Banking Associations Seek "Clarity" & "Consistency"

By Andrew Cochran

I hope you read Dennis Lormel's and Douglas Farah's posts on terrorist financing trends. From a different perspective: On January 10, the American Bankers Association and all state banking associations, plus Puerto Rico's, co-signed a letter to the heads of the federal financial regulatory agencies - Treasury (and its quasi-independent components FinCEN, OCC, and OTS), Federal Reserve Board, and FDIC - to request more consistency in examinations for Bank Secrecy Act compliance. To quote, "(T)he lack of consistency in examination oversight and compliance guidance is a major theme of regulatory complaints received by ABA and the state banking associations." According to the letter, bank regulators have recently talked of a "zero tolerance policy" for deficiencies, leading to "defensive filings" of information required under the BSA.

Over the past couple of years, compliance officials and government reps at major banks and the ABA have given me details of the excruciating efforts they make to comply with BSA requirements, especially after they were beefed up in Title III of the USA Patriot Act. These officials are patriotic, sincere, and very smart, and smaller banks are particularly caught in a budgetary squeeze when spending big money on compliance systems. Moreover, several major financial institutions have been instrumental in preventing terrorist events through their prompt notification of law enforcement.

But the letter comes at an awkward time, after a steady stream of stories about the failures of major financial institutions, here and abroad, to establish effective anti-money laundering or terrorist financing mechanisms. The financial regulators, while working with financial institutions towards a more consistent standard, have to answer critics who say that we still haven't closed the gaps, especially after the Riggs Bank fiasco, in which the OCC clearly dropped the ball. Congressional committees must exercise their oversight powers to review the examination procedures and ensure that cooperation between the regulators and the regulated and a well-intentioned standardization doesn't lead to weakness and gaps while the enemy persists.

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