Bank Executives to be Held Personally Liable for Money Laundering

In what is clearly a continuing trend, the State of New York is considering to hold bank executives personally liable for failures of their bank anti-money laundering (AML) systems and processes.

According to Benjamin Lawsky, superintendent of New York’s Department of Financial Services, in sworn attestations similar to those required by the Sarbanes-Oxley Act, the state may begin requiring senior executives to attest to the adequacy of their banks’ systems for monitoring customer transactions, just as they have to verify financial statements.

This will be backed up by random audits of bank’s AML systems that will be conducted by Lawsky’s department.  Lawsky has already conducted at least one model audit using sophisticated data mining tools to examine bank transactions for signs of money laundering and claims that the results were stunning in the number and value of suspect transactions that his audit revealed had passed through the AML system.

This move should cause banks to re-examine and improve their AML systems and procedures, starting from the front-line KYC tools all the way to real time transaction monitoring and ongoing media monitoring of customer behaviors.