Especially since the Great Recession began, the American public has become more critical of the way that alleged financial crimes are prosecuted. Whether or not it is true, it is often said that heads of banks and corporate CEOs never face criminal charges.
In reality, the U.S. financial system is highly monitored by federal agencies, and many criminal investigations do not make headlines. Yet in the interest of cracking down on white-collar crime, regulators are introducing increasingly stringent controls that make it difficult for many companies to do business – even legally.
Earlier this month, news agencies reported that the Financial Crimes Enforcement Network (FinCEN) is seeking to expand reporting requirements for what are called “suspicious activity reports.” In order to fight money laundering and insider trading, regulators already require mutual funds, brokerages and banks to file SARs.
FinCEN is now seeking to require credit card firms, check cashers, investment advisers and others to also file SARs. The purpose of recruiting these entities as informants is to “file formal reports notifying U.S. authorities of any suspicious trading by employees or outside parties.”
SARs and other reporting requirements are important in the fight against terrorism and terrorist organizations. But they also make it significantly harder for certain financial institutions to do even legitimate business. Some banks, for instance, have become averse to doing business with clients that might be considered “risky” under the reporting requirements.
What often gets lost in the public conversation about financial crimes is that complex financial systems are connected to one another by a web of transactions, most of which may be legitimate. Therefore, assigning culpability is not nearly as easy or straightforward as most people realize. And regulations imposed on an already complex system need to be balanced against how those regulations will impact the ability to continue doing business.
Source: Reuters, “U.S. rules would expand white-collar crime informers,” Nov. 10, 2014