Regulators Should Hold Execs Accountable on BSA Violations: Curry

Executives and senior management officials at the nation's largest banks must be held accountable for Bank Secrecy Act violations, Comptroller of the Currency Thomas Curry said Monday.

In a speech before the Association of Certified Anti-Money Laundering Specialists in Hollywood, Fla., Curry argued that regulators have allowed individuals at large, complex institutions to wriggle off the hook for BSA violations, instead attributing compliance failures to "the collective decision making of a great many people over a long period of time."

"That has to be changed," Curry said. "Management at large banks needs to eliminate these accreted compliance weaknesses so that institutional structural flaws do not become an excuse for a lack of accountability... Shouldn't we, as bank supervisors, demand that institutions designate and hold senior managers responsible for BSA risk management just as they would for any other activity or line of business?"

Curry stopped shy of suggesting that regulators push for criminal prosecution of bank executives, calling the decision "solely the responsibility of law enforcement." Democratic lawmakers, including Sens. Elizabeth Warren, D-Mass., Mark Warner, D-Va., and Jeff Merkley, D-Ore., have urged the OCC and other bank supervisors to crack down on individuals who fail to enforce anti-money laundering laws.

Increased regulatory scrutiny over banks' BSA and anti-money laundering compliance has led some lenders to sever relationships with high-risk businesses like money transmitters. While de-risking measures can be warranted, Curry recommended that banks devote more resources to risk management rather than "abandoning customers in higher risk categories."

"Money transmitters, as a business, are more risky than, say, your local movie theater," Curry said. "But that doesn't mean that all money transmitters are high risk, nor does it mean that other types of businesses couldn't be used for illicit purposes... Higher-risk categories of customers call for stronger risk management and controls, not a strategy of total avoidance."

Curry appeared generally optimistic about banks' compliance efforts. "We are seeing progress, especially in terms of the priority that management at our large banks is placing on BSA compliance," he said. The speech's upbeat tone stood in marked contrast to Curry's remarks before the Institute of International Bankers a year ago, in which he criticized major lenders like HSBC, JPMorgan Chase (JPM) and Citigroup (NYSE: C) for falling short in risk management.