Fed Adopts Wire Transfer Rules to Fight Laundering

By Seiberg, Jaret | American Banker, December 22, 1994 | Go to article overview

Fed Adopts Wire Transfer Rules to Fight Laundering


Seiberg, Jaret, American Banker


WASHINGTON -- The Federal Reserve Board approved record-keeping requirements for most wire transfers Wednesday, despite the concerns of one Fed governor.

The new rules, which take effect in January 1996, force institutions to retain for five years information on the identity of each customer who initiates a wire transfer of $3,000 or more.

The rules apply to banks, brokerage firms, and companies that provide wire transfer services. Banks will not have to create additional records for existing customers.

Fed Governor Lawrence B. Lindsey objected to the $3,000 threshold as too low, saying it would unfairly burden people who rely on Western Union to send large sums.

"Gee, that would make all those people who use Western Union happy," Mr. Lindsey said sarcastically of extra forms some customers might have to complete.

The Justice Department, however, opposed any exemption, according to Fed documents. Justice said criminals will simply divide their money into amounts just below the threshold to avoid the rule, Fed documents state.

Mr. Lindsey, who ultimately voted for the rule, also questioned whether it would effectively combat money laundering, noting that law enforcement officials could not provide concrete assessments of the data's usefulness.

American Bankers Association federal representative Kawika Daguio said he shares Mr. Lindsey's assessments. But, he said the Fed made the rule "more palatable" when it clarified that law enforcement officials had to give institutions a reasonable amount of time to produce the documents.

"Given the fact that we were stuck with the law, they did well by us," Mr. Daguio said of the Fed.

The rules are not as stringent as the Justice Department wanted. The department said in a Dec. 13 letter that regulators should explicitly require institutions to record the name, address, and account numbers of the recipient of the wire transfer.

The Fed, however, rejected that request, saying in the staff recommendation that nearly all institutions already collect that information. Consequently, a new rule is not needed, the staff wrote.

Wire transfers are an extremely popular method of moving money. …

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