US financial sector regulators have toughened the regime for when banks will be issued with cease-and-desist orders for failing to report possible money laundering transactions.

A cease-and-desist order is created if institutions fail to establish and maintain a coherently designed programme or correct a previous problem, regulators said. Banks and credit unions must have proper internal controls, independent testing of anti-money laundering programmes, a programme coordinator and a staff training programme.

The Comptroller of the Currency, Federal Reserve, Federal Deposit Insurance Corporation, Office of Thrift Supervision and the National Credit Union Administration have combined in stiffening their approaches to this anti money laundering regulation.

‘We think it's important to be uniform and transparent about our policies, especially regarding enforcement of anti-money laundering regulations,’ Federal Reserve governor Randall Kroszner said.

US banks have complained persistently about requirements that trigger numerous reports for various transactions, saying that it takes money, hours and staff training to comply with federal anti-money laundering rules.

Institutions are required to file several reports with regulators, including the Treasury Department's Financial Crimes Enforcement Network (FinCEN), if they detect certain violations or suspicious transactions.

Those include suspicious activity reports and currency transaction reports for transactions involving $10,000 or more in cash.

House financial services committee chairman Barney Frank, a Massachusetts Democrat, and the panel's top Republican, Spencer Bachus, on Thursday asked congressional investigators to review FinCEN reporting requirements.

They questioned the effectiveness of federal reporting requirements, which resulted in 17 million suspicious activity and currency transaction reports in 2006.

Mr Frank and Mr Bachus want the Government Accountability Office to review FinCEN's mission and find out to what extent banks are filing documents with regulators defensively to avoid potential sanctions from federal examiners.