WASHINGTON - Treasury Secretary Lawrence H. Summers said Thursday that regulators will try again to develop guidelines that would help bankers spot money launderers among their customers.
However, Mr. Summers emphasized that regulators were chastened by the failure of the "know-your-customer" proposal last year and would craft a scaled-back, more flexible version than the plan that incited a public backlash over privacy. Regulators withdrew that plan - which would have required banks to investigate the sources of their customers' money - after consumers sent tens of thousands of comment letters objecting to the proposal as a government intrusion into their confidential financial affairs.
"All of us certainly learned important lessons from the know-your-customer experience," Mr. Summers told reporters after a speech at a Bankers' Association for Finance and Trade luncheon here. "There is no intent of repetition."
Banker scrutiny of some of their customers is an unavoidable part of the federal government's anti-money-laundering strategy, which also includes a legislative proposal outlined by Mr. Summers on Thursday and other regulatory initiatives that officials will describe in detail next week. "U.S. financial institutions have to be our nation's first line of defense against money laundering," Mr. Summers said.
The guidelines, unlike the failed regulation, would have voluntary compliance and would zero in on "high-risk accounts" such as those of wealthy foreigners. The Treasury chief said this approach would target "a very small fraction of all accounts" and therefore should not panic the public.
Regarding legislation, Mr. Summers said the administration would work with lawmakers to introduce the International Counter-Money Laundering Act next week. The bill would give the Treasury secretary authority to identify countries or overseas financial institutions with weak anti-money-laundering policies, or suspicious types of international transactions. That formal designation would trigger different requirements depending on the situation, ranging from special reporting mandates on U.S. financial institutions that are doing business with the suspect parties, to barring institutions from opening or maintaining correspondent accounts for these entities.
- U.S. Treasury and Justice departments' anti-money laundering strategy (Introduction)
- The National Money Laundering Strategy for 1999 (Full-text)
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