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U.S. Banks and Criminal Money Laundering

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U.S. Banks are Spending Plenty of Money Trying to Track Money Laundering and Criminal Activity

Banks all over the United State allocate substantial resources trying to track criminal activity, such as money laundering. According to official reports issued by the US Treasury, major financial companies and investment banks (e.g. JPMorgan Chase, Bank of America and Citigroup) spend as much as $8.5 billion annually on AML compliance. In addition, the obligation to report the authorities any suspicious transaction requires plenty of manpower and resources.

In fact, the government is not willing to ease regulations out of fear of terror financing. These regulations originate to the 1970s, but they became much harsher after the 9/11 attack and the resulting USA Patriot Act.

It should be noted that according to the IMF, around 5 – 7  percent of global economy is based on money laundering. We are talking here about a huge sum of money. Gross world product is estimated at $110 trillion. Five percent of that is $5.5 trillion of illegal money that originates in criminal activity and finances illicit organizations, such as terror groups.

U.S. banks want to reform their obligation to report financial criminal activity, claiming current regulations are too demanding and all in all are not effective. In 2016, these banks issued close to million reports about suspicious money laundering transactions potentially connected to terrorism or drug trafficking. That is too much. What is proposed is to reduce the number of reports and instead let banks investigate only transactions that are found to be suspicious by law enforcement agencies.

It is not easy for the authorities to allow banks loosen their inspections. We must remember that the United States is still facing a major terrorist threat from salafi jihadism (for example, ISIS). However, it is hoped that now, after D. Trump entered office, regulatory policy will become less severe.

We must find the balance between the need to hinder financial criminal activity and the imperative of allowing the financial system operate more smoothly so as to make sure American economy preserves its competitive edge.

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