Industry experts fear that new wire transfer rules aimed at combatting money laundering will be ineffective.
Criminals will find other ways of illegally moving money, and the sheer volume of transfers will make detecting laundering difficult, these experts say.
Under the rules, which kick in Jan. 1, 1996, banks, brokerage firms, and other money transmitters must keep records on wire transfers of more than $3,000 for five years. The rules, published in the Jan. 3 Federal Register, attracted just 108 comments, half of them from banks.
Though the banking industry welcomed a rule pulling competitors under the Bank Secrecy Act, some banks complained about the compliance burden.
John Byrne, senior counsel at the American Bankers Association, said the wire transfer rules - five years in the making - are too little, too late. Officials need to be able to track where money enters the economy, not just where it moves once it is in the system, he said.
"I don't believe this information is going to be useful," Mr. Byrne said. "It is going to be rare that a case is made on this information alone."
But wire transfer regulations will eventually be buttressed by rules requiring banks to have "know your customer" policies.
The Treasury Department, expected to propose those rules in the next few months, should have a final "know your customer" rule in place by the fall. The rule, long overdue, has been held up by the restructuring of Treasury's Financial Crimes Enforcement Network and the agency's work on myriad other rules.
Once the rule is in place, wire transfer records could be used to back up suspicions or to piece together crimes, said Charles Intriago, publisher of Money Laundering Alert in Miami.
"Law enforcement will still need to know where and what to ask," he said.
The Treasury Department has said it will reexamine the wire transfer rules as technology advances.
The department may be influenced by a congressional Office of Technology Assessment study exploring new technologies to make wire transfer records more useful.
The study, begun last February, is expected to be released in August. According to a summary, the usefulness of the records to law enforcement is limited by the immense volume of transfers. Last year, 71 million transactions went through Fed Wire involving $208 trillion. Nonbanks, such as Western Union, handled 12.7 million transfers last year.
