AML Enforcement: Balancing Risk

To identify and trace criminal activity, federal law enforcement relies on the mandatory filing of suspicious activity reports by financial institutions subject to the Bank Secrecy Act. Because of the importance of SARs to law enforcement efforts, regulators do not require — and indeed have no interest in requiring — that financial institutions refuse to maintain accounts for clients with higher risk profiles, such as certain money services businesses.

In January 2015, Treasury Under Secretary David Cohen made this very point, remarking that through MSBs, the government has “access to crucial information that regulators and law enforcement depend on every day to prevent the abuse of the financial system.” He went on to express concern that “banks have been indiscriminately terminating the accounts of all MSBs, or refusing to open accounts for any MSBs.” Pointing out that regulators do not — contrary to a conclusion that some may draw from recently enhanced enforcement efforts — expect banks to be “infallible,” Cohen said that what regulators do expect “is that [banks] take seriously the variety of illicit finance risks that different clients present, and assess and address those risks on a client-by-client basis.” In theory, such assessment and monitoring should benefit both the institution, which is thus in a better position to comply with its SARs filing obligations, and the government, which can put the filed SARs to law enforcement use.