AML / CFT: Manhattan DA tells conference that SARs work

I want to thank the American Bankers Association and the American Bar Association for organising this conference, and for inviting me here today. It is a great pleasure to speak to you this morning about our shared goals of protecting financial institutions from criminals who use them to launder illegal proceeds. We are committed to working with the financial community to detect and prevent financial crime.

Most importantly, I thank you all for coming here today. Your presence here suggests that you are as interested in finding ways to work together as I am. I think we share certain goals. Free markets. Fair competition. And capitalism that works to fuel economic growth and investment. The message we deliver today is one of partnership with those in this room who believe in good corporate citizenship to not just help keep our markets fair, but also our communities secure. My personal message is that I believe we share those same goals, and the challenges we all have to address is how ? together? we will achieve them.

The work of compliance professionals has never been more crucial than it is today, because today in America, distrust of financial institutions has reached levels not seen since the Great Depression. We see resentment toward the financial sector in blogs and on late-night TV shows and in rallies and sit-ins. But that’s only half the story. We also see deep distrust of financial institutions within the financial sector itself, as investors wonder whether they can trust ratings agencies, regulatory bodies, or even the conclusions of their own research staffs.

Banks and financial institutions need to have a meaningful understanding of their risk exposure. And when they do not, there is uncertainty in markets, and that uncertainty is what causes credit markets to freeze and investor confidence to plummet. And you know that when banks stop lending the crisis can – and very nearly did – bring down a great economy. At this point in time, particularly, the work you do in your institutions’ anti-money laundering departments and compliance offices is as important as any profit centre. Your work is crucial to the survival of your institutions, just as your work is crucial to the function of credit markets, to the advancement of commerce and business, and to our economy as a whole.

Certainly, your work is crucial to law enforcement. This morning I would like to offer some examples of how the work that you and your colleagues do every day brings to light major fraud, protects the integrity of our economy, and helps us ? as the chief state prosecutor’s office for the county that holds the most important street in the world for global finance ? build the cases that act as a deterrent to double-dealing in the financial markets.

It starts with the voluminous Suspicious Activity Reports your institutions file each day. Many in your compliance departments must believe SARS are like letters to Santa Claus; you send them in, but you don’t know if anyone reads them. Well, let me start by putting that issue to rest.

Many of you know Rich Weber, who ran the Asset Forfeiture and Money Laundering Section at DOJ and who now heads my Major Economic Crime Bureau. Rich formed a SAR Action Team within my office that sifts through SARs literally on a daily basis, searching for evidence of serious crimes.

Rich estimates that over the last ten months his team has culled for analysis over 1400 SARS. Already, that meticulous work has launched more than 20 new grand jury investigations, helping us solve cases involving not just fraud, but even violent crime. One SAR, for example, alerted us to financial activity that related to an open homicide in the Bronx. Another led us to a “free-riding” scheme, in which the defendant opened multiple trading accounts and, by taking advantage of the delay in clearing transactions, sold stock he did not own, skimming the profits while walking away from the losses. In this manner, the defendant conducted more than USD60 million worth of illegal stock trades, and left six broker-dealers with substantial losses. The defendant in that case used fictitious shell corporations and accounts at disreputable offshore banks, but those accounts were cleared through an unknowing and legitimate US financial institution.

In yet another case, a single SAR, filed by a financial institution like many of yours, led us to a stolen art ring and enabled us to seize USD15 million in proceeds from the sale of stolen art and millions more in artworks.