AP News, June 22nd, 2007
All banks are required to watch out for terrorist financiers, drug lords and money launderers _ but for small banks that can be a big burden.
Treasury Secretary Henry Paulson announced plans Friday to come up with ways to ease the pressure on the nation's smaller banks. Treasury will work with banking regulators to craft a plan that better matches potential risks at a given financial institution with its anti-money-laundering obligations, Paulson said.
The effort could bring some relief to small banks, which have complained about the burden and cost of complying with various federal provisions.
"We can take a very commonsense approach here," Paulson said in a visit to the suburban offices of Treasury's Financial Crimes Enforcement Network, dubbed FinCen. The agency, housed in a nondescript office building, collects information on dubious financial transactions and other things that law enforcers can analyze to track down criminals and make sure the nation's financial system is not abused by them.
Details have yet to be worked out on the plan Paulson mentioned, and it may take a year for a final plan to be implemented, said FinCen's director James Freis Jr.
Federal provisions aimed at helping the government catch criminals currently apply to both large and small banks alike.
The plan is to reach a sensible balance. For instance, "an institution with minimal to no international business that serves only a handful of communities does not share the same risk profile as a bank that does business around the world in many currencies," FinCen said in the statement.
Asked what kinds of activities might lower a bank's risk and thus its obligations, Freis said it was too early to say and that those details would have to be worked out. There will be "active discussions" on those matters in coming weeks involving regulators and industry, he said.
The American Bankers Association as well as regulators, the Federal Deposit Insurance Corp., and the Office of Thrift Supervision welcomed the effort.
So does the Federal Reserve. It supports efforts "to bring greater clarity and efficiency to this critical area of regulation," said Fed Governor Randall Kroszner.
In other ideas aimed at better targeting anti-money laundering obligations, Paulson said FinCen wants to craft a narrower definition of what constitutes a money-service business, such as check cashiers. These businesses also have to comply with anti-money laundering provisions.
Many of the estimated 150,000 to 200,000-plus entities that are presently covered by the current definition "may only engage in financial services that pose little to no opportunity for money laundering," FinCen said. "A risk-based reduction in covered entities would result in a better concentration of examination resources," the agency said.
Separately, FinCen said Thursday that it would exempt casinos from having to file currency transactions reports on jackpots from slot machines and video lottery machines. This doesn't change the requirement for casinos to report all other transactions in currency of more than $10,000, the agency said.
"FinCen accepts that customers who win more than $10,000 in jackpots will have won those funds because of the workings of the random number generator in electronic gaming devices, and thus, are not likely to form part of a scheme to launder funds through casinos," the agency said.
In another matter, Paulson said Treasury very much supported the decision by authorities in the Chinese territory of Macau to release millions of dollars in North Korean funds held at Banco Delta Asia in order to move forward on six-nation nuclear disarmament talks. Some $25 million had been frozen after a U.S. financial clamp down on the bank. That so angered the North that it had stayed away from nuclear talks for more than a year.
