Journal Entry, US Senate Hearing on Bank Secrecy Act

Written on Thursday, March 7, 2013
Event at United States Senate Committee on Banking, Housing and Urban Affairs, Patterns of Abuse: Assessing Bank Secrecy Act Compliance and Enforcement


The Senate Banking Committee held a hearing to examine the extent, causes, and penalties of banks’ failure to adhere to anti-money laundering laws, and the lack of discipline of regulators who are meant to keep the banks in check with the law.

Witnesses for the hearing included representatives from the US Department of the Treasury, Office of the Comptroller of the Currency and the Federal Reserve System. These experts were primarily asked why they are not holding banks to the law when those banks have been found guilty of money laundering.

In December, the giant international bank HSBC was only penalized $1.9 billion for laundering money for the drug cartels and other illicit financial activity. The highlight of the hearing was U.S. Senator Elizabeth Warren grilling banking regulators on why banks could commit crimes and not be prosecuted by the law.

“What does it take?” Warren asked the panel of banking regulators. “How many billions of dollars do you have to launder for drug lords and how many economic sanctions do you have to violate before someone will consider shutting down a financial institution like this?

Comptroller of the Currency Thomas Curry and Federal Reserve Governor Jerome Powell explained that a charter repeal process would depend on a bank being convicted of a crime, for which Powell said the Justice Department has “total authority.”

All of the regulators stated they are working on improving regulations and enforcement and disputed that it was up to the Department of Justice to decide whether prosecution was appropriate. (The Justice Department did not have a witness at the hearing.) They were reluctant to weigh in on whether they thought HSBC should have faced trial, even though they consult closely with the DOJ on bank’s activities.

The Committee hearing was a good indication that the current system to bring banks to justice is disconnected and dysfunctional. There is no incentive to comply with the law when there are no consequences for individuals and only meager monetary penalties for financial institutions. Until the punishment fits the crime, there will be a continued disregard for anti-money laundering obligations. Subsequently, the US financial system will continue to complicity finance organizations responsible for drug and human-trafficking, extreme violence and terrorism.


Warren Questions US Agencies’ Light Touch on Money-Laundering (click here)

Congress must end “too big to jail” (click here)

US Senate Committee on Banking, Housing & Urban Affairs (click here)


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