I’m a lawyer, and I like to say that legal expertise is what gets you into the room. Knowing the law is necessary for professional legitimacy. But, in my view, it is not sufficient. Lawyers also have to consider the bigger picture—the purpose of relevant laws, the client’s needs, common sense, and fairness. Those same inquiries should be on the minds of other professionals—including risk professionals in the first line of defense. I mentioned earlier the recent “beneficial owner” regulations. Those rules are part of the customer due diligence regime for financial institutions. The rules tell you the information firms are required to gather and retain to help keep financial crime out of the banking and payment systems. They do not, however, directly answer the question, “Is this the type of customer we want to do business with?” That question requires judgment that is not the exclusive domain of lawyers. The answer will depend not on laws and regulations, but on your institution’s purpose and principles. Manage Account Relationships One area where the difference between what’s legal and what’s right is immediately relevant is the management of customer account relationships, including accounts for respondent banks. I know that this can be tricky. Banks do not want to take on unnecessary legal and reputational risk for the weaknesses and failures of account holders. Nor do banks want to needlessly disrupt or impair the efficiency and speed of the payment system. But that system is under attack. Perhaps we need to think differently about risks, benefits, and costs.
Some of those funds have been recovered, but Bangladesh Bank is still working to recover most of its loss. We at the New York Fed are still helping them to do so. Simply put, it was not just Bangladesh Bank that was wronged. The New York Fed—my client and employer of more than 20 years—was wronged as well. So I come to you today not as a dispassionate observer. I come to you today bearing the scrapes and bruises and scars of our own experience at the New York Fed. This morning, I will speak about where we are and where I think we should go from here. My message, in brief, is that we are all in this together. The integrity of the payment system is critical to the U.S. and global economy. Financial institutions and the official sector must do their utmost to protect the system from financial crime. 1/6  BIS central bankers' speeches  Where Are We Now? The payment system can be used to facilitate many types of crime. Fraud and theft have accompanied money transfers for as long as there has been money. The Romans considered counterfeiting to be a form of falsum, which was a fraud against the public.2 And, of course, Willie Sutton provided the timeless, common-sense explanation for bank robbery. Money laundering is, by contrast, a more recent development in criminal law. In the United States, anti-money laundering law reflects an evolution in focus from banknote tracking to combatting narco-trafficking to counterterrorism.