Other people's money: international banking is still going strong in South Florida despite challenges from bank regulators and patrons made anxious by tough efforts to thwart terrorism

South Florida CEO, March, 2005 by Mike Seemuth

Their legal interpretations "are highly subjective, and as a result, you have different examiners applying different standards," says Al Avila, an attorney in the Miami office of Tampa-based law firm Holland & Knight. For international bankers, compliance with anti-money-laundering regulations remains something of a guessing game.

"It is getting more burdensome," Avila says. "Right now, everyone is preoccupied with compliance"--not to mention competition with banks in foreign countries. "It does put us at a competitive disadvantage with European banks and others," he says.

The trend is hard on Miami in several ways, Avila says. "You and I are the ones who pay for it." One unseen cost is an aura of over-cautious behavior on the part of many international banks. "Enterprise and innovation are taking a back seat," he says.

At a conference he recently attended, Avila heard an anecdote about a bank that filed a suspicious activity report because an employee was observed stealing a strip of bacon off a hamburger in the bank's cafeteria.

"We're seeing defensive filings now," Avila says. "Banks are not taking any chances. They're filing everything and it's bogging down the enforcement system. That's a trend that has a lot of people worried, including the regulators."

But international bankers in Miami have experienced regulatory issues before and have overcome them or adjusted to them, Avila says. "They went through almost this exact situation in the late '80s and early '90s," he says, recalling that international banks in Miami embraced the need to "'know your customer' before most of the country knew what that meant."

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International bankers in Miami have learned the hard way. In April 1990, an anti-money laundering enforcement initiative led by the US Attorney's Office in Atlanta and known as "Operation Polar Cap" resulted in the simultaneous freezing of 700 bank accounts at 173 Florida banks clustered mostly in Miami. Executed by federal agents without the knowledge of state comptroller Gerald Lewis, Florida's top bank regulator at the time, the unprecedented account freeze was the result of a criminal investigation into drug trafficking.

Whatever the good intentions of "Operation Polar Cap," many wealthy non-resident aliens had an icy response, avoiding Miami banks for years following the crackdown. A similar operation by federal agents nine years earlier had already left bankers and their clientele in Miami bleeding financially. Customers of several local banks were arrested as a result of "Operation Greenback," which launched in 1981 by a combined task force of the US Attorney's Office, US Customs, the federal Drug Enforcement Administration (DEA), and the Internal Revenue Service (IRS). They arrested bank customers who had been involved in an unauthorized currency exchange business.

Things could have been worse. To their credit, international bankers in Miami have remained proactively engaged with regulators and lawmakers through the FIBA, which was formed in 1979, and which has represented the industry in successful efforts to mold the legal environment in which they operate.