Financial Update (Second Quarter 2007)

Preventing Money Laundering Calls for Fine-Tuned Strategy

money on a laundry lineBanks and other depository institutions remain the primary gateway to the U.S. financial system and are under constant threat of money laundering. Because of their unique role, banks must maintain their anti–money laundering (AML) diligence and support robust AML programs.

The important position of banks in the U.S. financial system is recognized in the National Money Laundering Strategy for 2007, which was released by an interagency group in May. This document outlines the ongoing and planned initiatives by government agencies to address money laundering threats, trends, and techniques.

Strategies for the future
The new strategies call for federal banking regulators (including the Federal Reserve), the Financial Crimes Enforcement Network, and other governmental and law enforcement agencies to combat money laundering by:

bullet image conducting outreach to banks regarding regulations for accounts of foreign financial institutions;
bullet image alerting banks to the threats of specified trade-based money-laundering techniques, such as the Black Market Peso Exchange, which is a method used by South American drug dealers to convert dollars to pesos;
bullet image improving information sharing with banks through Section 314 of the Patriot Act, which allows financial institutions to share information with each other to identify and then report to the federal government activities that may involve money laundering;
bullet image working with banks to identify illicit deposits related to bulk cash smuggling; and
bullet image alerting banks to the risks in providing services to shell companies and suggesting ways to mitigate these risks.

U.S. Money Laundering Threat Assessment off-site image pdf document
2007 National Money Laundering Strategy off-site image pdf document
The strategy also outlines steps directed at money service businesses, the insurance industry, and casinos. In addition, the United States will increase its efforts to promote cooperation internationally with information, training, and other support for foreign diplomatic, financial, and law enforcement authorities.

Building on earlier analysis
In December 2005 an interagency group, which included the Board of Governors of the Federal Reserve System, issued the U.S. Money Laundering Threat Assessment, the first governmentwide analysis of money laundering in the United States.

That assessment offered a detailed analysis of 13 different money laundering vulnerabilities along with statistics, enforcement information, and the regulatory/public policy background. These vulnerabilities include certain banking services, online payment systems, shell companies, stored value cards, and certain services offered by money services businesses.

Together with the 2007 strategy, these documents present a comprehensive view of the most important money laundering issues and the government's planned actions.

This article was written by John Atkinson, an assistant vice president in the Atlanta Fed's supervision and regulation division.

June 12, 2007