Fincen's Wire Transfer Plan Draws Criticism

WASHINGTON — Industry representatives largely panned news of a Financial Crimes Enforcement Network plan to require banks to report all international wire transfers to the government, citing concerns about the usefulness of the data and privacy issues.

The proposal, which was released Monday, would target approximately 300 banks and 700 money services businesses that directly send or receive transfers to and from overseas. But industry representatives were skeptical such reporting, which would entail 500 million to 700 million new reports a year, would lead to any benefit.

"One of the concerns that has been raised since the statute has been processed in 2004 is: can Fincen process this data and what is that going to cost and what are you going to do about the privacy concerns?" said Rob Rowe, vice president and senior counsel for financial institutions policy and regulatory affairs for the American Bankers Association.

The plan would treat banks and MSBs differently. Under the proposal, banks would have to report all international wire transfers, regardless of the amount, while MSBs would only have to track transfers worth $1,000 or more.

The proposal would also require banks to create an annual report detailing the account number and account holder's tax identification number for all accounts used to originate or receive international wire transfers.

The industry has 90 days to comment and Fincen estimates the proposal would not go into effect until 2012 to allow for technology compliance. But anti-laundering experts were already attacking the proposal, saying Fincen is making a mistake.

Peter Djinis, a lawyer and former Fincen official, said this is simply "overregulating" and Fincen has not made its case that the information is useful. "I don't think the government has made the case the benefit outweighs the reporting and privacy cost," he said.

Djinis pointed out that the Patriot Act gave the government the authority to summon any wire transfer data from banks on anyone who is credibly suspected of money laundering or terrorist activity. That authority is sufficient to track down terrorist financiers, Djinis said.

Alan Sorcher, leader of the Deloitte's Anti-Money Laundering Strategic Leadership Group and a former Fincen adviser, said it is still an open question if the data will be useful. "I'm sure there is going to be some value to it," he said. "The question is whether it is going to be worth the burden."

John Byrne, executive president of the Association of Certified Anti-Money Laundering Specialists, said the proposal would come on top of millions of other reports already required by the government. At the end of 2009, depository institutions had made 1.2 million suspicious activity reports and 13.7 million currency transaction reports. "We're asking for more information, we are not eliminating any information gathering," he said. "So I think there is a need to show the information value and utility."

The industry has also complained that Fincen hasn't shown how it is going to protect the privacy of the data, particularly records that detail an account holder's Social Security information. "There will be a burden on Fincen to show how secure the information is," Byrne said. "The Social Security numbers, anytime you put it in another database it's obvious there needs to be more controls."