BCS Barclays PLC

By Christopher M. Matthews 

New York's top banking regulator is set to publish on Thursday strict and long-awaited anti-money-laundering regulations to take effect in 2017.

The new regulations, reviewed by The Wall Street Journal, add stringent requirements for banks to curb illegal transactions by known terror organizations and other criminals.

Among the more notable changes: a requirement that either board officers or senior compliance officers certify that companies' controls are adequate, potentially opening such individuals up to criminal liability if the controls are found lacking.

The Department of Financial Services, which regulates New York-chartered banks -- including Goldman Sachs Group and major foreign banks including Deutsche Bank AG, Barclays PLC and others -- has emerged as an aggressive pursuer of financial crime in recent years. Maria Vullo, the agency's recently confirmed superintendent, has said she plans to continue the tough enforcement policies of her predecessor, Benjamin Lawsky.

"Management must set the tone of compliance from the top so that message is disseminated throughout the enterprise," Ms. Vullo said. "With this new regulation, New York will lead both in the fight against terrorist financing and money laundering and in providing useful guidance to our regulated institutions."

The new regulations, which Mr. Lawsky announced last year, would require banks to maintain stringent electronic filters to flag suspicious transactions that violate U.S. economic sanctions and other rules or else face penalties from the office.

Other regulations already in place impose similar requirements, but the New York rules, which go into effect Jan. 1, go further by requiring banks to submit annually a board resolution or a finding from a senior compliance officer confirming the institution is in compliance with the regulations.

Such a requirement could open board members or compliance officers up to a regulatory penalty or criminal prosecution, if it is later determined their certification was false. The first certification to the department will be due in April 2018, according to the regulations, and banks are required to retain up to five years of documents related to the certification.

New York Gov. Andrew Cuomo proposed a version of the regulations in December that would have required a compliance officer to attest to the controls' adequacy but didn't offer the option for the board to do so instead. Banks and other interested parties had 45 days to weigh in on the proposed regulations.

After listening to the comments, the department reworked the regulations to include the board-certification option.

Other than that change, the final version that will be released Thursday largely mirrors the December proposal.

The new regulations could give the New York agency greater leeway to pursue money-laundering cases than some other federal banking regulators, such as the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.

The regulations also would require that banks regularly test and update filters based on a risk assessment of the institution and ensure they provide enough funding and hire qualified personnel to meet the requirements of the regulations.

As well, the regulations allow the department to inspect documentation related to anti-money-laundering controls and extract penalties if it finds shortcomings.

Write to Christopher M. Matthews at christopher.matthews@wsj.com

(END) Dow Jones Newswires

June 29, 2016 22:01 ET (02:01 GMT)

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