WASHINGTON — The federal government's top anti-money laundering official sought Tuesday to assure bankers that other parts of the financial industry will soon bear more responsibility in the fight against financial crime.
James Freis Jr., director of the Financial Crimes Enforcement Network, said that his agency is working to fill regulatory gaps that allowed certain financial institutions — including non-bank mortgage lenders, investment advisers, and certain issuers of prepaid cards — to avoid the reporting requirements that banks must follow.
Freis noted that prior to the financial crisis, non-bank lenders made about 50% of the mortgage loans in the United States. But those lenders do not have to report suspicious activity to the federal government. That will change soon, because Fincen is working to finalize a regulation that will impose anti-money laundering obligations on non-bank mortgage originators.
"We only have half the information available to us in terms of holding criminals accountable," Freis said during a speech at an anti-money laundering conference sponsored by the American Bankers Association.
Freis also highlighted new anti-money laundering rules for issuers of prepaid cards. He said that bank products are not subject to the rule, since banks are already subject to a regulatory scheme.
"You should not have a situation where essentially the same functionality can be provided by a bank and a non-bank, with essentially the same risks for criminal abuse, without sufficient controls," Freis said. "The consumer is entirely indifferent to who's behind many of the products that they have. They may not even know. I can promise you that the criminals are indifferent."
Freis also noted that Fincen is working on a rule that will bring investment advisors under its regulatory umbrella.
Mutual funds and broker-dealers already have regulatory obligations, but an earlier effort by Fincen to rope in investment advisors stalled. Now the agency is revisiting the issue.
"So that's something that you can look forward to in the coming year," Freis said.
