How Wall Street Can Fight Organized Crime


Financial institutions are the "front line" of defense against transnational criminal organizations that rely on the legitimate banking system to hide their stolen or illegal assets, a top U.S. Treasury official said.

Many criminal groups hide in plain sight in cities like New York, London or Moscow, masquerading behind their investments in real estate or business, and relying on the financial system to move money around the world, David Cohen, the U.S. undersecretary for terrorism and financial intelligence, said in a speech.

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"Financial institutions act as both the plumbing and the gatekeepers of the global financial system," Cohen said in remarks at the Royal United Services Institute, a think tank in London.

Cohen called on banks to continue to protect the global financial system by conducting due diligence on their customers and sharing more information with regulators.

But government officials also have to do their part, and the U.S. Treasury also shares information with financial institutions about people or groups that may be involved in money laundering or terrorist financing, Cohen added.

"We have begun exploring new ways of enhancing this flow of information from government to industry by providing more context to financial institutions to make the information even more valuable to them," he said.

The U.S. Treasury has been working for more than two years on a new rule that would force financial institutions to report the "beneficial," or true, owners of certain accounts that may be held in the name of legal entities like corporations.

The know-your-customer rule proposal had been held up by some disagreements between Treasury and banking regulators, as well as banks' fears about the cost of compliance. The White House's Office of Management and Budget has until early July to complete its own review of the rule.

"(Transparency) leaves criminals with fewer places to hide," Cohen said.

The delineation between organized crime and terrorist networks is also becoming blurred, making organized crime a national security issue, he said. Both groups have begun to borrow each other's methods, or even join forces, such as al Qaeda affiliates in Yemen and North Africa working with criminal groups to kidnap people for ransom in order to raise funds.

"(But) we do not see widespread collaboration between (transnational criminal organizations) and terrorist groups, Cohen added, since the two groups have different goals.