US banks warn Trump will stick with tough money laundering stance

Owner of Virginia mall kiosk business sentenced for immigration, money laundering crimes
Owner of Virginia mall kiosk business sentenced for immigration, money laundering crimes

President’s new cap on regulations unlikely to apply to all areas of compliance


Big US banks are warning that money laundering is one area where they expect Donald Trump to maintain tough regulatory standards, despite the new president’s pledge to ease burdens where possible.

New York’s Department of Financial Services this week fined Deutsche Bank $425m over its role in a scheme that allegedly laundered $10bn out of Russia.

The action came days after Investors Bancorp, a $23bn-in-assets bank based in New Jersey, scrapped an agreement to buy a local rival, saying it could not satisfy the Federal Deposit Insurance Corporation that its anti-money laundering systems were up to scratch.

On Monday Mr Trump ordered a cap on all new regulations affecting business, signing an executive order that establishes a “one in, two out” rule for any new US regulations.

But AML may prove to be the exception, where Mr Trump sticks with the tough stance of the previous administration.

Gene Ludwig, chief executive of Promontory Financial Group and a former head of the Office of the Comptroller of the Currency, said that he expects AML efforts to remain “a serious area of focus” for the Trump administration — especially in light of the strong anti-terror stance of the first couple of weeks.

“With more countries under the gun, and no prospect of easing sanctions on countries like Iran — quite the contrary — you’d have to assume this area will stay the same or get tougher,” he said.

Bank stocks have roared higher since the election, as investors have warmed to the prospects of higher interest rates and lower taxes, as well as a shift in the regulatory environment.

Even before the election of Mr Trump, there were signs that compliance burdens were beginning to ease after years of steady increases in costs. Much of that spending was linked to the Dodd-Frank Act of 2010, which subjected big banks to rigorous annual stress tests and made them draw up plans for their orderly winding-down, among a host of other requirements.

Analysts say that banks could begin to see drops in the cost of regulatory compliance, as the Trump administration focuses less on financial stability and more on ways in which regulation can spur economic growth.

This week Mr Trump vowed to “do a big number” on Dodd-Frank, saying its excessive regulation had made it “virtually impossible” for small and midsized businesses to get loans from banks.

But a “more constructive ‘tone at the top’” is unlikely to filter down to AML departments, said Matt Keating, analyst at Barclays in New York, noting that state and federal agencies continue to be watchful.

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