Academic journal article ABA Banking Journal

New Era for Secrecy Act Compliance?

Academic journal article ABA Banking Journal

New Era for Secrecy Act Compliance?

Article excerpt

Despite rumors to the contrary, examiners and other federal bureaucrats are human, and human beings are often most comfortable when they can deal in the cut-and-dried, the black-and-white, the rote.

So it's not surprising that much of the Bank Secrecy Act compliance and examination effort used to focus on measurable, if not always extremely meaningful, factors.

"Too much attention was put on the perfection of the currency transaction report [CTR] and we all lost sight of the real purpose of the form," observes Treasury official Stan Morris.

Pausing to think of an example, Morris, based in Washington, points out that if local retailer Woodward & Lothrop made large cash deposits, as would be expected, in D.C.'s Riggs Bank, a teller who put a post office box number in the address space of a CTR would be transgressing. Only a street address is acceptable. So an objection would come back from Treasury and the bank could later be criticized for not filing a perfect form.

"And you know what?" says Morris in a recent interview. "I don't care. Woody's is not laundering money through Riggs Bank. If they were, I wouldn't find out on that form, with or without an address. So what we have to do is to change the mindset, because we want to focus on judgment and not the rote reporting of cash activity."

Rethinking a controversial approach

Morris is director of the Financial Crimes Enforcement Network and a veteran law enforcement official. "FinCEN," as the investigative-analytical agency is called for short, has long been a part of the anti-money-laundering apparatus at Treasury, and in May of last year became the center of Treasury's effort when its regulatory Office of Financial Enforcement was placed under FinCEN's wing. The appointment of Morris as FinCEN director was concurrent with the reorganization.

Morris has pledged to eliminate much of the regulatory overkill bankers got used to in BSA compliance (see the checklist nearby), but this will be at a cost. In exchange for relieving banks of the mindlessness of traditional BSA compliance, he wants them to be mindful instead--learning to spot patterns of potential money-laundering and being willing to report it. As its quid pro quo, Morris wants FinCEN to do a job communicating to banks the trends and shifts in technique it is hearing about, so they can be watching for it.

"We need to go from what was an adversarial, heavy reporting system, complete with criminal penalties, to much more of an alliance," says Morris. …

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