March 07, 2013


WASHINGTON – Today, Senate Banking Committee Chairman Tim Johnson (D-SD) held a hearing titled “Patterns of Abuse: Assessing Bank Secrecy Act Compliance and Enforcement.” 
The hearing continued the Committee’s oversight of the administration of the Bank Secrecy Act and its anti-money laundering rules (“BSA/AML”). Illicit flows of money through the financial system have been linked to international drug trafficking organizations, terrorist groups, and sanctioned nations such as Iran and North Korea.
Below is Chairman Johnson’s statement as prepared for delivery:
“The Committee is called to order. 
“Today we will assess large money center banks’ compliance with U.S. anti-money laundering rules.  Our financial system is a major target for those who want to conceal and move illicit funds, since the dollar is the world’s reserve currency. That’s why strong AML compliance coupled with tough enforcement is critical.  
“In recent years we have seen major enforcement actions against a large number of global banks that allowed billions of dollars to flow through the U.S. financial system in a concealed way.  They include ABN Amro, Lloyd’s, Credit Suisse, Wachovia, Barclay’s, ING, Standard Chartered, and HSBC.  These banks violated the Bank Secrecy Act and our sanctions rules against Iran, Cuba, and other countries, in various ways, which cost the banks over $5 billion in fines and forfeitures. In addition, Citibank and JPMorgan Chase have been required to overhaul their BSA compliance systems in the face of major violations.   
“This pattern of violations is disturbing. Holes in banks’ anti-money laundering systems can protect funds stolen by corrupt leaders and drug cartels, help sanctions violators, and enable terrorist financing. To address this threat we must understand how banks’ safeguards malfunction and assess the way the government enforces our AML rules. As we do that, we should consider several important issues:
  • The government depends on bank compliance programs to detect and prevent money laundering.  Should senior management be required to confirm the strength of their programs regularly, so that they don’t break down, as appears to have happened at a number of banks? 
  • In the recent major penalty cases, U.S. banks failed to deal effectively with funds from non-U.S. branches or affiliates; some of the latter intentionally undermined rules and procedures they knew were required in the U.S.  How can we ensure more uniform compliance and enforcement of U.S. and international rules?
  • The time between citations by bank examiners and enforcement actions cannot be allowed to drag out, as was done in some of these cases.  While I’m pleased the OCC and other regulators are intensifying their efforts in this area, they must let law enforcement know early on about potential problems, to prevent illicit funds from being moved while problems are being fixed.
  • Last, questions have been raised about remedies, including the need for prosecution.  We should consider today the full range of remedies in cases like these, including:  BSA injunctions, banning from the industry those individuals who violate the rules, suspending a particular kind of activity or line of business at a bank in response to violations, and other measures.  
“We must do more to ensure that global banks, including their affiliates and branches who seek access to the U.S. system, have effective anti-money laundering systems in place.  If the recent record of AML-related violations by U.S. banks is any indication, we clearly have a long way to go before that is accomplished.  I hope today’s hearing can advance the discussion of how to reach this goal.
“I now turn to Ranking Member Crapo for his opening statement.”