Banks Should Come Clean on Laundering
The Russian money-laundering story is a scandal in more ways than one. It is a failure of federal law, government regulation, and bank self-discipline. The advent of high-speed electronic wire transfer systems that move trillions of dollars every day make the policing of money laundering more difficult, but not impossible. Banks shouldn't hide behind technology to excuse illegal behavior.
The truth is that commercial banks find the business of moving money around the world for high-net-worth individuals extremely profitable. They've been in it for decades. Some banks even have a history of working with U.S. intelligence agencies to move money quietly. Countries with poor economic policies often experience capital flight, and banks have been there to facilitate the transfer. In the process, legal and illegal monies often get commingled, which appears to be the case with Russia. Back in the '70s and '80s, hundreds of billions of dollars left Latin America for the U.S. and Europe through commercial banks. They know how to do it.
They therefore know how to stop it. Certainly federal law needs updating. Money laundering laws cover only six foreign crimes and need to be broadened. Regulators have to better monitor the flow of electronic funds through wire systems as well. But banks bear the major responsibility. Bank of New York clearly courted Russian capital fight by employing people connected to that country's new political and financial elite. When a torrent of tens of billions began pouring out of Moscow, BONY should have surmised that a portion of that flow might be illegal. The bank should have called in the feds. Instead, it appears that a competitor in the business of moving money for the world's rich, Republic National Bank of New York, blew the whistle.
Money laundering is a gray area of global banking. But bankers have been operating in these shadows for a long time. They should know right from wrong.