[Congressional Record Volume 144, Number 137 (Monday, October 5, 1998)]
[House]
[Pages H9474-H9480]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MONEY LAUNDERING DETERRENCE ACT OF 1998
Mr. LEACH. Mr. Speaker, I move to suspend the rules and pass the bill
(H.R. 4005) to amend title 31 of the United States Code to improve
methods for preventing financial crimes, and for other purposes, as
amended.
The Clerk read as follows:
H.R. 4005
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,
[[Page H9475]]
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.--
[[Page H9476]]
(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)''.
[[Page H9477]]
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''.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Iowa (Mr. Leach) and the gentleman from Minnesota (Mr. Vento) each will
control 20 minutes.
The Chair recognizes the gentleman from Iowa (Mr. Leach).
General Leave
Mr. LEACH. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days within which to revise and extend their remarks
and insert extraneous material on H.R. 4005, the bill under
consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Iowa?
There was no objection.
Mr. LEACH. Mr. Speaker, I yield myself such time as I may consume.
The Money Laundering Deterrence Act of 1998 is intended to strengthen
the hand of Federal law enforcement in detecting and prosecuting
financial crimes, and to encourage greater reporting of suspicious
monetary transactions by financial institutions and their agents.
It is estimated that upwards of $500 billion in laundered funds, a
large portion of it derived from narcotics trafficking, is cycled
through the United States financial system on an annual basis. Any
meaningful strategy for combating the international drug trade and
other global criminal enterprises must include strong legal mechanisms
for detecting the flows of their illicit proceeds. Left unchecked,
money laundering has a devastating effect on the integrity of financial
institutions and, because it is the lifeblood of drug traffickers, on
the social fabric as well.
Beginning with the passage of the Bank Secrecy Act of 1970, the
Committee on Banking and Financial Services has been at the forefront
of legislative efforts to erect a system of financial reporting and
recordkeeping designed to give law enforcement authorities sufficient
tools to detect and prosecute money laundering offenses. The various
reporting requirements imposed by the Bank Secrecy Act and subsequent
legislation promote the disclosure of information relating to
suspicious financial transactions by financial institutions and other
commercial enterprises, and the subsequent dissemination of that
information among Federal, State and local law enforcement authorities.
In crafting these bills, Congress has sought to advance a number of
policy objectives, including facilitating the law enforcement
community's access to accurate and complete information regarding
possible money laundering, and encouraging safe and sound practices at
Federal insured depository institutions, while, at the same time,
protecting the free flow of legitimate commerce and the privacy
interests of legitimate bank customers.
H.R. 4005, as amended by the committee in its June 11 markup to the
legislation, contains a series of amendments to the Bank Secrecy Act
and other provisions of the United States Code related to money
laundering offenses.
First, it extends safe harbor protections to independent public
accountants who submit reports of suspicious financial activity to the
Federal Government.
Second, it provides financial institutions with immunity from civil
liability when making employment references that may include suspicions
of an employee's involvement in illegal activity, unless such
suspicions are known to be false or the institution has acted with
malice or reckless disregard for the truth.
Third, it makes reports of suspicious financial activity filed with
the Federal Government available to self-regulatory organizations as
defined by the Securities and Exchange Act of 1934, such as the
National Association of Securities Dealers.
Fourth, it requires the Secretary of the Treasury to promulgate
``Know Your Customer'' regulations within 120 days of enactment of the
legislation; submit a comprehensive report to Congress on so-called
private banking activities, those personalized services that financial
institutions provide to clients with high net worth, often involving
complex transactions conducted offshore; prescribe regulations
requiring financial institutions to maintain all accounts in such a way
as to ensure that the name of an account holder, and the number of his
or her account are associated with all activity in the account; and
develop criteria to identify areas outside the United States where
money laundering is concentrated.
H.R. 4005 is a product of broad bipartisan consensus within the
committee, which approved it by voice vote, and reflects serious
thoughtful input from both the Republican and Democratic members of the
committee. I would like to accord special recognition in this regard to
the gentlewoman from New Jersey (Mrs. Roukema) and the gentleman from
Alabama (Mr. Bachus), who chairs the Subcommittee on General Oversight
and Investigations of the Committee on Banking and Financial Services.
Under his leadership, and her leadership, the subcommittees have held a
series of hearings highlighting aspects of the money laundering problem
and the Federal Government's efforts to address it. Several of the
provisions in this bill are there simply because of the oversight that
was conducted.
Before concluding my remarks, Mr. Speaker, let me also recognize the
constructive role played by the ranking member, the gentleman from New
York (Mr. LaFalce), and the gentleman from Minnesota (Mr. Vento), in
shepherding this legislation through committee and on to the floor. I
look forward to a successful completion of this task at this time.
Mr. Speaker, I submit for the Record correspondence, and attachments
thereto, regarding H.R. 4005.
House of Representatives,
Committee on the Judiciary,
Washington, DC, September 28, 1998.
Hon. Jim Leach,
Chairman, House Committee on Banking and Financial Services,
Washington, DC.
Dear Jim: I respectfully request that section 9 of H.R.
4005 be removed before the bill is brought to the floor on
the suspension calendar. The section, entitled ``Fungible
Property in Bank Accounts'' modifies section 984 of title 18
of the United States Code and makes a substantive change to
federal civil asset forfeiture law as it relates to the
forfeiture of fungible property in the form of cash or funds
deposited in a financial institution. As the House Leadership
wants to delay consideration of reforms to our federal civil
asset forfeiture laws until the 106th Congress, it would be
more appropriate for this provision to be considered at that
time.
Sincerely,
Henry J. Hyde,
Chairman.
____
House of Representatives, Committee on Banking and
Financial Services,
Washington, DC, October 1, 1998.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary, Rayburn House Office
Building, Washington, DC.
Dear Chairman Hyde: Thank you for your letter of September
28, 1998, notifying me of your objection to H.R. 4005's
provision relating to civil asset forfeiture. In deference to
your concerns--and to the House leadership's view that
further consideration of civil asset forfeiture reforms
should await the next Congress--this provision will be
removed from the bill reported by the Banking Committee on
July 8, 1998. In making the accommodation, it is my hope that
the legislation can be brought to the House floor
expeditiously for consideration under suspension of the
rules.
On a related issue, I am writing to apprise you of a
legislative proposal that the Banking Committee has received
from the Department of Justice that touches on matters of
shared jurisdiction between our respective committees. As you
know, on June 22, 1998, the United States Supreme Court held
that the government's seizure of some $357,000 in cash from
an individual attempting to carry the funds out of the
country without filing the currency reporting form required
by the Bank Secrecy Act violated the Eighth Amendment ban on
``excessive fines.'' See United States v. Bajakajian, 118 S.
Ct. 2028 (1998). In an effort to mitigate what it sees as the
Bajakajian decision's detrimental consequences for narcotics
and money laundering enforcement, the Department of Justice
has proposed amending Title 31 to make the act of bulk cash
smuggling a criminal offense, and to authorize seizure of the
smuggled currency in accordance with the civil and criminal
forfeiture provisions found in
[[Page H9478]]
Title 18. A summary of the proposal submitted by the Justice
Department is enclosed for your review.
I have informed Justice Department officials that I am
willing to entertain any credible proposal for aiding law
enforcement in detecting and prosecuting drug-related money
laundering, and therefore intend to keep an open mind on the
merits of their suggested legislation responding to
Bajakaijian. I also made clear to the Department, however,
that the specific measure it has advanced is one that would
require favorable consideration not only by our Committee,
but also by the Committee on the Judiciary, since the
substantive Title 31 offense created by the proposed
legislation is one that falls squarely within Banking
Committee jurisdiction and the sanctions involving civil
and criminal forfeiture are obviously within the purview
of the Judiciary Committee. (Indeed, while it is typically
the case that the definition of a criminal offense is more
fundamental to a statute than the penalties imposed for
committing that offense, here, it seems to me, the reverse
may be true.)
I am aware that you have been a leading critic of the way
that the civil forfeiture laws are currently being applied.
Accordingly, I have informed the Department that while I am
open to their suggestions, I am unprepared to go forward with
consideration of their proposal in this Congress unless you
are supportive. In this regard, please let me know if there
are any elements of the administration's approach that you
think would be advisable at this time.
Thank you for your consideration of these matters.
Sincerely,
James A. Leach,
Chairman.
____
analysis of bulk cash smuggling statute and related amendments
As recent Congressional hearings and investigative reports
in the press have revealed, currency smuggling is an
extremely serious law enforcement problem. Hundreds of
millions of dollars in U.S. currency--representing the
proceeds of drug trafficking and other criminal offenses, as
well as income not reported for income tax purposes--is
annually transported out of the United States to foreign
countries in shipments of bulk cash. Smugglers use all
available means to transport the currency out of the country,
from false bottoms in personal luggage, to secret
compartments in automobiles, to concealment in durable goods
exported for sale abroad.
Presently, the only law enforcement weapon against such
smuggling is Section 5316 of Title 31, United States Code,
which makes it an offense to transport more than $10,000 in
currency or monetary instruments into, or out of, the United
States without filing a report with the United States Customs
Service. The effectiveness of Sec. 5316 as a law enforcement
tool has been diminished, however, by a recent Supreme Court
decision. In United States v. Bajakajian, 118 S. Ct. 2028
(1988), the Supreme Court held that Sec. 5316 constitutes a
mere reporting violation, which is not a serious offense to
purposes of the Excessive Fines Clause of the Eighth
Amendment. Accordingly, confiscation of the full amount of
the smuggled currency is unconstitutional, even if the
smuggler took elaborate steps to conceal the currency and
otherwise obstruct justice.
Confiscation of the smuggled currency is, of course, the
most effective weapon that can be employed against these
smugglers. Accordingly, in response to the Bajakajian
decision, the Department of Justice proposed making the act
of bulk cash smuggling itself a criminal offense, and to
authorize the imposition of the full range of civil and
criminal sanctions when the offense is discovered. Because
the act of concealing currency for the purpose of smuggling
it out of the United States is inherently more serious than
simply failing to file a Customs report, strong and
meaningful sanctions, such as confiscation of the smuggled
currency, are likely to withstand Eighth Amendment challenges
to the new statute.
Sections 1 and 2 of the bill set forth the new bulk cash
smuggling offense as well as a set of findings explaining why
the smuggling of bulk cash is a serious law enforcement
problem. The new offense, which would be codified at 31
U.S.C. Sec. 5331, would make it an offense for anyone to
knowingly conceal more than $10,000 in currency or other
monetary instruments on his person or in any conveyance,
article of luggage, merchandise or other container, and to
transport or attempt to transport that currency across the
border with the intent to avoid the reporting requirements in
Section 5316. In other words, the offense has three elements:
(1) concealment; (2) transportation (or attempted
transportation); and 3) specific intent to evade filing a
complete and accurate report with the Customs Service.
The statute is intended to apply to persons who commit any
of a wide variety of smuggling offenses involving bulk cash--
from the money brokers for the drug cartels who stuff $20
bills into trucks bound for Mexico or appliances being
exported to Colombia, to couriers who attempt to cross the
border with currency concealed in their luggage. It would
also apply to efforts to move money into or out of the United
States at places other than ports of entry where CMIR reports
are customarily filed. In other words, unlike the CMIR
statute, which only applies once the duty to file the Customs
report has been triggered, Section 5331 would apply to a
person who had not yet reached the border, or was traveling
at a place other than a port of entry, but was traveling (or
intending to travel) toward the border with the intent to
cross it, and had already concealed the money with the intent
to evade the reporting requirement.
The penalty section provides for incarceration of up to 5
years. In addition, and in lieu of any criminal fine, the
penalty section authorizes the confiscation of the smuggled
money in accordance with the usual procedures for criminal
and civil forfeiture. (The civil forfeiture provisions are
essential to permit confiscation of discovered currency in
cases where the smuggler is not found, is a fugitive, or is
not the legal owner of the money; the innocent owner
provisions of 18 U.S.C. Sec. 981(a)(2) would, however,
protect innocent owners of smuggled money.) Confiscation of
smuggled goods has been regarded as the appropriate penalty
for smuggling offenses since the first Customs laws were
enacted in the 18th Century. To address concerns that such
confiscation is a blunt instrument that should be mitigated
in some circumstances to avoid a hardship, the bill
explicitly authorizes courts to mitigate forfeitures of
currency involved in currency reporting offenses to avoid
Eighth Amendment violations by considering a range of
aggravating and mitigating circumstances. Those circumstances
include the value of the currency or other monetary
instruments involved in the offense; efforts by the person
committing the offense to structure currency transactions,
conceal property or otherwise obstruct justice; and whether
the offense is part of a pattern of repeated violations.
It must be stressed, however, that bulk cash smuggling is
an inherently more serious offense than simply failing to
file a Customs report. Because the constitutionality of a
forfeiture is dependent on the ``gravity of the offense''
under Bajakajian, it is anticipated that the full forfeiture
of smuggled money will withstand constitutional scrutiny in
most cases. For the confiscation to be reduced at all, the
smuggler will have to show that the money was derived from a
legitimate source and not intended to be used for any
unlawful purpose. Even then, the court's duty will be to
reduce the amount of confiscation to the maximum that would
be permitted in accordance with the Eighth Amendment and the
aggravating and mitigating factors set forth in the statute.
Section 3 of the bill makes conforming amendments to the
existing criminal and civil forfeiture provisions for the
reporting and structuring violations in Title 31. Its purpose
is simply to put all of these provisions in one place (e.g.,
by moving some of the existing forfeiture provisions for
currency reporting violations from title 18 to title 31 and
combining them with the provisions that are already codified
at 31 U.S.C. Sec. 5317(c)), and to set forth rules for
mitigating the forfeitures to avoid constitutional violations
in accordance with Bajakajian. This is necessary to address
the concern expressed by the Court in Bajakajian that
Congress had not made it clear that trial courts are
authorized to reduce forfeitures down to the maximum level
permissible to avoid violating the Excessive Fines Clause
when a statute, on its face, appears to authorize only the
full amount of structured of unreported currency.
Again, this does not imply that such forfeitures must be
reduced in all cases. In structuring cases, for example, a
pattern of repeated conduct over a period of time would
likely support the confiscation of the full amount of
structured currency irrespective of whether the defendant met
his burden of showing that the property was derived from a
legitimate source and was not intended to be used for any
unlawful purpose.
Mr. Speaker, I reserve the balance of my time.
{time} 1745
Mr. VENTO. Mr. Speaker, I yield myself such time as I may consume.
(Mr. VENTO asked and was given permission to revise and extend his
remarks and to include extraneous material.)
Mr. VENTO. Mr. Speaker, I rise in support of this measure, H.R. 4005,
the Money Laundering Deterrence Act of 1998, authored by the gentleman
from Iowa (Mr. Leach), the distinguished chairman of the Committee on
Banking and Financial Services.
This legislation significantly improves the ability of our Nation's
law enforcement authorities to curtail money laundering and prosecute
criminals involved in these illegal activities.
The Committee on Banking and Financial Services has had a successful
and long bipartisan history of bringing anti-money laundering
legislation to the floor of this House of Representatives and,
following its completion, enactment into law.
We have traditionally reported bills making it more difficult for
drug pushers and other criminals to deposit their profits in the
legitimate banking system and have cleared the path and policies so
that prosecutors can effectively
[[Page H9479]]
charge and put these criminals in jail. This measure continues that
effort because it clarifies and perfects existing law and regulations
that have already been proven effective in the effort to curtail money
laundering.
I believe it is important to focus the attention of the House on the
series of amendments adopted in committee. These are amendments offered
by our colleague the gentlewoman from California (Ms. Waters), who is
without peer in her efforts to get to the heart of serious drug
problems in her Los Angeles congressional district.
The Waters amendments target the sensitive and secret world of the
private banking community. The Waters amendments were designed to make
certain that the comfort and courtesies afforded the wealthy in the
banking board rooms are subject to the same reporting requirements
enforced in the lobbies of our financial institutions.
With the passage of the Waters amendments, the committee will have
some of the information it will need to ensure that laws of our Nation
are fully enforced, even in the rarified world of private banking.
An important part of this bill reported by the Committee on Banking
and Financial Services has been deleted in deference to the
jurisdiction of the Committee on Ways and Means.
To complement the reporting requirements imposed on the financial
industry, the Ways and Means Committee amended the tax code to require
that all businesses and professional corporations file a report with
the IRS whenever they accept $10,000 or more in cash as payment for
goods and services provided. In hearings before our Committee, we
received testimony which indicated that the protections appropriately
provided to information gathered under the tax code were otherwise
impeding the ability of the law enforcement community to access and use
this information. The provisions of H.R. 4005, as reported by the
Committee, transferred the reporting requirement from the tax code to
the Bank Secrecy Act, the statute under which the financial
institutions reports are presently collected and made available to
legitimate law enforcement authorities. That provision has now been
dropped. Although I accept and understand the need for the Ways and
Means Committee to be able to review amendments to the tax code, the
American public should not be asked to accept inefficiencies in our
crime fighting policies because of the Congress' rules of jurisdiction.
Mr. Speaker, I sincerely hope that the Committee on Ways and Means
will soon conduct a full review of the referenced 8300 reporting
requirements so that appropriate changes can be made as soon as
possible to maximize the use of these valued reports.
Finally, Mr. Speaker, I want to again compliment the gentleman from
Iowa (Mr. Leach) for his leadership in bringing this bill not only
through the committee, but to the full House in a timely manner and
basis. This bill is an important step in providing the law enforcement
community the tools they need to keep money laundering under control.
I again urge adoption of this bill and support for it.
Mr. Speaker, I submit for the Record the thoughtful statements
supporting the bill from the gentleman from New York (Mr. LaFalce), the
ranking Democrat Member.
Mr. LaFALCE: Mr. Speaker, I rise to support H.R. 4005, The Money
Laundering Deterrence Act of 1998.
I wish to join the Ranking Member of the Financial Institutions
Subcommittee, Congressman Bruce Vento, in complimenting the
distinguished Chairman of the Banking Committee, Congressman Jim Leach,
for bringing this bill to the floor in a timely manner. As was noted by
previous speakers, this legislation significantly improves the ability
of our nation's law enforcement authorities to bring money launderers
to justice.
H.R. 4005 continues the Banking Committee's long and bipartisan
tradition of reporting important anti-money laundering legislation to
the House of Representatives. Today's bill continues this effort in
that it further improves existing law and encourages greater reporting
of suspicious financial activity by financial institutions and their
agents.
I am pleased to report that some of the most important provisions of
this bill were introduced as amendments authored by the distinguished
Congresswoman from California, Maxine Waters. Congresswoman Waters'
tremendous energy and dedication to the concerns of Congressional
District have led her to be one of the Congress' most vigilant
crusaders against those who would use the traditional banking system to
launder illegal proceeds, particularly those profits realized from the
sale of illegal drugs in her South Central Los Angeles District. The
Waters' amendments were designed to make certain that wealthy
individuals cannot use their influence to cause banks to ``look the
other way'' when it comes to those laws the banks normally implement
vigorously. With the passage of the Waters amendments, the Committee
will have begun the effort of investigating private banking practices,
particularly as they relate to serving wealthy individuals who insist
on secrecy in their financial dealings.
Finally, Mr. Speaker, I again compliment Chairman Leach for his
leadership in bringing this bill not only to the Committee but to the
full House on a timely basis. The bill is another important step in
providing the law enforcement community the tools they need to keep
money laundering under control.
I urge the adoption of this bill.
Mr. VENTO. Mr. Speaker, I reserve the balance of my time.
Mr. LEACH. Mr. Speaker, I yield 3 minutes to the gentlewoman from New
Jersey (Mrs. Roukema), who has been so instrumental in bringing this
bill forward.
(Mrs. ROUKEMA asked and was given permission to revise and extend her
remarks.)
Mrs. ROUKEMA. Mr. Speaker, I especially rise to thank the chairman
for his leadership here, and certainly for those on the other side of
the aisle who have been working so hard on this legislation, both
pieces of legislation I should say. And I do want to say that the good
news has been that the U.S. is making significant strides in limiting
money laundering through our financial institutions. That we know.
But the bad news, as we learned, is that organized crime is turning
to other U.S. businesses for their money laundering as well as
financial institutions in other countries. And I believe these two
pieces of legislation are making a significant step in the direction of
helping the law enforcement community with stronger statutes on money
laundering so that we can coordinate with the help law enforcement
needs.
I certainly want to thank the chairman again for his leadership here.
I also want to say that I believe that we can go farther, and of course
I am assuming and doing everything I can do to hope that the other body
will act promptly on this legislation and not let it falter here in the
waning days of this Congress.
But I would also say that there is more to be done in the next
Congress. And I have introduced just on Friday of this past week the
Bulk Cash Smuggling Act of 1998. We will go into more on that at
another time. But it will be complementary to what we are doing here.
It deals with currency or monetary instruments in excess of $10,000
that is transported either in or out of the United States and civil
forfeiture questions with regard to those monies. We will talk about
that at another time. It should complement what we are doing.
But we are taking a giant stride in the right direction here to get
at the criminal elements that are making a sham out of our financial
institutions.
Mr. VENTO. Mr. Speaker, I yield myself such time as I may consume.
Just in closing from my side, I would say that this half trillion
dollars of illegal money that is washing through our society through
our banks needs to be regulated, needs to be addressed. We need to
provide the law enforcement and Treasury and other specific officials
with the authority so that they can, in fact, trace this and, in fact,
effectively fight the type of creative crime that is going on in our
society, especially with electronic banking and other regulations.
At the same time we are very concerned about privacy, very concerned
about due process. I think this bill does strike the proper balance in
terms of those issues and puts in the hands of law enforcement
officials at the national and State level a consistent policy with
regards to this that can and will continue to need our diligence and
attention to prove if it is going to ultimately be effective in dealing
with the growing problem of money laundering for these diverse
problems, whether it is for crime, whether it is for drugs, whether it
is for other types of gambling and other types of illegal activities.
As most I think can see, the tools need to be there in the hands of
the prosecutors and in the hands of the law
[[Page H9480]]
enforcement officials to, in fact, enforce our laws at the State and at
the national level.
Ms. WATERS. Mr. Speaker, I rise in strong support of H.R. 4005, the
Money Laundering Deterrence Act of 1998. I would like to thank Chairman
Leach, Ranking Member LaFalce and Representatives Roukema and Vento for
their efforts to bring this bill to the floor.
This tough bi-partisan bill reflects a new willingness by Congress to
get tough on drug money laundering. The illegal drug trade is one of
the world's largest industries, with annual revenues of more than $500
billion a year worldwide, eclipsing even the revenues generated from
the production of oil and gas. But the illegal drug trade would come to
a screeching halt tomorrow without the ability to launder drug profits
through financial insitutions globally. By making our money laundering
laws tougher and closing up the loopholes this legislation is an
important step in putting an end to the ability of the cartels use to
profit from their terrible trade.
Now the need for tougher money laundering is clearer than ever. We
only need to look at the massive money laundering, murder and drug
trafficking case involving Raul Salinas de Gotari, former Mexican
cabinet minister and brother of Mexican President Carlos Salinas de
Gotari. This case highlights allegations of the use of Citibank/
Citicorp's private bank system by Salinas and other drug traffickers in
laundering at least $130 million dollars in drug proceeds.
Citibank's private banker, Amy Elliot was central to the allegations.
Ms. Elliot set up an elaborate and secretive system for Salinas to get
his money that was banked in Mexico out of the country, and into
offshore and Swiss bank accounts. Ms. Elliott used Citibank's
concentration accounts to transfer hundreds of millions of Salinas'
proceeds. The concentration accounts acted to effectively cut off the
paper trail of Salinas' money, making it next to impossible for law
enforcement agencies to track the drug money. With Ms. Elliot's
skillful assistance, the former President's borther is suspected of
laundering hundreds of millionas of dollars in drug proceeds.
Two weeks ago, the New York Times and the Wall Street Journal
reported that the Swiss Attorney General's office has completed a 369
page report on this case that asserts among other damaging allegations
that ``[w]hen Carlos Salinas de Gotari became President of Mexico in
1988, Raul Salinas de Gortari assumed control over practically all drug
shipments through Mexico. Through his influence and bribes paid with
drug money, officials of the army and the police supported and
protected the flourishing drug business.''
This is simply one of many cases that point to the need for
comprehensive money laundering legislation. The Money Laundering
Deterrence Act of 1998 is a very good first step.
I offered a number of amendments to the bill in Committee to focus
attention on the ``private banking'' system and the dangers of its
abuse by major money launderers, drug cartels and organized crime
syndicates.
I also amended the bill by calling for tougher enforcement of our
nation's money laundering laws and closer scrutiny of our domestic
financial institutions. These amendments added important weapons in the
battle against major money laundering operations.
My amendments strengthen H.R. 4005 by:
Requiring the Secretary of the Treasury to submit to the House and
Senate Banking Committees a report on the ``private banking'' system;
Prohibiting banks from maintaining accounts that prevent the name and
account number of a customer from being associated with the account
activity of an account holder. This would outlaw certain concentration
accounts in use by banks, if they can be used to effectively hide the
identity of the account holder;
Requiring the Secretary of the Treasury to issue ``Know Your
Customer'' regulations within 120 days from the date of enactment of
the Act; and
Identifying areas outside the United States where money laundering is
concentrated and increasing penalties for violations of United States
money laundering laws associated with activities in these identified
countries.
I am pleased we are moving forward in the pursuit of the money
laundering kingpins who are at the center of the half a trillion dollar
annual drug trade and I ask my colleagues to support this important
legislation.
Mr. Speaker, I yield back the balance of my time.
Mr. LEACH. Mr. Speaker, I have no further requests for times, and I
yield back the balance of my time.
The SPEAKER pro tempore (Mr. Miller of Florida). The question is on
the motion offered by the gentleman from Iowa (Mr. Leach) that the
House suspend the rules and pass the bill, H.R. 4005, as amended.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill, as amended, was passed.
The title was amended so as to read:
``A bill to amend titles 18 and 31, United States Code, to
improve methods for preventing money laundering and other
financial crimes, and for other purposes.''.
A motion to reconsider was laid on the table.
____________________