NCPA - National Center for Policy Analysis

Banks May Face Sweeping Changes In Foreign Dealings

September 21, 1999

A bill being introduced on Capitol Hill to combat money laundering could substantially alter the relationship between U.S. banks and their foreign clients, observers predict. Sponsored by Rep. James Leach (R-Iowa), it would prohibit U.S. financial institutions from providing correspondent banking services for a whole class of banks that are licensed in off- shore jurisdictions but have little or no physical presence there.

  • The bill would also require firms to identify the ultimate owner of any account established in the U.S. by a foreign entity that isn't publicly traded.
  • An important part of the legislation would strengthen "know your customer" rules for U.S. banks and other financial institutions handling the accounts of foreigners.
  • The bill would substantially broaden the list of prosecutable offenses under current money-laundering laws to include money obtained through bribes or fraud against a foreign government -- as well as by pilfering foreign- aid money.

Rep. Leach, who is chairman of the House Banking Committee, said the legislation would "significantly increase the transparency of the international banking system and pierce the veil of secrecy that for too long has made it possible for institutions and individuals operating in largely unregulated off-shore jurisdictions to gain unfettered access to the U.S. financial system for purposes of legitimizing the proceeds of illegal activities."

Source: Michael Allen, "Money-Laundering Bill Could Affect Banks Dealing with Foreign Customers," Wall Street Journal, September 21, 1999.

 

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