Money Laundering:

Observations on Private Banking and Related Oversight of Selected Offshore Jurisdictions

T-GGD-00-32: Published: Nov 9, 1999. Publicly Released: Nov 9, 1999.

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Thomas J. McCool
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Pursuant to a congressional request, GAO discussed money laundering in relation to private banking and highlighted some regulatory issues related to the vulnerability of selected offshore jurisdictions to money laundering, focusing on: (1) regulators' oversight of private banking in general; (2) regulators' oversight of private banking in selected offshore jurisdictions; (3) barriers that have hampered regulators' oversight of offshore banking; and (4) future challenges that confront regulators' efforts to combat money laundering in offshore jurisdictions.

GAO noted that: (1) federal banking regulators have overseen private banking through examinations that, among other things, focus on banks' "know your customer" policies; (2) these policies enable banks to understand the kinds of transactions a particular customer is likely to engage in and to identify any unusual or suspicious transactions; (3) federal banking regulators have examination procedures that cover private banking activities conducted by banks operating in the United States; (4) in cases that involve private banking activities conducted by branches of U.S. banks operating in offshore jurisdictions, examiners rely primarily on banks' internal audit functions; (5) GAO found that the key barriers to U.S. regulators' oversight of offshore banking activities are secrecy laws that restrict access to banking information or that prohibit on-site examinations of U.S. bank branches in offshore jurisdictions; and (6) an important challenge that confronts efforts to combat money laundering is the extent to which such secrecy laws will continue to be barriers to U.S. and foreign regulators.

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