WASHINGTON —A group of the largest U.S. banks are taking aim at rules that dictate how financial institutions investigate and report potential criminal activity.
The banks are arguing that the rules imposed in the years after the Sept. 11, 2001, attacks and strengthened during the Obama administration are onerous and ineffective, and are proposing a complete overhaul of the guidelines, Reuters reported.
The Clearing House, a trade association representing the largest U.S. banks including JPMorgan Chase & Co., Bank of America and Citigroup, has long raised concerns about the effectiveness of the rules, but this will be the first time the group has publicly called for them to be revamped, Reuters noted.
“The proposal will set the stage for an intensive lobbying effort targeting bank regulators and members of the Senate and House of Representatives finance committees. President Trump has said he wants to cut costly regulations for Wall Street,” Reuters stated.
Faced with record penalties in recent years over failures to alert authorities to criminal activities, banks say they now over-report, filing hundreds of thousands of SARs out of fear of later falling foul of regulators, stated Reuters. “Now we tell banks to file a (report) on everything that might be criminal,” Gary Shiffman, CEO of compliance software maker Giant Oak, told the news outlet. “But when everything is a priority, nothing ends up being a priority.”
The number of suspicious activity reports rose from 669,000 in 2013 to almost a million in 2016, according to U.S. Treasury's Financial Crimes Enforcement Network (FinCEN), which enforces anti-money laundering rules and collects data on suspicious transactions from banks around the country, noted Reuters.
The Clearing House will propose a new system under which banks do not investigate and report every transaction that could possibly raise a red flag, according to people involved in the effort. Instead, banks would focus on investigating and reporting transactions based on specific concerns relayed to them by law enforcement. Under this approach, banks could shift their focus, as law enforcement priorities change, stated Reuters.
Institutions in different parts of the country may also watch out for certain types of criminal transactions, based on information from authorities. For example, law enforcement could warn banks in the southwest of the United States to look out for drug traffickers moving funds to Mexico, according to people involved in drafting the proposal, Reuters reported, adding that The Clearing House also will call for the creation of an information-sharing platform that would allow banks to share data among themselves about possible criminal transactions.