U.S. to ease small bank money laundering oversight

Fri Jun 22, 2007 9:14pm BST

By John Poirier

WASHINGTON, June 22 (Reuters) - U.S. authorities said on Friday they are adopting a risk-based approach to policing banks' compliance with money laundering regulations, a step giving some relief to small banks with little or no international business.

U.S. small community banks have complained for years that costly regulatory examinations should differ from those at big banks.

Federal banking officials said the risk-based approach will begin with next year's bank examination cycle. However, they provided little detail on which bank activities might be relaxed or targeted in federal examinations.

Banking and law enforcement authorities at the Financial Crimes Enforcement Network (FinCen) are developing new standards to administer the federal Bank Secrecy Act and anti-money laundering laws. "We will be putting some meat on the bones over the next year," said John Reich, director of the Office of Thrift Supervision.

Treasury Secretary Henry Paulson called the changes "a common sense approach" to make law enforcement more efficient. "There will be more things coming," he said. "These are the first steps."

The Independent Community Bankers of America industry group applauded the move, saying the changes would reduce the "disproportional regulatory burden facing community banks."

FinCen also said it has been working to more narrowly define so-called money services businesses, which currently offer cash checking and money transfers.

Last year, an Internal Revenue Service official told Congress that a failure to better regulate money service stores might drive those businesses underground and allow them to evade anti-money laundering efforts.

Separately, FinCen said it issued a final rule exempting casinos from having to report currency transactions reports, required for transactions involving $10,000 or more, on jackpots from slot machines and video lottery terminals.

The exemption also applies to currency inserted into electronic gaming devices. FinCen said the casino industry sought relief from these requirements because these jackpots result in a significant percentage of currency transaction reports.

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