Sunday, April 9, 2017


Lately, we have been hearing much about the plans, of the banking industry trade group, The Clearing House, to put forth a proposal to minimize the Suspicious Activity Reports (SARs) filed by American financial institutions. While we understand that the costs of SAR filings, together with other compliance costs, have skyrocketed, as more and more SARs are filed by the banks, in what it says is an overabundance of caution, the plans does not work.

Here's why:

(1) Drastically reducing SARs, in favor of targeted filings, as directed in your  geographical area, by law enforcement agencies, simply will not work. The notification of trends is reactive, not proactive; by the time banks receive such notices, the activity listed has, most likely, been in operation for months, as it must be observed, analyzed, and disseminated, all of which takes up valuable time. Money laundering is, whether we like it or not, a dynamic, and very responsive, crime, and its participants constantly modify their operations, changing both how, and where, they conduct their covert cash movements. You cannot expect that a law enforcement notice is current enough to make a difference, on a real-time basis.

(2) Clearing House wants FinCEN, not the OCC, to be the regulatory police. FinCEN is, unfortunately, understaffed and under budget, and to expect it to take the place of a regulatory agency, who has years of experience, in the enforcement role, is to expect far too much.

Is there is real solution ? You bet there is. if US banks have truly effective KYC, and KYCC, programs, the filing of SARs would seriously decline, but we are not yet seeing either of them being created, and operated. When that happens, you will see a major decline in SARS, because when a bank knows its customers, as well as its customers' customers, it does not randomly file SARs, because it understands the conduct of the clients' business. Let's focus upon a real solution, and not follow a group seeking to cut compliance costs decide upon some well intentioned, but ineffective, plan that will only increase money laundering inside the United States, in my humble opinion, based upon by experience on both sides of the problem.

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