WASHINGTON -- Federal Reserve Governor John P. LaWare assured the House Banking Committee on Wednesday that new reporting requirements for fund transfers will not hamper the competitiveness of U.S. banks.
Mr. LaWare said that record-keeping requirements will meet the needs of the government's effort against money laundering while protecting the efficiency and integrity of the payments system.
A provision of the 1992 Housing and Community Development Act instructs the Treasury and Fed to establish such requirements before Jan. 1, 1994.
The American Bankers Association, fearing the reporting of electronic money transfers would unduly increase paperwork, urged the banking committee to extend the effective date for the new regulations, said Sara Redding Wilson, senior corporate counsel of Signet Banking Corp., who testified on behalf of the ABA.
Tries to Reassure Bankers
But Mr. LaWare tried to be reassuring, saying the bankers' needs would be "carefully weighted" against the government's need to curb money laundering.
Critics contend that past reporting requirements have been wasted or unproductive.
Banks already are required under the Bank Secrecy Act to report most cash transactions exceeding $10,000. Banks filed nine million of these currency transaction reports, known as CTRs, to the Internal Revenue Service last year.
The IRS computer data base had stored about 50 million reports as of April 1993. The General Accounting Office expects that total to hit 92 million in 1996.
"There are far too many CTRs and far too many data," Henry Wray, a GAO official, said at Wednesday's hearing.
The GAO computed that the jumble of government agencies involved in the money-laundering fight made a total of about 2.5 million queries on Bank Secrecy Act data in 1992.
Another GAO official, Michael Eid, said the glut of information could be alleviated if banks were to report only suspicious transactions.
Questions Suggest Answers
Robert B. Serino, deputy chief counsel of the Office of the Comptroller of the Currency, seemed to agree that the current system has shortcomings.
He raised several questions suggesting possible changes:
* Should banks be required to submit CTRs for well-established customers?
* Do less costly alternatives to detect money laundering exist?
* Is the $10,000 reporting threshold appropriate?
Raising the minimum to $25,000 for business "would cut about a third of CTR filings," ABA senior counsel John Byrne said in an interview.
A 1992 ABA survey estimated that banks pay $3 to $15 to file a CTR, depending on whether their systems are automated. The IRS estimated it cost $2 to process eac report in 1992.
Ms. Wilson said her Virginia-based company filed 48,000 CTRs last year, the vast majority being "routine currency transactions by well-established retail businesses, including many Fortune 500 companies. Very rarely do we get a subpoena or a follow-up inquiry concerning any of these low-value reports."
Mr. Reerink writes for the Medill News Service.