[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4005 Engrossed in House (EH)]


  2d Session

                               H. R. 4005

_______________________________________________________________________

                                 AN ACT

 To amend titles 18 and 31, United States Code, to improve methods for 
 preventing money laundering and other financial crimes, and for other 
                               purposes.
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
105th CONGRESS
  2d Session
                                H. R. 4005

_______________________________________________________________________

                                 AN ACT


 
 To amend titles 18 and 31, United States Code, to improve methods for 
 preventing money laundering and other financial crimes, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Money Laundering 
Deterrence Act of 1998''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Amendments relating to reporting of suspicious activities.
Sec. 4. Expansion of scope of summons power.
Sec. 5. Penalties for violations of geographic targeting orders and 
                            certain recordkeeping requirements.
Sec. 6. Repeal of certain reporting requirements.
Sec. 7. Limited exemption from Paperwork Reduction Act.
Sec. 8. Promulgation of ``know your customer'' regulations.
Sec. 9. Report on private banking activities.
Sec. 10. Availability of certain account information.
Sec. 11. Sense of the Congress.
Sec. 12. Designation of foreign high intensity money laundering areas.
Sec. 13. Doubling of criminal penalties for violations of laws aimed at 
                            preventing money laundering in foreign high 
                            intensity money laundering areas.
Sec. 14. Laundering money through a foreign bank.
Sec. 15. Criminal forfeiture for money laundering conspiracies.
Sec. 16. Charging money laundering as a course of conduct.
Sec. 17. Venue in money laundering cases.
Sec. 18. Technical amendment to restore wiretap authority for certain 
                            money laundering offenses.
Sec. 19. Knowledge that the property is the proceeds of a felony.
Sec. 20. Coverage of foreign bank branches in the territories.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress finds as follows:
            (1) The dollar amount involved in international money 
        laundering likely exceeds $500,000,000,000 annually.
            (2) Organized crime groups are continually devising new 
        methods to launder the proceeds of illegal activities in an 
        effort to subvert the transaction reporting requirements of 
        subchapter II of chapter 53 of title 31, United States Code, 
        and chapter 2 of Public Law 91-508.
            (3) A number of methods to launder the proceeds of criminal 
        activity were identified and described in congressional 
        hearings, including the use of financial service providers 
        which are not depository institutions, such as money 
        transmitters and check cashing services, the purchase and 
        resale of durable goods, and the exchange of foreign currency 
        in the so-called ``black market''.
            (4) Recent successes in combating domestic money laundering 
        have involved the application of the heretofore seldom-used 
        authority granted to the Secretary of the Treasury and the 
        cooperative efforts of Federal, State, and local law 
        enforcement agencies.
            (5) Such successes have been exemplified by the 
        implementation of the geographic targeting order in New York 
        City and through the work of the El Dorado task force, a group 
        comprised of agents of Department of the Treasury law 
        enforcement agencies, New York State troopers, and New York 
        City police officers.
            (6) Money laundering by international criminal enterprises 
        challenges the legitimate authority of national governments, 
        corrupts government institutions, endangers the financial and 
        economic stability of nations, and routinely violates legal 
        norms, property rights, and human rights. In some countries, 
        such as Columbia, Mexico, and Russia, the wealth and power of 
        organized criminal enterprises rivals their own government's.
            (7) The structure of international criminal enterprises 
        engaged in money laundering is complex, diverse, and 
        fragmented. Organized criminal enterprises such as the 
        Colombian and Mexican cartels, the Russian ``mafiya'', Sicilian 
        crime families, and Chinese gangs are highly resistant to 
        conventional law enforcement techniques. Their financial 
        management and organizational infrastructure are highly 
        sophisticated and difficult to track because of the 
        globalization of the financial service industry.
    (b) Purposes.--The purposes of this Act are as follows:
            (1) To amend subchapter II of chapter 53 of title 31, 
        United States Code, to provide the law enforcement community 
        with the necessary legal authority to combat money laundering.
            (2) To expedite the issuance by the Secretary of the 
        Treasury of regulations designed to deter money laundering 
        activities at certain types of financial institutions.

SEC. 3. AMENDMENTS RELATING TO REPORTING OF SUSPICIOUS ACTIVITIES.

    (a) Amendment Relating to Civil Liability Immunity for 
Disclosures.--Section 5318(g)(3) of title 31, United States Code, is 
amended to read as follows:
            ``(3) Liability for disclosures.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law--
                            ``(i) any financial institution that--
                                    ``(I) makes a disclosure of any 
                                possible violation of law or regulation 
                                to an appropriate government agency; or
                                    ``(II) makes a disclosure pursuant 
                                to this subsection or any other 
                                authority;
                            ``(ii) any director, officer, employee, or 
                        agent of such institution who makes, or 
                        requires another to make any such disclosure; 
                        and
                            ``(iii) any independent public accountant 
                        who audits any such financial institution and 
                        makes a disclosure described in clause (i),
                shall not be liable to any person under any law or 
                regulation of the United States, any constitution, law, 
                or regulation of any State or political subdivision 
                thereof, or under any contract or other legally 
                enforceable agreement (including any arbitration 
                agreement), for such disclosure or for any failure to 
                notify the person who is the subject of such disclosure 
                or any other person identified in the disclosure.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to a disclosure or communication required under Federal 
                securities law, other than provisions of law that 
                specifically refer to the Currency and Foreign 
                Transactions Reporting Act of 1970.
                    ``(C) Rule of Construction.--Subparagraph (A) shall 
                not be construed as creating--
                            ``(i) any inference that the term `person', 
                        as used in such subparagraph, may be construed 
                        more broadly than its ordinary usage so to 
                        include any government or agency of government; 
                        or
                            ``(ii) any immunity against, or otherwise 
                        affecting, any civil or criminal action brought 
                        by any government or agency of government to 
                        enforce any constitution, law, or regulation of 
                        such government or agency.''.
    (b) Prohibition on Notification of Disclosures.--Section 5318(g)(2) 
of title 31, United States Code, is amended to read as follows:
            ``(2) Notification prohibited.--
                    ``(A) In general.--If a financial institution, any 
                director, officer, employee, or agent of any financial 
                institution, or any independent public accountant who 
                audits any financial institution, voluntarily or 
                pursuant to this section or any other authority, 
                reports a suspicious transaction to an appropriate 
                government agency--
                            ``(i) the financial institution, director, 
                        officer, employee, agent, or accountant may not 
                        notify any person involved in the transaction 
                        that the transaction has been reported and may 
                        not disclose any information included in the 
                        report to any such person; and
                            ``(ii) any other person, including any 
                        officer or employee of any government, who has 
                        any knowledge that such report was made may not 
                        disclose to any person involved in the 
                        transaction that the transaction has been 
                        reported or any information included in the 
                        report.
                    ``(B) Coordination with paragraph (5).--
                Subparagraph (A) shall not be construed as prohibiting 
                any financial institution, or any director, officer, 
                employee, or agent of such institution, from including, 
                in a written employment reference that is provided in 
                accordance with paragraph (5) in response to a request 
                from another financial institution, information that 
                was included in a report to which subparagraph (A) 
                applies, but such written employment reference may not 
                disclose that such information was also included in any 
                such report or that such report was made.''.
    (c) Authorization To Include Suspicions of Illegal Activity in 
Employment References.--Section 5318(g) of title 31, United States 
Code, is amended by adding at the end the following new paragraph:
            ``(5) Employment references may include suspicions of 
        involvement in illegal activity.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law and subject to subparagraph (B) of 
                this paragraph and paragraph (2)(C), any financial 
                institution, and any director, officer, employee, or 
                agent of such institution, may disclose, in any written 
                employment reference relating to a current or former 
                institution-affiliated party of such institution which 
                is provided to another financial institution in 
                response to a request from such other institution, 
                information concerning the possible involvement of such 
                institution-affiliated party in any suspicious 
                transaction relevant to a possible violation of law or 
                regulation.
                    ``(B) Limit on liability for disclosures.--A 
                financial institution, and any director, officer, 
                employee, or agent of such institution, shall not be 
                liable to any person under any law or regulation of the 
                United States, any constitution, law, or regulation of 
                any State or political subdivision thereof, or under 
                any contract or other legally enforceable agreement 
                (including any arbitration agreement), for any 
                disclosure under subparagraph (A), to the extent--
                            ``(i) the disclosure does not contain 
                        information which the institution, director, 
                        officer, employee, agent, or accountant knows 
                        to be false; and
                            ``(ii) the institution, director, officer, 
                        employee, agent, or accountant has not acted 
                        with malice or with reckless disregard for the 
                        truth in making the disclosure.
                    ``(C) Institution-affiliated party defined.--For 
                purposes of this paragraph, the term `institution-
                affiliated party' has the meaning given to such term in 
                section 3(u) of the Federal Deposit Insurance Act, 
                except such section 3(u) shall be applied by 
                substituting `financial institution' for `insured 
                depository institution'.''.
    (d) Amendments Relating to Availability of Suspicious Activity 
Reports for Other Agencies.--Section 5319 of title 31, United States 
Code, is amended--
            (1) in the 1st sentence, by striking ``5314, or 5316'' and 
        inserting ``5313A, 5314, 5316, or 5318(g)'';
            (2) in the last sentence, by inserting ``under section 
        5313, 5313A, 5314, 5316, or 5318(g)'' after ``records of 
        reports''; and
            (3) by adding the following new sentence after the last 
        sentence: ``The Secretary of the Treasury may permit the 
        dissemination of information in any such reports to any self-
        regulatory organization (as defined in section 3(a)(26) of the 
        Securities Exchange Act of 1934), if the Securities and 
        Exchange Commission determines that such dissemination is 
        necessary or appropriate to permit such organization to perform 
        its function under the Securities Exchange Act of 1934 and 
        regulations prescribed under such Act.''.

SEC. 4. EXPANSION OF SCOPE OF SUMMONS POWER.

    Section 5318(b)(1) of title 31, United States Code, is amended by 
inserting ``examinations to determine compliance with the requirements 
of this subchapter, section 21 of the Federal Deposit Insurance Act, 
and chapter 2 of Public Law 91-508 and regulations prescribed pursuant 
to such provisions, investigations relating to reports filed by 
financial institutions or other persons pursuant to any such provision 
or regulation, and'' after ``in connection with''.

SEC. 5. PENALTIES FOR VIOLATIONS OF GEOGRAPHIC TARGETING ORDERS AND 
              CERTAIN RECORDKEEPING REQUIREMENTS.

    (a) Civil Penalty for Violation of Targeting Order or Certain 
Recordkeeping Requirements.--Section 5321(a)(1) of title 31, United 
States Code, is amended--
            (1) by inserting ``or order issued'' after ``regulation 
        prescribed'' the 1st place it appears; and
            (2) by inserting ``, or willfully violating a regulation 
        prescribed under section 21 of the Federal Deposit Insurance 
        Act or under section 123 of Public Law 91-508,'' before ``is 
        liable''.
    (b) Criminal Penalties for Violation of Targeting Order or Certain 
Recordkeeping Requirements.--Section 5322 of title 31, United States 
Code, is amended--
            (1) in each of subsections (a) and (b), by inserting ``or 
        order issued'' after ``regulation prescribed'' the 1st place it 
        appears;
            (2) in subsection (a), by inserting ``, or willfully 
        violating a regulation prescribed under section 21 of the 
        Federal Deposit Insurance Act or under section 123 of Public 
        Law 91-508,'' before ``shall''; and
            (3) in subsection (b), by inserting ``or willfully 
        violating a regulation prescribed under section 21 of the 
        Federal Deposit Insurance Act or under section 123 of Public 
        Law 91-508,'' before ``while violating''.
    (c) Structuring Transactions To Evade Targeting Order or Certain 
Recordkeeping Requirements.--Section 5324(a) of title 31, United States 
Code, is amended--
            (1) in the portion of such section which precedes paragraph 
        (1), by inserting ``, the reporting requirements imposed by any 
        order issued under section 5326, or the recordkeeping 
        requirements imposed by any regulation prescribed under section 
        21 of the Federal Deposit Insurance Act or section 123 of 
        Public Law 91-508'' after ``regulation prescribed under any 
        such section''; and
            (2) in paragraphs (1) and (2), by inserting ``, to file a 
        report required by any order issued under section 5326, or to 
        maintain a record required pursuant to any regulation 
        prescribed under section 21 of the Federal Deposit Insurance 
        Act or section 123 of Public Law 91-508'' after ``regulation 
        prescribed under any such section'' where such term appears in 
        each such paragraph.
    (d) Increase in Civil Penalties for Violation of Certain 
Recordkeeping Requirements.--
            (1) Federal deposit insurance act.--Section 21(j)(1) of the 
        Federal Deposit Insurance Act (12 U.S.C. 1829b(j)(1)) is 
        amended by striking ``$10,000'' and inserting ``the greater of 
        the amount (not to exceed $100,000) involved in the transaction 
        (if any) with respect to which the violation occurred or 
        $25,000''.
            (2) Public law 91-508.--Section 125(a) of Public Law 91-508 
        (12 U.S.C. 1955(a)) is amended by striking ``$10,000'' and 
        inserting ``the greater of the amount (not to exceed $100,000) 
        involved in the transaction (if any) with respect to which the 
        violation occurred or $25,000''.
    (e) Criminal Penalties for Violation of Certain Recordkeeping 
Requirements.--
            (1) Section 126.--Section 126 of Public Law 91-508 (12 
        U.S.C. 1956) is amended to read as follows:
``Sec. 126. Criminal penalty
    ``A person willfully violating this chapter, section 21 of the 
Federal Deposit Insurance Act, or a regulation prescribed under this 
chapter or such section, shall be fined not more than $250,000, or 
imprisoned for not more than five years, or both.''.
            (2) Section 127.--Section 127 of Public Law 91-508 (12 
        U.S.C. 1957) is amended to read as follows:
``Sec. 127. Additional criminal penalty in certain cases
    ``A person willfully violating this chapter, section 21 of the 
Federal Deposit Insurance Act, or a regulation prescribed under this 
chapter or such section, while violating another law of the United 
States or as part of a pattern of any illegal activity involving more 
than $100,000 in a 12-month period, shall be fined not more than 
$500,000, imprisoned for not more than 10 years, or both.''.

SEC. 6. REPEAL OF CERTAIN REPORTING REQUIREMENTS.

    Section 407(d) of the Money Laundering Suppression Act of 1994 (31 
U.S.C. 5311 note) is amended by striking ``subsection (c)'' and 
inserting ``subsection (c)(2)''.

SEC. 7. LIMITED EXEMPTION FROM PAPERWORK REDUCTION ACT.

    Section 3518(c)(1) of title 44, United States Code, is amended--
            (1) by redesignating subparagraphs (C) and (D) as 
        subparagraphs (D) and (E), respectively; and
            (2) by inserting after subparagraph (B) the following new 
        subparagraph:
            ``(C) pursuant to regulations prescribed or orders issued 
        by the Secretary of the Treasury under section 5318(h) or 5326 
        of title 31;''.

SEC. 8. PROMULGATION OF ``KNOW YOUR CUSTOMER'' REGULATIONS.

    (a) In General.--Within 120 days after the date of the enactment of 
this Act, the Secretary of the Treasury shall promulgate ``Know Your 
Customer'' regulations for financial institutions.
    (b) Rule of Construction.--This section shall not be construed as 
precluding any supervisory agency for any financial institution from 
requiring the financial institution to submit any information or report 
to the agency or another agency pursuant to any other applicable 
provision of law.
    (c) Definition of Financial Institution.--For purposes of 
subsection (a), the term ``financial institution'' shall not include 
any broker, dealer, investment company, or investment adviser as such 
terms are defined in the Securities Exchange Act of 1934.

SEC. 9. REPORT ON PRIVATE BANKING ACTIVITIES.

    (a) In General.--Within 1 year after the date of the enactment of 
this Act, the Secretary of the Treasury, in consultation with Federal 
banking agencies, shall submit to the Committee on Banking and 
Financial Services of the House of Representatives and the Committee on 
Banking, Housing, and Urban Affairs of the Senate a report on--
            (1) the nature and extent of private banking activities in 
        the United States;
            (2) regulatory efforts to monitor such activities and 
        ensure that such activities are conducted in compliance with 
        the Bank Secrecy Act; and
            (3) policies and procedures of depository institutions that 
        are designed to ensure that such activities are conducted in 
        compliance with the Bank Secrecy Act.
    (b) Private Banking Activities.--In subsection (a), the term 
``private banking activities'', with respect to an institution, 
includes, among other things, personalized services such as money 
management, financial advice, and investment services that are provided 
to clients with high net worth and that are not provided generally to 
all clients of the institution.

SEC. 10. AVAILABILITY OF CERTAIN ACCOUNT INFORMATION.

    Section 5318(h) of title 31, United States Code, is amended by 
adding at the end the following new paragraph:
            ``(3) Availability of certain account information.--The 
        Secretary of the Treasury shall prescribe regulations under 
        this subsection which require financial institutions to 
        maintain all accounts in such a way as to ensure that the name 
        of an account holder and the number of the account are 
        associated with all account activity of the account holder, and 
        to ensure that all such information is available for purposes 
        of account supervision and law enforcement.''.

SEC. 11. SENSE OF THE CONGRESS.

    It is the sense of the Congress that the Secretary of the Treasury 
should make available to all Federal, State, and local law enforcement 
agencies and financial regulatory agencies the full contents of the 
data base of reports that have been filed pursuant to subchapter II of 
chapter 53 of title 31, United States Code.

SEC. 12. DESIGNATION OF FOREIGN HIGH INTENSITY MONEY LAUNDERING AREAS.

    (a) In General.--Subchapter II of chapter 53 of title 31, United 
States Code, is amended by inserting after section 5326 the following 
new section:
``Sec. 5327. Designation of foreign high intensity money laundering 
              areas
    ``(a) Criteria.--The Secretary of the Treasury, in consultation 
with appropriate Federal law enforcement agencies, shall develop 
criteria by which to identify areas outside the United States in which 
money laundering activities are concentrated.
    ``(b) Designation.--The Secretary of the Treasury shall designate 
as a foreign high intensity money laundering area any foreign country 
in which there is an area which is identified, using the criteria 
developed under subsection (a), as an area in which money laundering 
activities are concentrated.
    ``(c) Notice.--On the designation under subsection (b) of a country 
as a foreign high intensity money laundering area, the Secretary of the 
Treasury shall provide written notice to each insured depository 
institution (as defined in section 3(c)(2) of the Federal Deposit 
Insurance Act) and each depository institution holding company (as 
defined in section 3(w)(1) of such Act) that has control over an 
insured depository institution of the identity of the foreign country 
and include with the notice a written warning that there is a 
concentration of money laundering activities in the foreign country.''.
    (b) Clerical Amendment.--The table of sections for such chapter is 
amended by inserting after the item relating to section 5326 the 
following new item:

``5327. Designation of foreign high intensity money laundering 
                            areas.''.

SEC. 13. DOUBLING OF CRIMINAL PENALTIES FOR VIOLATIONS OF LAWS AIMED AT 
              PREVENTING MONEY LAUNDERING IN FOREIGN HIGH INTENSITY 
              MONEY LAUNDERING AREAS.

    Section 5322 of title 31, United States Code, is amended by adding 
at the end the following new subsection:
    ``(d) The court may double the sentence of fine or imprisonment, or 
both, that would otherwise be imposed on a person for a violation 
described in subsection (a) or (b) if person commits the violation with 
respect to a transaction involving a person in, a relationship 
maintained for a person in, or a transport of a monetary instrument 
involving a foreign country, knowing that the foreign country is 
designated under section 5327(b) as a foreign high intensity money 
laundering area.''.

SEC. 14. LAUNDERING MONEY THROUGH A FOREIGN BANK.

    Section 1956(c)(6) of title 18, United States Code, is amended to 
read as follows:
            ``(6) the term `financial institution' includes any 
        financial institution described in section 5312(a)(2) of title 
        31, United States Code, or the regulations promulgated 
        thereunder, as well as any foreign bank, as defined in 
        paragraph (7) of section 1(b) of the International Banking Act 
        of 1978 (12 U.S.C. 3101(7)).''.

SEC. 15. CRIMINAL FORFEITURE FOR MONEY LAUNDERING CONSPIRACIES.

    Section 982(a)(1) of title 18, United States Code, is amended by 
inserting ``, or a conspiracy to commit any such offense'' after ``of 
this title''.

SEC. 16. CHARGING MONEY LAUNDERING AS A COURSE OF CONDUCT.

    Section 1956(h) of title 18, United States Code, is amended--
            (1) by inserting ``(1)'' before ``Any person''; and
            (2) by adding at the end the following:
    ``(2) Any person who commits multiple violations of this section or 
section 1957 that are part of the same scheme or continuing course of 
conduct may be charged, at the election of the Government, in a single 
count in an indictment or information.''.

SEC. 17. VENUE IN MONEY LAUNDERING CASES.

    Section 1956 of title 18, United States Code, is amended by adding 
at the end the following new subsection:
    ``(i) Venue.--(1) Except as provided in paragraph (2), a 
prosecution for an offense under this section or section 1957 may be 
brought in--
            ``(A) any district in which the financial or monetary 
        transaction is conducted, or
            ``(B) any district where a prosecution for the underlying 
        specified unlawful activity could be brought, if the defendant 
        participated in the transfer of the proceeds of the specified 
        unlawful activity from that district to the district where the 
        financial or monetary transaction is conducted.
    ``(2) A prosecution for an attempt or conspiracy offense under this 
section or section 1957 may be brought in the district where venue 
would lie for the completed offense under paragraph (1), or in any 
other district where an act in furtherance of the attempt or conspiracy 
took place.''.

SEC. 18. TECHNICAL AMENDMENT TO RESTORE WIRETAP AUTHORITY FOR CERTAIN 
              MONEY LAUNDERING OFFENSES.

    Section 2516(1)(g) of title 18, United States Code, is amended by 
striking ``a violation of section 5322 of title 31, United States Code 
(dealing with the reporting of currency transactions)'' and inserting 
``a violation of section 5322 or 5324 of title 31, United States Code 
(dealing with the reporting and illegal structuring of currency 
transactions)''.

SEC. 19. KNOWLEDGE THAT THE PROPERTY IS THE PROCEEDS OF A FELONY.

    Section 1956(c)(1) of title 18, United States Code, is amended by 
inserting ``, and regardless of whether or not the person knew that the 
activity constituted a felony'' before the semicolon at the end.

SEC. 20. COVERAGE OF FOREIGN BANK BRANCHES IN THE TERRITORIES.

    Section 20(9) of title 18, United States Code, is amended by 
inserting ``, except that, for purposes of the application of that 
definition, the term `State' as used in such Act includes a 
commonwealth, territory, or possession of the United States'' after 
``Banking Act of 1978''.

            Passed the House of Representatives October 5, 1998.

            Attest:

                                                                 Clerk.