And, in response to a terrorist attack or other significant national security event, is your bank proactively searching its payment activity to see if it has potentially relevant information? One question that I get asked from time to time is if law enforcement can share more information about the activity reported in SARs. I believe law enforcement is always looking for ways to enhance the effectiveness of its information sharing. I want to recognize FinCEN’s efforts to share more information via its public website and in its reports to Congress about the information it collects from the industry through SARs. The New York Fed also tries to do its part. It hosts three major conferences every year in which the FBI, FinCEN, local law enforcement, and financial firms discuss financial crime—especially terrorist financing, money laundering, and cyber-crime. We do our best to act as a liaison between banks and law enforcement officials. We’ll keep at it. Conclusion Stepping back, I’d encourage you to consider as well what your firm’s response to financial crime says about its purpose and culture. What does it say about the role of the financial services industry in society? And, to get personal for a moment, how does that response make you feel about where you work and how you make a living? From where I sit, gaps in AML and other payment system defenses make a terrible impression because of the terrible things funded through illegal payments.
A few years ago, the television show 60 Minutes covered an undercover operation that captured on video fifteen out of sixteen Manhattan lawyers offering advice on how an African official could secretly move funds into the country. 14 The investigator posed as an adviser to an African minister of mining who managed to accumulate millions of dollars for personal use— expensive real estate, a jet, and a yacht. In the end, no firms actually took on the client. These were just preliminary meetings. And they were a set-up. No actual crimes were committed. Still, only one lawyer out of sixteen told the undercover investigator to get lost. What an eyeopener. As a lawyer and a central banker—and as a New Yorker— I found this report deeply troubling. Where Do We Go From Here? So that’s where I see us today. Where do we go from here? Let me share some ideas, which are not mutually exclusive. Build Good Habits For starters, let’s be honest about “looking the other way.” Many financial institutions have, at times, turned a blind eye to evidence of money laundering, sanctions evasion, corruption, kleptocracy, and plain theft. Over time, some institutions become weak links in our system when they take on riskier clients, perhaps in order to chase profit, without developing the ability to manage those relationships in a responsible way. Often these relationships start small: one lowvalue, ethically suspect transaction.