the operations of foreign banks in the united states. this network of partners requires a high degree of coordination. the regulatory authorities communicate constantly regarding bsa - related matters. for example, among bank regulators, there are a number of electronic systems in place that allow secure access to examination information. this allows regulators to monitor the status of organizations under their direct or indirect purview. it is also the federal reserve ’ s practice to notify relevant functional regulators when a supervisory action may have impact on an institution subject to their supervision. in addition, bank regulators collaborate in the development of consistent examination procedures and examiner training. the usa patriot act required a surge of rulemaking activity, and the federal reserve and its regulatory colleagues continue to advise treasury as it completes this important work. law enforcement coordination the federal reserve routinely coordinates with federal and state law enforcement agencies with regard to potential criminal matters, including anti - money laundering and financial crime activities. this coordination may occur when the federal reserve takes action to address matters that are also addressed in a criminal proceeding, when the financial condition of a bank is affected by a criminal matter, or when law enforcement draws on federal reserve staff expertise in its investigative work. the federal reserve maintains open channels of communication with law enforcement, whether through interagency working groups or informal staff level contacts. conclusion the federal reserve believes that banking organizations should take reasonable and prudent steps to combat illicit financial activities such as money laundering and terrorist financing, and to minimize their vulnerability to risks associated with such activity. for this reason, the federal reserve ’ s commitment to ensuring compliance with the bank secrecy act continues to be a high supervisory priority. the federal reserve has an important role in ensuring that criminal activity does not pose a systemic threat, and, as important, in improving the ability of individual banking organizations in the united states and abroad to protect themselves from illicit activities. thank you again for inviting me today to explain the federal reserve ’ s work in this important area.

diminishing efficacy on this market - impact dimension, so in this instance the past evidence seems like a good guide to future outcomes. however, the evidence on treasury - market impact is just a starting point. to fully evaluate an lsap, one needs to take several further steps, some of which are more open to debate. in so doing, it is helpful to clarify the specifics of the supply - demand story. one version of this story works through the market price of duration risk, which is the interest rate risk borne by an investor in long - term bonds. in this case, all bonds – including treasury securities, corporate bonds, and mbs – can be thought of as close substitutes for one another, and an lsap, by reducing the total quantity of duration in private hands, lowers the price of duration risk and so reduces the yields on all long - term bonds by an amount proportional to their duration. going further, this story might also suggest that, to the extent that equities embed duration risk, the return investors require to hold them should fall commensurately, thus giving a significant boost to stock prices. in other versions of the story, markets are more segmented, and treasury securities and other bonds are not such close substitutes, so an lsap has differential effects on various securities. in this case, an lsap that absorbs treasury supply would be expected to lower the yields on treasury securities relative to those on corporate bonds, or alternatively, to increase the corporate - treasury spread. 7 and by a similar logic, an lsap might have only a modest effect on stock prices. with this backdrop, let ’ s start with the efficacy side of the question. take our $ 500 billion lsap and, as mentioned earlier, stipulate that it reduces the 10 - year treasury rate by 20 basis points. a simple way to proceed would be to plug this 20 basis point change into one of our econometric models and ask what the consequences are for gross domestic product growth and unemployment. as a concrete case, if you did this exercise with the fed ’ s workhorse frb / us model, it would tell you that the $ 500 billion lsap should bring down the unemployment rate by approximately two - tenths of a percentage point at a two - year horizon. 8 this effect is economically meaningful. the model is due to kim and wright ( 2005 ). see woodford ( 2012 ) for an opposing