Information on Private Banking and Its Vulnerability to Money Laundering
GGD-98-19R: Published: Oct 30, 1997. Publicly Released: Nov 5, 1997.
- Full Report:
Pursuant to a congressional request, GAO reviewed private banking activities in the United States and the vulnerability of such activities to money laundering, focusing on: (1) the nature and extent of private banking activities in the United States; (2) regulatory efforts to monitor private banking activities and ensure that these activities comply with the Bank Secrecy Act (BSA); (3) policies and procedures of banks to ensure that their private banking activities comply with BSA; (4) law enforcement perspectives on the vulnerability of international private banking activities to money laundering; and (5) U.S. regulators' efforts to oversee the offshore private banking activities of banks located in the United States.
GAO noted that: (1) there is no generally accepted definition of the products and services that make up private banking or who constitutes it clients; (2) as a result, it is difficult to measure the extent of private banking with any precision; (3) a 1996 overview of private banking issued by an industry publication provided information on 35 institutions surveyed with reported private banking assets ranging from $197 million to $300 billion; (4) the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) are to review BSA compliance of the private banking activities as part of their overall BSA examinations of banks under their supervision; (5) in addition to these overall BSA examinations, the Federal Reserve Bank of New York recently undertook a focused review of private banking activities in its district, including a review of banks' anti-money-laundering programs and know-your-customer policies; (6) all of the 11 banks GAO visited told GAO that they had formal programs intended to ensure their compliance with BSA; (7) these programs included such policies and procedures as identifying and reporting suspicious transactions and know-your-customer programs; (8) some bank officials GAO contacted expressed concern about regulatory oversight of know-your-customer policies, noting that the lack of a formal regulation about such policies may contribute to inconsistencies in how the regulators review the area; (9) law enforcement views on the vulnerability of international private banking to money laundering varied; and (10) some law enforcement officials indicated that private banking was no more vulnerable than any other banking area, while others stated that certain characteristics of private banking make the area more susceptible to money laundering.