The weather may be cooling, but the summer of money laundering is far from over. There hasn’t really been an uptick in banks looking the other way on dirty money (they have for years), it’s that regulators are finally stepping up.
The attention to money laundering began with a shocking report by the Senate Permanent Subcommittee on Investigations, which revealed that HSBC had systematically laundered money to terrorists and criminals. The result? Nothing. HSBC has yet to pay a fine or face significant regulation.
Instead, the charge was taken up by New York-based regulator Benjamin Lawsky when he fined Standard Chartered $340 million dollars for letting Iranian businesses illegally access the U.S. financial system. The fine was exacted by the quick and aggressive action by Lawsky’s Department of Financial Services, which, reportedly, irritated other regulators who were moving at a glacial pace.
Finally, the national regulators are getting involved. A report from Reuters suggests that the Office of the Comptroller of the Currency (OCC) investigation has concluded that J.P. Morgan has potentially allowed money to slip through the cracks. The crimes at stake:
Banks are required to file reports of suspicious activity but that can add to costs. Regulators and banks sometimes disagree over whether those reviews produce reports that actually identify financing tied to illegal narcotics, terrorism or sanctioned countries.
And the result?
The OCC probe -- and potentially inquiries by other regulators such as the U.S. Justice Department -- could still widen and identify specific transactions that allowed illicit funds to move through the bank.
Prior to this investigation, the OCC has inadequately regulated money laundering. For example, the agency had failed to act upon the 17,000 alerts of suspicious activity by HSBC, frequently concerning business with Iran.
This raises hopes that new OCC Chief Thomas Curry, appointed in March, is up to the job. Senior Fellow Wallace Turbeville described Curry’s challenge as to “to reverse [the OCC’s] decades-old reputation of being a sympathetic, and many times collaborative, regulator of the financial sector.” This investigation is a start. Let’s hope the OCC can keep up the heat.