The persistent whistling you’re hearing around financial centers in Manhattan is coming from contented bank executives. Since the election of Donald Trump, their companies’ stock prices have soared, amid expectations of regulatory abandonment. Their former colleague ex–Goldman Sachs president Gary Cohn is setting policy inside the White House, and their former lawyer Jay Clayton plans to blind the SEC to their money-making schemes. If Republicans can get their act together on major legislation, bank executives will be rewarded with a triple bounty of tax cuts: on their corporate taxes, their individual rates, and the Obamacare taxes that fall entirely on the wealthy.
But what’s the old saying about giving someone an inch and their taking a mile? Instead of smiling at their good fortune and getting down to the business of ripping off clients for profit, the world’s largest banks want to do less to stop drug lords, tax cheats, and terrorists from moving money through their institutions—at precisely the moment when the regulators are poised to walk off the field themselves.
The ask comes in the form of a report the Clearing House Association, a financial-industry trade group, released last week. The report proposed numerous reforms to the anti–money laundering (AML) compliance process, complaining that “the nation’s financial firms are effectively deputized to prevent, identify, investigate, and report criminal activity.”
Financial firms are forced into this duty because of a federal law, the Bank Secrecy Act, in place since 1970. Since banks, you know, perform banking transactions, they are uniquely positioned to detect when a drug lord or a sketchy hedge fund is trying to wash illicit money through legitimate channels. When transactions are larger than $5,000, or have hallmarks of terrorist financing, tax evasion, or money laundering, they must file a suspicious activity report (SAR) and deliver them to federal regulators. This provides raw data for law enforcement to connect the dots on criminal activity.
The report would have you believe that these SARs are so burdensome (“carefully crafted, highly detailed”) that they cost the industry more than it takes to fund the FBI. So to be clear, here’s what’s in a SAR: the subject of the transaction’s personal information, the date of the transaction, the name of the bank where it occurred and its contact information, and a written description of the activity.
If you think this is maybe less than a rigorous hurdle, you’re absolutely right. And it’s even more concerning when you consider that banks are truly terrible at anti–money laundering compliance. They’re fined for compliance failures all the time. Here’s one fine against Raymond James. And Credit Suisse. And Deutsche Bank. And Taiwanese firm Mega Bank. All of those were within the past nine months. For allowing the Sinaloa drug cartel and terrorist financiers to launder illegal cash for a decade, HSBC infamously paid $1.9 billion—but their compliance system remains so weak that the British Financial Conduct Authority opened an investigation just yesterday.