|Civil Society Welcomes U.S. Anti-Money Laundering Review|
Coalition of NGOs Urges Treasury to Address Beneficial Ownership Issues, Expand List of Predicate Offenses, Require Enhanced Due Diligence for All PEPs
Transparency Groups Originally Requested AML Review in September 2011
“Enforcement Must Be a Priority”
November 14, 2012
WASHINGTON, DC – The Financial Accountability and Corporate Transparency (FACT) Coalition1 welcomed news that the U.S. Department of the Treasury will be leading a government task force to review the nation’s antiquated anti-money laundering (AML) regulations. The FACT Coalition—an alliance of more than 60 prominent anti-corruption, transparency, small business, and global development groups—originally called on the Treasury Department in September 2011 to undertake such a review.
“We are pleased the Administration recognizes that there are holes in the current regulatory regime that need to be addressed in a comprehensive manner,” said Heather Lowe, legal counsel and director of government affairs at Global Financial Integrity (GFI), a member of the FACT Coalition. “A piece-meal approach to reform simply won’t cut it.”
The Coalition members recommend that the task force identify and make recommendations to close gaps in the current AML framework, including requiring financial institutions to identify the true, human, beneficial owner of all accounts and to perform enhanced due diligence on all politically exposed persons (PEPs), and expanding the list of predicate offenses for money laundering to include any felony under U.S. law, whether committed domestically or abroad. The review should also assess how well banks are managing money laundering risk and the extent to which the regulators are enforcing U.S. laws to prevent money laundering.
“How can U.S. banks not know who their true, human clients are?” noted Stefanie Ostfeld, policy advisor for FACT Coalition member Global Witness. “When a bank does not identify the beneficial owner of an account, it cannot meaningfully assess risk, and this leaves the U.S. financial system wide open to the laundering of the proceeds of corruption, drug trafficking and organized crime.”
“It is a huge loophole to only require additional scrutiny on private banking accounts of politically exposed persons (PEPs) with assets over $1 million,” added Ms. Ostfeld. “$900,000 can bankroll a lot of mischief.”
“The U.S. is only one of a few OECD countries that still has a limited, specific list of crimes that can be underlying crimes for a money laundering case, and that list is even shorter when the crime creating the money to be laundered is committed abroad,” said Ms. Lowe of GFI. “Most countries take the approach that any crime—or the equivalent any U.S. felony—can be a predicate offense for money laundering. The U.S. should adopt such an approach and bring itself in line with international practice.”
Finally, the groups noted that even if AML regulations are improved, it remains crucial to ensure that they are being adequately enforced. In their 2011 letter to the U.S. Treasury Department, the FACT Coalition highlighted a recent study by the UK’s Financial Services Authority (FSA), which found three-quarters of British banks were “not doing proper customer due diligence” with the regulator also “admitting it is likely that British banks harbor corrupt funds.” The letter continued to state, “There is no evidence to suggest that the situation in other financial centers, including the U.S., would be any different from what the FSA found in the U.K.”
“Even if our nation’s money laundering regulations are improved, until the punishment impacts a bank’s bottom line and senior bankers are directly held accountable, banks are not going to change their behavior and seriously tackle dirty money,” explained Ms. Ostfeld.
Notes to Editors:
Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system.
For additional information please visit www.gfintegrity.org.