US: AML compliance sparks debate

Anti-money laundering compliance laws help uncover illegal activities, but banks find the measures costly to implement.

BY JANE BUSSEY
jbussey@MiamiHerald.com

Banks -- facing the rising burden of complying with anti-money laundering rules -- often ask why federal officials are picking on them.

''Where are the criminals going to place their proceeds? At some point in banks,'' said Justice Department lawyer Lester M. Joseph, borrowing from Willie Sutton's purported quip that he robbed banks because that is where the money is.

Joseph, principal deputy chief in the Justice Department's asset forfeiture and money-laundering section, spoke Wednesday at the Florida International Bankers Association's annual Anti-Money Laundering Compliance Conference.

He said investigators simply follow the money and sometime end up targeting a bank for criminal enforcement if they discover it didn't have ''a serious compliance program'' in place.

Under the Bank Secrecy Act and the USA Patriot Act, banks must report suspicious activity and know their customers -- and that includes knowing whether those they do business with are drug traffickers, corrupt government officials or even an official's mistress.

Anti-money laundering consultant Brett Wolf said that the cost of implementing reporting programs was rising to the point where an anti-money laundering compliance officer can cost a bank half a million dollars.

''What everyone is concerned about is how do you balance the need for information with the compliance burden,'' said Wolf, anti-money laundering editor with Complinet, a New York company.

Throughout the three-day conference at the Radisson Miami Hotel, Washington officials emphasized the need to impose reporting requirements to counter drug trafficking and terrorist financing but also acknowledged the need to strike a balance.

They promised to listen, especially to concerns that stringent reporting rules are driving Latin American financial transactions away from Miami and to financial centers in Europe and elsewhere.

THE EURO FACTOR

Martin Redrado, the president of Argentina's Central Bank, said some of the hurdles and higher costs mean U.S. banks are losing business as Latin American banks simply decide to take their transactions to Europe and do business in euros.

''For a policy to be effective, you need to build consensus. It cannot be imposed,'' Redrado said.

Banks from the United States and Latin America are meeting in Cartagena, Colombia from April 18-20 to discuss the challenges of enforcing anti-money laundering rules across borders.

Washington officials attending the FIBA meeting, however, made it clear that while the government is trying to modify its approach, anti-money laundering safeguards are here to stay.

''It is even more relevant as we have collectively watched the world becoming more dangerous,'' William F. Baity, acting director of the Financial Crimes Enforcement Network, said Wednesday, the final day of the conference.

Further complicating the panorama for banks are 2005 rules that require them to carry out due diligence on all their correspondent banks, which adds an extra burden on South Florida banks that do business with hundreds of counterparts in Latin America and the Caribbean.

Although Redrado, the Argentine official, said he did not believe there was ''any possibility of modifying'' the anti-money laundering rules, he pointed out there are many gray areas that need to be cleared up to ease compliance. ''Be specific,'' he said.

ACCRUING INTEREST

Interest in anti-money laundering compliance is on the rise. Some 1,100 people attended this year's FIBA conference compared to around 700 people last year, and about 40 vendors participated, offering software and other services to help banks with their compliance requirements.

This year there was also a significant increase in the number of domestic bank representatives attending the conference. ''You can see all of the [anti-money laundering] regimen is being spread out all over,'' said Clemente Vasquez-Bello, an attorney from Gunster Yoakley and the conference chairman. ``In the past it was [just] applied to big money center banks and international bankers.''

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