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New Anti-Money Laundering Bill Targets Bank Executives

By Rachel Louise Ensign and Michael R. Crittenden, The Wall Street Journal

A House Democrat plans to introduce a bill Wednesday that would toughen anti-money laundering laws by placing an emphasis on penalties for executives and giving a Treasury Department bureau greater enforcement powers.

The “Holding Individuals Accountable and Deterring Money Laundering Act” highlights some lawmakers’ dissatisfaction with recent money-laundering penalties and provides a new roadmap for strengthening enforcement.

The legislation will be introduced by Maxine Waters (D., Calif.), the top Democrat on the House Financial Services Committee and co-sponsored by other Democrat committee members including Carolyn Maloney (D., N.Y.). The measure would target top brass at firms that come under scrutiny for their anti-money laundering controls, according to a copy of the bill viewed by the Wall Street Journal.

For instance, it would raise the maximum prison sentence for willfully evading an institution’s Bank Secrecy Act program or controls to 20 years from the typical cap of five years.

“A spate of recent high-profile enforcement actions has made it clear that the consequences for non-compliance are far from adequate,” said a summary of the legislation. The measure is part of a package of legislation that includes a bill meant to deter the use of shell companies for illegal means.

While the current gridlock in Washington means the anti-money laundering bill is a long shot to become law, it underscores the increased scrutiny among policy makers on money laundering violations. Comptroller of the Currency Thomas Curry and other top regulators have expressed concern that too many banks have taken a lax approach to combating money-laundering, in part because of the 2008 financial crisis, which forced bank executives’ attention elsewhere.

In response, examiners at the Office of the Comptroller of the Currency, Federal Reserve and Federal Deposit Insurance Corp. have increased scrutiny on banks’ anti-money laundering programs, levying fines for violations and even delaying some mergers. Major firms such as J.P. Morgan Chase & Co., Citigroup Inc.C +0.45%, HSBC Holdings HSBA.LN +0.59% PLC and Standard Chartered STAN.LN +0.18% PLC have all faced fines, penalties or other enforcement actions.

Provisions listed under “holding executives responsible for violations” include a requirement that the Justice Department explain to Congress “why it did or did not pursue prison sentences” when it settles an anti-money laundering probe for a financial penalty.

The bill raises questions about other tactics that have become a regular part of the anti-money laundering enforcement toolkit. It says the independent consultants often appointed to monitor a bank’s compliance program after the firm runs into regulatory trouble should be held to the same standard as bank employees if they commit wrongdoing.

It would also give the Financial Crimes Enforcement Network, a bureau of the Treasury Department known as FinCEN that is tasked with combating money laundering by collecting information, authority to litigate on its own. FinCEN now typically works with other agencies on money-laundering cases.

The legislation would also establish a FinCEN whistleblower program very similar to the one the Securities and Exchange Commission put in place after the 2010 Dodd-Frank financial-reform act. Under this prospective program, tipsters could get a bounty for reporting violations of anti-money laundering laws.

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