receive training in understanding the basics of money laundering. Examiners are also trained in the provisions of the Bank Secrecy Act and the Treasury's rules and regulations implementing it and in identifying suspicious activity that may be associated with money laundering. This training is provided during initial courses that our examiners attend upon entering the Federal Reserve System. Additional training regarding Bank Secrecy Act compliance and related matters is also provided to experienced examiners during the course of supplemental training programs in which they are required to participate over their careers, as well as training programs sponsored by the Federal Financial Institutions Examination Council and various law enforcement agencies. …

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