CHARLES H. MORLEY, a consultant specializing in fighting financial crime, says community bank executives must confront even their best customer if they suspect an unusual transaction.
The president of the Arlington, Va.-based Morley Group says there's much at stake. The government can revoke a bank's charter and seize property, and executives can face stiff jail terms.
A former special agent with the Internal Revenue Service, and a chief investigator with the Senate permanent subcommittee on investigations, Mr. Morley formed his firm in 1985. It offers advice on financial crimes to banks, U.S. government agencies, and foreign governments. It also produces videos detailing how crooks launder money. He had this to say to American Banker reporter Bill Atkinson.
Q.: Do community banks have to worry about money laundering?
MORLEY: The answer to that is yes. I think they are extremely vulnerable. They don't realize the dangers they face.
Q.: Who should they keep an eye on?
MORLEY: The bad guy could be a local car dealer. They have to worry about a local businessman bribing a zoning commissioner and manipulating a bank account to free up the money. We are talking about the average person.
Q.: What can small banks do to keep the crooks out?
MORLEY: Obviously, you have to follow government regulations exactly. If it becomes known that your financial institution knows what the laws are ... that goes a long way to keeping [unscrupulous] people out of your bank, especially the professional bad guy.
Q.: What else?
MORLEY: Knowing your customer is obviously something banks have always had to do. Any type of unusual transaction, even though you know them, should draw your attention. It is extremely difficult to question them ... you just have no choice.
Q.: What should a bank do if the government begins a money laundering probe?
MORLEY: The first thing you do is get excellent legal advice. Get criminal counsel who has experience in these a cause these are fairly recent laws.
Q.: What else?
MORLEY: Obviously, you have to cooperate with the government fully. You have to bend over backwards. Don't give the government anything without making a photocopy of it. Your best defense up front is to have a very complete, thorough compliance system in place long ago. Sure it costs money ... but it is chump change compared to what you are going to have to spend if you have to defend yourself.
Q.: What is the government going to want?
MORLEY: When the government comes in, simply bury them with paperwork. It is extremely important to have a corporate memory of all of the things you have done. That to me is one of the best defenses you could have.