Advisors across the country are taking in a report recommending stricter rules for banks and increased due diligence by senior management – a move coming after a rash of money laundering settlements and a debate on whether bankers are "too big to jail."
In a consultation paper, the Basel Committee on Banking Supervision – comprised of central bankers and top-level regulators from across the globe – said banks should enhance due diligence on individuals who plan to maintain large account balances. It also calls for greater scrutiny of regular cross-border wire transfers and individuals who are “politically exposed.”
The proposal would put increased responsibility on senior bank managers.
“Decisions to enter into or pursue business relationships with higher-risk customers should entail enhanced due diligence measures," reads the report.Those include approvals to enter into or continue such relationships.
Recent cases in the US raised ire when global banks paid large settlements for alleged infractions of money laundering and terrorist financing rules.
HSBC settled for US$1.9 billion over claims it gave terrorists and drug cartels access to the US financial system, while Standard Chartered paid over US$660 million to settle claims it provided access to Iran. ING agreed to a settlement in excess of US$600 million over charges it transferred funds to Cuba and Iran.
Although the fines were sizable, there was popular outrage that bank executives escaped criminal prosecution for the alleged infractions. This spawned the meme that bank execs have become "too big to jail."
While not mentioning any specific cases, the consultation paper noted “recent developments, including robust enforcement actions taken by regulators and the corresponding direct and indirect costs incurred by banks due to their lack of diligence."
It said the costs and damage to banks could probably have been avoided had they maintained effective risk-based anti-money laundering and anti-terrorist financing policies and procedures.
The consultation paper is open for comments until 27 September.