Financial Crime World

US Tightens Banking Regulations to Combat Anti-Money Laundering

The United States has introduced new regulations governing correspondent accounts and due diligence requirements for banks and broker-dealers to strengthen its fight against money laundering and terrorist financing.

Prohibitions and Requirements

  • Banks and broker-dealers are prohibited from maintaining correspondent accounts with foreign banks that do not have a physical presence in any country.
  • Financial institutions must take reasonable steps to ensure that their correspondent accounts are not used to indirectly provide services to such banks.
  • Records identifying an agent for service of legal process for correspondent accounts must be maintained.

Enhanced Due Diligence

  • Financial institutions are required to maintain records identifying the customer who is the direct or beneficial owner of funds in concentration accounts.
  • Minimum standards have been established for financial institutions and customers regarding the identity of a customer, which must be applied when opening an account.

Immunity from Liability and Notification

  • Reporting suspicious activities is granted immunity from liability.
  • Notification to individuals of SAR filing is prohibited, except as necessary to fulfill official duties.

Anti-Money Laundering Programs

  • Financial institutions are required to establish anti-money laundering programs, which must include:
    • Internal policies, procedures, and controls
    • Designation of a compliance officer
    • Ongoing employee training programs
    • An independent audit function

Expanded Definitions and Reporting Requirements

  • The definition of money transmitter has been expanded to include informal/underground banking systems, making them subject to the Bank Secrecy Act.
  • Brokers and dealers registered with the Securities Exchange Commission are required to submit suspicious activity reports under the Bank Secrecy Act.

Improved Communication Network

  • FinCEN (Financial Crimes Enforcement Network) is required to establish a highly secure network to facilitate and improve communication between FinCEN and financial institutions, enabling electronic filing of BSA reports and providing alerts to financial institutions.