The only people who know money laundering better than Richard A. Small are either in jail or under investigation.
As the Federal Reserve Board's expert on money laundering, Mr. Small is responsible for writing Bank Secrecy Act and know-your-customer rules. He also supervises two examiners and three investigators who grill banks suspected of laundering cash.
"He has been a crucial asset," said Herbert A. Biern, the deputy associate director of the Fed's division of supervision and regulation and Mr. Small's boss. "He has well-recognized, multifaceted talents in developing a Bank Secrecy Act program and overseeing and personally conducting investigations of complex instances of wrongdoing."
Mr. Small is well-known for being blunt and keeping an intense schedule. An early riser, he's in the Fed's gym by 5 a.m. to exercise before heading to his desk at 7:30. "I am nuts, and my wife tells me that," Mr. Small said. But his eating habits are so unhealthy "that I really need to exercise, and this is the only way to do it."
His biggest pending project is the much-anticipated know-your-customer rules. The regulation, in the works since May 1996, is expected to specify the steps a bank must take to verify customers' identities. "It will require banks to have systems in place so they know who they are dealing with," Mr. Small said.
The Treasury Department's Financial Crimes Enforcement Network had been working on a similar rule since 1994. But it dropped its independent effort this winter, deciding to defer to Mr. Small.
The Fed created Mr. Small's unit in 1989 when the Bank of Credit and Commerce International scandal surfaced. Examiners contact his unit whenever they detect suspect transactions that could be part of a money- laundering scheme.
For example, an examiner recently notified him that a bank had an account with scores of large deposits and withdrawals. Mr. Small dispatched an investigator to determine what was happening. "We dig around and do background checks on the account holders," he said.
It wasn't always like this. Before 1991 the Fed would notify other law enforcement agencies of the trouble and then basically ignore it.
"Now we report it and look at it ourselves," he said. "The cops have so much to do that if we can find out what is wrong and package it for them, then it is a lot less work to bring it to prosecution."
He began the unit solo. In fact, he was also expected to help litigate enforcement actions. "The Fed didn't think it would be a full-time job," he said.
Eight years later, Mr. Small still finds himself working on BCCI-related cases. He was intimately involved in preparing fraud charges against former top BCCI official Ghaith R. Pharaon, who was fined $37 million by the Fed in February. All told, his unit has sought to recover nearly $1 billion for BCCI victims.
Mr. Small has worked for a variety of government agencies since graduating from Hofstra University law school in 1980. He began prosecuting price-fixing and bid-rigging cases in the antitrust division at the Justice Department before taking over the organized crime unit in the department's Los Angeles office. He spent a year as acting deputy assistant Treasury secretary for law enforcement before joining the Fed in 1989.
