Smaller banks struggle to track terrorist funds

Smaller US banks are not entirely wild about the idea of having to enforce the new rules that could follow if a proposed online gaming ban goes into effect, the Wall Street Journal reports. Under the rules proposed by Congress, they would be required to block electronic transactions involving illegal Internet casinos. Lobbyists representing small to medium sized banks are arguing that the burden of monitoring 35 billion annual transactions would involve an awful lot of work and considerable expense.

Ignoring a provision in the proposed new legislation directing the government to come up with an implementation plan that wouldn't be overly burdensome for banks, the Independent Community Bankers of America says the smaller banks don't have the resources to block offshore gambling transactions.

The American Bankers Association, which represents the nation's biggest banks, has not voiced the same level of concern. But the little guys are balking at the extra work involved in modernizing their systems and keeping the list of offshore casinos updated. "It would be extremely challenging," says one consultant, adding that "it is already difficult for banks to identify electronic transfers involving (...) known terrorists and drug dealers."

This sounds a bit like the arguments proponents of online file sharing and illegal downloading have been making for years: If it's difficult and complicated to police the internet, why bother trying? Three to five years after the first critics argued that it would be practically impossible to control the flow of illicit content, the volume of illegal file sharing has dropped and companies like iTunes are doing very well, thank you.

The major banks are a self-regulated force, proactively embracing money laundering and terrorist financing issues and gaining brownie points in the process. It would be surprising if whingers in the minor league were to erode the lawmakers' resolve.