U.S. Banks Fight Dirty Money Rules

 Econintersect:  U.S. banks have been criticized for holding billions of dollars belonging to dictators and regimes from around the world.  They are objecting to any attempt to tighten international rules that would control these activities, which are a form of money laundering of funds from corrupt politicians.

Governments have been freezing assets tied to regimes in Libya, Egypt and Tunisia but banks have been resisting attempts to prevent international money flow from poltical corruption.  From the Wall Street Journal:

The Financial Action Task Force, part of the Organization for Economic Co-operation and Development that sets international standards for money-laundering laws, is conducting a review of its guidelines aimed at closing loopholes.

The review, due to be completed later this year, comes amid criticism of banks for holding billions of dollars in assets allegedly belonging to regimes in Libya, Egypt and Tunisia. Swiss bank regulators are looking into whether a dozen Swiss banks followed antimoney-laundering laws in accepting money from officials in those three countries.

“Banks will have understood that no head of state will have earned these sums of money legitimately,” says Mark Pieth, chairman of the OECD’s antibribery group. “The very fact that they have found this money begs very serious questions.”

But U.S. banks are pushing back against a proposal by the FATF that would require financial institutions to identify the person who ultimately benefits from an account. The proposal would toughen the existing standards, which call on banks to take reasonable measures to identify the beneficial owner of an account.

Nicholas Shaxson, author of a new book “Treasure Islands”, has a GEI Opinion Blog article which discusses “Foreign Dirty Money in the U.S.”  Shaxson quotes Treasury Secretary Timothy Geithner who has stated that there is over $3 trillion in hot money from abroad that is in the U.S..  Shaxson goes on to state that the incredible total of money flowing into the U.S. illicitly is far less than the hot money that is flowing out. 

Sources:  The Wall Street Journal and GEI Opinion Blog