WASHINGTON -- Bankers who aid law enforcement officials by keeping a suspicious account open wouldn't have to worry about their action running afoul of regulators under legislation sponsored by U.S. Rep. French Hill.
H.R. 5783, known as the Cooperate With Law Enforcement Agencies and Watch Act of 2018, offers protection for financial institutions that cooperate with federal, state, local or tribal investigations.
The House Financial Services Committee approved the legislation 55-0 Thursday, one of six bills that they forwarded to the full House for consideration.
U.S. Rep. Bill Foster, a Democrat from Illinois, is the co-sponsor.
Hill, a Little Rock Republican who serves on the committee, said the goal is to offer a safe harbor for those who are helping to facilitate a criminal investigation.
When financial institutions spot certain unusual transactions, they are required to file what is known as a suspicious activity report.
Once the warning signs are spotted, banks may be eager to drop the suspicious customer.
Sometimes, however, law enforcement officials will express interest in the account and seek the bank's assistance.
"Very frequently, law enforcement agencies ... will approach a bank and tell them 'We want you to keep a bank account open so that we can monitor it,'" Hill said.
The financial institution receives a "keep open" letter requesting that they allow the transaction to continue rather than shutting down the account.
The cooperation is appreciated by crime fighters, but the unusual banking activity raises red flags for bank examiners, he said.
"The bank examiner says 'You've filed a suspicious activity report on this account. ... You've written it up, but you've left the account open and that's a violation of the Bank Secrecy Act and the AML [Anti-Money-Laundering rules] and it's a violation of your internal policies that your board of directors has approved,'" Hill said.
The legislation, if approved, would ensure that bankers aren't docked on a compliance exam for complying with this type of request.
The bill wouldn't relieve the bank of its obligation to continue monitoring and reporting any subsequent suspicious transactions arising from the account.
Hill is the former chairman and chief executive officer of Delta Trust and Banking Corp., a Little Rock financial institution he founded and led before its purchase in 2014 by Simmons First National Corp. of Pine Bluff.
"This happens," the congressman said. "Even in my small financial institution it would happen periodically."
"If you're running a bigger company, particularly with branches in major urban areas or in ... a border environment, you might have a lot of these floating around inside the bank for different reasons from different law enforcement agencies. It becomes a much larger compliance burden," he added.
Bill Holmes, president and chief executive officer of the Arkansas Bankers Association, said he's pleased that Hill has addressed the issue.
"The banks were caught in the middle and we never felt like we were very good at it," he said.
"This just looks like a very simple fix, to me, to a problem that comes up occasionally. It looks like a very clean, easy way to do it and takes our banks out of worrying about it," he said.
Business on 06/09/2018