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Business

Lawsky targets banks with anti-money-laundering proposals

By
Kevin Dugan
Published Feb. 25, 2015, 2:13 p.m. ET

Benjamin Lawsky is just getting warmed up.

New York’s top financial watchdog is targeting a slew of new proposals at big banks as part of a regulatory crusade that has already made him one of the most feared men on Wall Street.

Lawsky’s office is considering holding senior executives personally accountable for the “adequacy and robustness” of systems designed to detect questionable banking in foreign countries.

The superintendent of the Department of Financial Services is also weighing testing the firms’ systems for catching suspect dealings.

Lawsky said fighting money laundering is key to the war on terrorism.

“Money is the oxygen feeding the fire that is terrorism,” he said Wednesday during a talk at Columbia Law School. “Without moving massive amounts of money around the globe, international terrorism cannot thrive.”

The banks are still grappling with a host of tougher regulations in the wake of the financial meltdown.

“If the regulators aren’t transparent, it may create an unwinnable scenario where banks’ compliance programs are held up and compared to a model that’s not visible to them,” said Matthew Schwartz, a partner at Boies Schiller & Flexner.

The proposals come after Lawsky slammed BNP Paribas and Standard Chartered with steep fines to settle allegations that they moved money out of rogue nations like Iran and Sudan.

Lawsky is also considering rules aim at getting banks to beef up cyber security, saying he’s worried that hackers could bring down the nation’s financial system.

The old password system is “dead” and banks need more layers of security such as multi-factor authentication, which sends codes to customers’ cell phones, he said.

Lawsky, who upended the regulatory pecking order in his pursuit of Standard Chartered, faulted his fellow watchdogs for punishing corporations rather than individuals for financial crimes.

“In my opinion, if in any particular instance we cannot find someone, some person, to hold accountable, that just means we have stopped looking,” he said.

Lawsky, 44, who has led the DFS since 2012, has considered leaving his position but declined to comment on his plans.