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U.S. Senate Banking Committee Hears Testimony on BSA Reform
Thursday, January 11, 2018 6:35 AM

The U.S. Senate Committee on Banking, Housing, and Urban Affairs held a public meeting Tuesday to examine opportunities to reform and strengthen BSA enforcement. The hearing and testimony focused on effectiveness of anti-money laundering efforts and on beneficial ownership in which shell companies are used to hide the true ownership of money.

The BSA was passed in 1970, and amended periodically since then, with the legislative purpose of generating information to assist law enforcement detect money laundering and terrorist financing. The committee is exploring avenues to update and strengthen the BSA.

The witnesses appearing before the committee were Greg Baer, president of The Clearing House Association; Dennis Lormel, president and CEO of DML Associates (and former chief, FBI Financial Crimes Program); and Heather Lowe, legal counsel and director of government affairs, Global Financial Integrity. 

Baer testified that the system is rule-based, rather than risk-based, geared towards the financial institution’s need to meet compliance expectations that may not result in preventing or detecting financial crime. Financial institutions’ performance is graded by examiners that focus on policies, procedures, and quantifiable metrics, and not by law enforcement or national security officials. It is possible for a program to be compliant but not effective at identifying illegal activity. The rules over-generate alerts, costing time and money but not producing efficient reports on money laundering. Approximately 40 percent of SARS reports are about structuring but not illegal activity.

Lormel believes the system works, although it has many inefficiencies. Law enforcement consistently receives valuable intelligence from BSA data, but the system can be more effective and efficient. The more convoluted and distracting the regulatory process becomes, the greater the likelihood that the financial system serves as a facilitation tool for criminals and terrorists.

The committee members and witnesses discussed the challenges to determining beneficial ownership. According to Baer, the United States has a reputation as a place to hide money because of the lax standards companies face when registering.

According to Lowe, companies with unknown or hidden ownership are the number one problem in the AML world. She recommended that those involved in real estate closings, lawyers, and others be required to have AML programs in place, as they act as a proxy to open the door to the financial system for criminals and their money. 

Sen. Warner suggested that title insurers, investment advisors, and crypto currency dealers should be required to have AML regimes.

For more information, please contact Texas Credit Union Association President Jeff Huffman at 469-385-6488 or