It used to be primarily a focus of large financial institutions, but these days money laundering is a concern that the Bank of Americas of the nation share with regional and community banks, and even with credit unions.

Regulators lately have been turning more of an eye to smaller institutions as the larger ones become more efficient and accurate in finding money laundering. The Bank Secrecy Act and the Patriot Act both spell out rules for how banks should report money laundering to the federal government. Since 9/11, the enforcement has been stricter.

In a speech to 1,300 bankers last week in Baltimore, William Fox, director of the Treasury Department’s Financial Crimes Enforcement Network (FinCen), said that those bankers were America’s “eyes and ears” when it comes to spotting suspicious banking activity, according to the Associated Press.

The Bank Secrecy Act requires all banks to have a way to detect anomalies in banking transactions and to report suspicious activities to the federal government.

“There are certain regulations that require financial institutions to look for money laundering,” noted Tom Burns, vice president of production for Avon-based COCC.

So the issue is of importance to many Connecticut banks, and can be a complicated one. Banks are required to first have an anti-money laundering policy, according to Burns. The bank uses several factors, such as geography and the products it offers, to decide how high a risk of money laundering it has. Then the bank must find a way to identify suspicious activity.

Odd Patterns

Companies like COCC are coming up with ways to make detecting and reporting suspicious activity easier. Last week, COCC released an outsourced anti-money laundering solution following the system’s pilot with Abacus Federal Savings Bank in New York City.

COCC’s Anti-Money Laundering Solution constructs a permanent compliance database from multiple transaction sources. It is a rules-based system and uses preset and client-specific anomalies to automatically alert the bank to odd patterns and to identify possible money-laundering suspects.

“For example, the bank may elect to review all business customers who make deposits in even amounts of money, such as $2,000,” said Wendy DeMore, COCC’s first vice president of product management, in a prepared statement. “The bank may also want to be alerted to customers whose behavior deviates significantly from their peer group. The system is flexible enough to enable the bank to search for different activities at different times to keep the criminals off guard.”

After COCC’s system tells the banks of any anomalies it finds, the bankers must decide if the anomaly is significant enough to report to the federal government.

Money laundering is a significant issue in the banking world, according to Burns.

“It truly is one of the few things bankers can go to jail over,” he said.

One offense of money laundering can land someone in jail for five years; each transaction is considered an offense. That makes it different from other transgressions. For most, the institution simply has to pay a fine.

Money laundering is also a concern for the federal government because of the possibility of terrorists using American banks to store and transfer their money.

One institution – Riggs Bank, which is now owned by Pittsburgh-based PNC Financial Services Group – pleaded guilty in January to a felony charge of failing to report suspicious transactions involving foreigners, including former Chilean dictator Augusto Pinochet and members of his family, according to the AP. Riggs also agreed to pay a $16 million fine.

In October, Birmingham, Ala.-based AmSouth Bank was ordered to pay $40 million to the federal government for not filing suspicious activities reports.

The potential fallout from any crime means that banks are generally eager to file reports of suspicious activities. And after those two banks received their fines, filing suspicious activities reports became even more common.

In Fox’s speech last week, he asked bankers to “calm down” and use their judgment before reporting a customer’s actions. Bankers are filing too many reports because of worries that missing a possible terrorist will ruin their company’s image or get them a fine, Fox said, and that is bogging down his department.

“We’re all going to have to calm down a little bit,” Fox told the American Bankers Association’s regulatory compliance conference, according to the AP. “We’re asking you to use your judgment when you report to us … We’re not lurking around every corner; we’re not looking to whack people around.”

The system sometimes can be difficult to navigate, he added.

“This system is not an easy system necessarily to comply with,” Fox said.

Abacus Federal Savings Bank officials said they are pleased with the way COCC’s system has helped expedite the process of detecting abnormalities.

“Any financial institution performing this process manually can’t possibly get the job done,” said Jill Sung, president and chief executive officer of Abacus Federal Savings, in a prepared statement. “You need a high-powered technology solution to meet the constant challenge of discovering structured transactions.”

Abacus Federal Savings processes cash and wire transactions that are considered “high risk” by regulatory agencies. “The COCC solution standardizes our approach to [anti-money laundering] activity, which is what the regulators are looking for,” said Sung.