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The BSA is the core of Treasury's anti-money laundering efforts, and one of the main elements of this authority is the ability to require financial institutions to retain records that can be an invaluable tool in criminal, tax or regulatory proceedings.
"Wire transfers are the arteries of the international financial system," said Treasury Under Secretary for Enforcement Ron Noble. "Not surprisingly, use of wire transfers is a necessity for many large scale money laundering schemes. Wire transfers are used both to move funds out of (or into) the United States and to confuse the money trail.
"These rules mark a basic shift of our attention from cash at the teller's window to concentrating on crime hidden in the details of legitimate commerce."
The rules, which were developed by the Treasury and the Federal Reserve Board, are designed to strike an appropriate balance between the costs of compliance and the need of law enforcement agencies for information relating to wire transfers. Once they take full effect, the two final rules will significantly assist law enforcement efforts in cases involving wire transfers by requiring information identifying parties to such transactions, and if necessary making it available to investigators.
The first rule, issued jointly by the Treasury and the Board of Governors of the Federal Reserve System, requires banks and non-bank financial businesses to collect and retain information with respect to certain wire transfers.
The second rule requires each institution operating in the U.S. in wire transfer transactions to include certain identifying information in the payment orders sent to the next "receiving" or "intermediary" institution in the transmittal chain (so that the information "travels" with the transmittal order).
The final rules will be filed with the Federal Register on Thursday (December 22) and published in accordance with the Register's schedule.
The preparation of these regulations has been a five-year process. Treasury first proposed regulations relating to recordkeeping for funds transfers in October 1990, and in 1993 the rules were re-proposed for comment. The final rules announced today will become effective on January 1, 1996, which gives financial institutions a year to create systems to implement the regulations.
"I think the industry will find that its concerns are reflected in these final regulations," said Ronald K. Noble, Treasury's Under Secretary for Enforcement. "For instance, we have excluded smaller transactions--those below $3,000--from the recordkeeping process, and tried to conform the rules and implementation to commercial realities."
Stanley E. Morris, Director of the Financial Crimes Enforcement Network which administers the BSA, emphasized that the criminals who underestimate the effect of these rules will do so at their own peril.
"People should not think this is simply more paper," he said. "It's anything but. These rules will for the first time give us a significant picture of the details of funds movement, especially as they relate to the tax haven and off-shore banking preserves used by international money launderers.
"Over time, our computer systems will be able to map the avenues of illicit money movement and the people traveling those avenues," he said.