After claiming for years that bankers were filing ever more suspicious activity reports in response to regulatory pressure, experts are attributing the latest spike to a dramatic rise in actual financial crime.

The number of reports filed by depository institutions last year rose nearly 13% from a year earlier — the largest increase in three years — to 733,529, according to a report to be released next month by the Financial Crimes Enforcement Network.

It also was the 12th consecutive year, since Fincen started keeping records in 1996, that SARs hit a new high.

New York state prosecutors charged a blacklisted Chinese metals dealer Tuesday with illegally circumventing U.S. economic sanctions through shell companies to utilize Manhattan banks.

Li Fang Wei and his Dalian, China-based company Limmt Economic Trade Co. conducted dozens of illegal transactions between November 2006 and September 2008 with New York banks, according to the 118-count indictment filed by the Manhattan District Attorney’s office. The transactions involved deals to further Iran’s purported nuclear weapons program, according to the indictment.
 

The Chilean government has filed lawsuits against four banks it says either negligently or deliberately helped former dictator Augusto Pinochet hide $26 million in stolen funds.  

The civil suits filed Wednesday in a Miami federal court, seek unspecified damages that could total in the tens of million from PNC Financial Services Group Inc., Banco Santander, Espirito Santo Bank and Banco de Chile.

Hedge fund lobbyists increased their spending by over 700 percent between 2006 and 2008 in an effort to stave off stricter oversight, according to data provided by a non-partisan research group.

Representatives of the $2.5 trillion industry increased their total spending on lobbying from $870,000 in 2006 to $6.7 million the following year, according to Washington, D.C.-based Center for Responsive Politics. Hedge fund groups upped their spending by an additional $900,000 in 2008, according to the center, which collects data on money spent on U.S. lobbying efforts.

The number of suspicious activity reports filed by banks, thrifts, and credit unions is on track to set a record for the 12th year in a row — every year since regulators first required the filings, according to data released by the Financial Crimes Enforcement Network.

In the first six months of this year the number of filings by financial institutions increased 5% from a year earlier, to 343,974. If that trend continues, the full-year total is likely to exceed last year's figure of 649,176.

A massive overhaul of U.S. financial regulations proposed by Treasury Secretary Henry Paulson likely will lead to more consistency in anti-money laundering examinations, compliance experts say.

The “Blueprint for Financial Regulatory Reform,” unveiled by Paulson in March, would expand the oversight power of the Federal Reserve, consolidate the Securities and Exchange Commission and the Commodity Futures Trading Commission and eliminate the Office of Thrift Supervision (OTS). The Office of the Comptroller of the Currency would assume the operations of the OTS.

More than five years after regulators proposed AML regulations for hedge funds, compliance experts in Washington, D.C., say the initiative will continue to gather dust as regulators shift their priorities toward the capital crisis and other regulatory issues.

The Financial Crimes Enforcement Network (FinCEN) in September 2002 proposed a requirement that unregistered investment companies, including hedge funds, maintain anti-money laundering programs.

As a share of the estimated $50 billion-plus pie of bank IT spending, the $147 million U.S. institutions spent on anti-money laundering compliance products last year was barely a flake of crust.

Dropping the account of a politically exposed person (PEP) can be an administrative burden for banks requiring thorough documentation to satisfy bank examiners. But banks looking to close an account for a particularly sensitive PEP need a much more involved plan of action to stem any potential reputational damage from customers and the media, say consultants.

When the U.S. Treasury Department barred U.S. financial institutions from doing business with a Macau bank, it broke new ground by relying on the Patriot Act to gain a bargaining chip in nuclear discussions with North Korea, international law and banking experts say. The Treasury's Financial Crimes Enforcement Network (FinCEN) on Wednesday formerly declared Banco Delta Asia a prime money laundering concern 18 months after the agency cited evidence that the bank was involved in laundering money for the North Korean government.