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NEWS RELEASE 2007
ABA Media Contact: Jon Snowling
(202) 663-5468
E-mail:jsnowlin@aba.com
ABA PROVIDES TESTIMONY URGING CONGRESS TO IMPROVE THE SAR PROCESS
WASHINGTON, May 10 – The American Bankers Association asked Congress today to improve the suspicious activity reporting process and to make Bank Secrecy Act compliance requirements more effective in the fight against money laundering, terrorism financing and other financial crime.
Speaking before the House Financial Services Subcommittee on Oversight and Investigations, Megan Davis Hodge emphasized the need to eliminate inefficient and outdated reporting obligations, fine tune the SAR process and find effective solutions to reduce the cost burden of BSA data reporting.
"While vigilance is high to combat threats against our financial and economic system, the issue before us today is how to use the resources available to all parties in the most effective way to increase our success," said Hodge, who is director of anti-money laundering at RBC Centura Bank in Raleigh, N.C. Hodge explained that updating the archaic CTR system by eliminating fillings for seasoned business customers would go a long way to improve the SAR process.
"As any athlete knows, you improve performance when you eliminate wasted movements. Streamlining our BSA efforts will allow us to improve results," said Hodge. Hodge expressed concern that the current SAR process is burdensome and leads to unwarranted reporting.
"The number of SARs filed by depository institutions has grown from 81,197 in 1997 to 567,080 in 2006, a seven-fold increase," said Hodge. "As these numbers continue to rise, the question looms ever larger: Are they a measure of success or excess? Can this possibly reflect an epidemic of illicit activity eating away at the integrity of American banking? We think not."
Hodge attributed the increase in SAR fillings to factors such as:
- Regulatory pressures that promote "defensive filings" and inflate SAR volume out of proportion to the risk represented by the underlying conduct; and
- In the absence of constructive feedback from government, banks tend to report a broad range of suspicious activity regardless of the likelihood of action or interest by law enforcement.
Hodge suggested that agencies can help reduce defensive SARs by assuring that examiners follow exam standards. "We believe that much of the solution to this serious problem resides in eliminating fear of supervisory second-guessing by making sure examiners respect the bank's risk assessment and abide by the review standards established in the Interagency Exam Procedures," said Hodge.
The American Bankers Association, on behalf of the more than two million men and women who work in the nation's banks, brings together all categories of banking institutions to best represent the interests of this rapidly changing industry. Its membership-which includes community, regional and money center banks and holding companies, as well as savings associations, trust companies and savings banks-makes ABA the largest banking trade association in the country.
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