Dirty cash laws meets little brokerage opposition
By Kevin Drawbaugh
WASHINGTON, Oct 16 (Reuters) - Anti-money laundering bills moving through Congress looked unlikely to meet open opposition from the global securities industry, although brokerages large and small could be affected, officials said Tuesday.
Reflecting a broad mood shift, the Sept. 11 attacks have given Washington's war on dirty cash enough momentum to deflect objections about regulatory burdens and personal privacy that in years past stymied similar attempted crackdowns.
``The focus of the industry is to work with Capitol Hill and federal investigators to choke off the laundering of money to terrorist organizations,'' said Jim Spellman, spokesman for the Securities Industry Association, representing more than 740 firms like Merrill Lynch and Co. Inc. (NYSE:MER - news) and
Morgan Stanley (NYSE:MWD - news).
With a Senate bill approved, the House of Representatives was expected to vote Wednesday or Thursday on a bill that could change the way securities firms do business.
Part of the House bill would order the Treasury Department to devise rules forcing ``financial institutions'' to verify the identities of persons opening new accounts and check them against government lists of ``known or suspected terrorists.''
Another part of the bill would order up rules requiring brokerages to report ``suspicious activity'' involving clients to the government. Still another proposal would require firms to adopt in-house anti-money laundering programs.
If passed by Congress, the impact of these orders will depend on how the Treasury Department interprets them, a process open to industry influence. But for now, gripes about red tape and government scrutiny of investors have been sidelined by a stunned industry willing to accept new limits.
The cooperative mood is evident far beyond Wall Street. Stephen Vranek, president of little West Suburban Securities in Oak Brook, Illinois, said: ``The attitude has changed a lot ... Maybe before the tragedy you might have gotten some opposition. But maybe not anymore.''
WAR ON MONEY LAUNDERING DRAFTS IN BROKERS
Money laundering usually refers to criminals depositing dirty cash into banks, shuffling it through accounts to hide its origins and then mixing it into the legal economy. As a result, commercial banks that accept cash deposits are on the front line of anti-money laundering efforts.
Most of the measures before Congress tackle banking regulations and these would affect some big brokerages -- such as J.P. Morgan Chase & Co. Inc. (NYSE:JPM - news), Credit Suisse First Boston and Dresdner Kleinwort Wasserstein -- which are owned by bank holding companies.
But some of the biggest U.S. broker-dealers -- Merrill Lynch, Morgan Stanley, Goldman Sachs Group Inc. (NYSE:GS - news), Lehman Brothers Holdings Inc. (NYSE:LEH - news) and Bear Stearns Cos Inc. (NYSE:BSC - news) -- are not bank controlled, like hundreds of smaller regional and local firms.
These companies are governed by cash transaction and other anti-money laundering laws. They comply voluntarily with some rules, such as reporting suspicious activity, and some already have in-house monitoring programs. The industry in the past has resisted additional government rules, arguing its restrictions on cash and cash-equivalent transactions protect it.
``Securities firms don't take cash, banks do. Securities firms don't take cash equivalents, banks do. There's a lot of stuff that we've done to close the door (to money laundering),'' said Betty Santangelo, a lawyer at Schulte Roth & Zabel in New York, who advises the Securities Industry Association.
But the industry has its critics who argue it is vulnerable to the account shuffling stage of money laundering in an age of electronic fund transfers and push button trading.
``Their lobby has done a great job at keeping them away from the regulations that the banks have had to deal with for 15 years,'' said Charles Intriago, publisher of Miami-based Money Laundering Alert. ``Yet because of their worldwide presence and their lack of sensitivity to these issues, they're probably more vulnerable than banks are right now to money laundering.''
ca.us.biz.yahoo.com
The mer.nyse news - ca.us.biz.yahoo.com - often brings bits of interest, i find ... here's one - 'Brokerages may end overseas ventures to cut costs' - ca.us.biz.yahoo.com
'Merrill is considering dramatic cutbacks in its Japan, Canada, Australia and India units, the Journal said.
``Those aren't the hot spot countries, with the possible exception of Japan, at some point,'' said Trone. ``The next area of growth is Europe. Europe we believe will be relatively untouched by the presumed upcoming cost-cutting.'' '
[...]
'``What we have certainly learned is that international markets are dominated by local providers, who are banks,'' he said. In many cases, there are regulations and laws in place that prevent U.S. brokerages from engaging in margin lending, a lucrative activity in which customers borrow against their holdings to invest in more stock.'
.. heh heh ... point in favour of the SEG model of broker alliances ... it's not just margin either, there's much more regulation detail |
