Close The Account!

"What do you do if you suspect your customer of money laundering or kiting, and you've reported it, and nothing has been done by the IRS or anybody else, and the customer is still doing it?"

This was the question put to Richard Small, special counsel of the Federal Reserve Board of Governors at a session on money laundering in Washington, DC at the ABA Regulatory Conference.

"Close the account," was the quick reply. "As long as you're not discriminating, you can close a customer's account at any time. You have the right to choose what customers you wish to service." In the case of an ongoing investigation, Rick suggested that the financial institution should get a letter from IRS, or whichever the investigating agency may be, with instructions to leave the account open. Otherwise, in the case of ongoing activity, the account should be closed.

John Byrne, senior legislative counsel for the American Bankers Association added that the Annunzio-Wylie safe harbor provisions should protect the financial institution in situations such as these. He also agreed the account should be closed with all possible speed.

Copyright © 1994 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 5, No. 1, 8/94