WASHINGTON A House Financial Services Committee hearing today on money laundering could be the first public step toward more extensive information-sharing among financial institutions, regulators, and law enforcement agencies three often antagonistic groups that are tentatively banding together against terrorism and the money that funds it.
In recent days industry representatives have acknowledged that terrorist attacks on New York and Washington had forced financial services companies to reassess their role in the fight against terrorism. Congressional hearings will not be the only forum in which that role is debated.
I think that Sept. 11 changed everything, Jeffrey P. Neubert, the president and chief executive officer of the New York Clearing House, said in an interview Tuesday. I dont know what the answer is, but clearly the processes in place now were not sufficient to uncover this situation.
Mr. Neuberts group will convene a meeting of high-level bankers, regulators, and law enforcement officials as early as next week. He said he plans to ask participants to step back, be open-minded, and start with a clean slate to try to consider new ways that the industry and the government can join forces to fight terrorism.
The tragic events of the 11th have changed all of our perspectives, have changed all of our understanding, and have brought home just how significant this is. It begs for us to look at how we do business, to deal openly with one another, and to not be adversarial, he said.
The meeting was proposed by Victor J. Menezes, the chairman and chief executive officer of Citibank NA. He said that he and former Treasury Secretary Robert Rubin, now the chairman of Citigroups executive committee, would lead a Citi delegation. The plans for the meeting were first reported by The Wall Street Journal on Tuesday.
Industry observers said that a strengthened commitment on the part of the financial services industry was hardly surprising given the target of the New York attacks.
It is my sense that the global financial services community is firmly committed to doing everything they can to root out terrorism, said Donald T. Vangel, a former senior vice president of the Federal Reserve Bank of New York.
I dont think any other industry was as directly affected, unless it was the airline industry, said Mr. Vangel, who is now a partner with Ernst & Youngs risk management and regulatory practice. This is about more than just getting the bad guys.
He said that he would not expect the industry to offer to give up core concepts of customer privacy, but that expects to see more cooperation with law enforcement. My personal perception is that secrecy and privacy have taken a secondary importance to this horrific event of Sept. 11, he said. Maintaining the confidentiality of client information will remain very important to financial institutions. But I think they are prepared to be very aggressive about ferreting out illegal activities.
The witnesses at todays hearing are scheduled to include Treasury Secretary Paul ONeill as well as representatives from the Treasury and Justice departments and the Federal Bureau of Investigation. Also testifying will be industry representatives, including Edward L. Yingling, the chief lobbyist for the American Bankers Association, and Marc E. Lackritz, the president of the Securities Industry Association.
We do agree that there is going to have to be a real partnership between law enforcement and the banks, Mr. Yingling said Tuesday. I do think we can do this and get the balance right in terms of still protecting the privacy and having the trust of our customers.
According to a memo circulated to committee staff members, the witnesses have been asked to describe the financial networks and operations of the terrorists responsible for the Sept. 11 attacks, including the role, if any, of banks, securities firms, insurance companies, money services businesses, trading companies, and charitable organizations.
Witnesses were also asked to identify any vulnerabilities or high-risk areas in the financial services sector, to recommend appropriate legislative solutions, and to outline ways to improve public-private cooperation between government and industry in addressing terrorist financing concerns.
Mr. Yingling said that any effort at increased cooperation would have to be a two-way street. Where we really need help from law enforcement is in identifying those areas and those groups that need the special attention, he said. I think the industry has the procedures in place to address this. We need them to identify where they want these mechanisms to be used.
Some efforts at improving communication between industry and regulators has already begun. Last week Treasury Department officials, including Deputy Treasury Secretary Kenneth W. Dam and Under Secretary for International Affairs John B. Taylor, met with several industry representatives and asked for ideas about improving the coordination of the public and private sectors in the fight against terrorism.
