The US Treasury department should allow banks in the US to share suspicious activity reports with overseas branches to help them avoid money laundering violations, according to a trade group.
US government rules prohibiting such sharing of information hurt a bank’s ability to police transactions linked to money laundering because the firm is prevented from having a global view of such activities, said the Clearing House Association, the trade group representing some of the world’s largest financial institutions including JPMorgan Chase, HSBC, Deutsche Bank and Barclays.
The issue is crucial for global banks that want to avoid future penalties after paying billions of dollars in fines for violating anti-money laundering rules. Many of those transactions have focused on cross-border activities within a bank, which is why the Clearing House thinks a change in rules is needed.
Last Thursday, German lender Commerzbank agreed to a $1.5bn settlement with various US authorities to resolve money laundering and sanctions-busting violations. Also on Thursday, Andorra’s government dismissed the board of Banca Privada d’Andorra after the US accused the private bank of money-laundering activities for Venezuelan, Russian and Chinese interests.
“These [US government] restrictions impede the ability of globally active US depository institutions to conduct effective and efficient enterprise-wide [anti-money laundering] risk management, risk assessment and activity monitoring,” the Clearing House said in a letter sent on Friday to the Treasury department’s financial crimes enforcement network, or Fincen, which combats money laundering and maintains a database of suspicious activity reports.
Under current Fincen rules, US banks and US branches of foreign banks are prohibited from sharing suspicious activity reports with any overseas branch or affiliate. The restrictions are aimed at ensuring the confidentiality of reports.
To address those concerns, the Clearing House recommends that Fincen issue guidance that allows banks in the US to share suspicious activity reports with foreign branches as long as those offices are located in a country that is a member of the Financial Action Task Force.
The 36-member global task force sets standards to combat money laundering and terrorist financing, and includes most countries in Europe, the Russian Federation, China, Japan and Singapore.
If an overseas branch is located in a country that is not a member of the task force, the Clearing House suggests that banks be allowed to share suspicious activity reports if there is a confidentiality agreement with the overseas branch office.
“It is crucial that each bank have the ability to share suspicious activity reports and other [anti-money laundering] related information across its global organisation to strengthen its ability to detect and prevent financial crimes,” said Paul Saltzman, president of the Clearing House.
The group said such changes would allow banks to more effectively monitor transactions, produce better suspicious activity reports, provide more information to law enforcement agencies and better spot money laundering and terrorist financing trends.
In 2010, Fincen revised its rules to allow a US bank to share suspicious activity reports with other domestic affiliates. US branches of foreign banks are also allowed to share information collected inside the US with their overseas headquarters.
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