Federal and state authorities are investigating a handful of
major U.S. banks for failing to monitor cash transactions in and out
of their branches, a lapse that may have enabled drug dealers and
terrorists to launder tainted money, according to officials who
spoke on the condition of anonymity.
These officials say they are beginning one of the most aggressive crackdowns on money-laundering in decades, intended to send a signal to the nation's biggest banks that weak compliance is unacceptable.
Regulators, led by the Office of the Comptroller of the Currency, are close to taking action against JP-Morgan Chase for insufficient safeguards, the officials said. The agency is scrutinizing several other Wall Street giants, including Bank of America.
JPMorgan is in the spotlight partly because federal authorities accused the bank last year of transferring money in violation of U.S. sanctions against Cuba and Iran.
Prosecutors from the Justice Department and the Manhattan district attorney's office are also investigating several U.S. financial institutions, according to several law enforcement officials.
Under the Bank Secrecy Act, financial institutions such as banks and check-cashers must report any cash transaction of more than $10,000 and bring any dubious activity to the attention of regulators.
The federal law also requires banks to have complex controls in place to detect any criminal activity.
The comptroller's office, JPMorgan and Bank of America declined to comment.
The investigations are gaining momentum as concern is growing in Washington that illicit money is coursing through the U.S. financial system.
In July the Senate Permanent Subcommittee on Investigations accused HSBC of exposing "the U.S. financial system to money- laundering and terrorist financing risks" between 2001 and 2010. The British bank, which is also under investigation by federal and state prosecutors, is suspected of funneling cash for Saudi Arabian banks with ties to terrorists, according to federal authorities with direct knowledge of the investigations. HSBC officials have pointed out that they had strengthened controls to prevent money-laundering and replaced employees tainted by the allegations.
The case against HSBC alarmed banking regulators, who wondered if monitoring flaws could be pervasive in the banking industry. The comptroller's office, which lawmakers accused of missing warning signs about HSBC's weaknesses, has stepped up its scrutiny of U.S. banks in recent months.
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