[Congressional Record Volume 145, Number 158 (Wednesday, November 10, 1999)]
[Senate]
[Pages S14569-S14571]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LEVIN (for himself and Mr. Specter):
  S. 1920. A bill to combat money laundering and protect the United 
States financial system by addressing the vulnerabilities of private 
banking to money laundering, and for other purposes; to the Committee 
on Banking, Housing, and Urban Affairs.


                 money laundering abatement act of 1999

  Mr. LEVIN. Mr. President, today I am introducing, along with Senator 
Specter, the Money Laundering Abatement Act of 1999.
  The Senate Permanent Subcommittee on Investigations, of which I am 
the ranking member, is currently holding hearings on problems specific 
to private banking, a rapidly-growing financial service in which banks 
provide one-on-one services tailored to the individual needs of wealthy 
individuals. The Subcommittee's investigation and hearings show that 
private bankers have operated in a culture which emphasizes secrecy, 
impeding account documentation for regulators and law enforcement 
entities. This culture makes private banking peculiarly susceptible to 
money laundering.
  The Money Laundering Abatement Act is intended to supplement and 
reinforce the current anti-money-laundering laws and bolster the 
efforts of regulators and law enforcement bodies in this nation and 
around the world and the efforts of others in Congress.
  The Subcommittee's year-long investigation and testimony by 
distinguished financial experts, regulators, and banking industry 
personnel, revealed that private bankers regularly create devices such 
as shell corporations established in offshore jurisdictions to hide the 
source of and movement of clients' funds. The motives may be benign or 
they may be questionable but one thing is certain: they make it harder 
for regulators and law enforcement personnel to track the ownership and 
flow of funds and avert or apprehend laundering of the proceeds of drug 
and weapons trafficking, tax evasion, corruption, and other 
malfeasance. To make matters worse, many activities which Americans 
find reprehensible and which can destabilize regimes and economies are 
not currently illegal under foreign laws. Therefore, as the current 
money laundering laws are written, transactions in funds derived from 
such activities do not constitute money laundering, but they ought to 
constitute money laundering punishable under United States laws.
  My bill would patch these holes, particularly as they apply to 
private banking activities, the volume of which experts predict will 
grow exponentially as more and more wealth is created and banks compete 
for this lucrative line of business. Accordingly, I am today 
introducing legislation that would significantly increase the 
transparency of our banking system and make it possible for law 
enforcement and civil process to pierce the veil of secrecy that for 
too long has made it possible for institutions and individuals 
operating in largely unregulated off-shore jurisdictions to gain 
unfettered access to the U.S. financial system for purposes of 
legitimizing the proceeds of illegal or unsavory activity.
  A great problem in detecting money laundering is that many private 
banking transactions are conducted through fictitious entities or under 
false names or numbered accounts in which the actual or beneficial 
owner is not identified. The bill requires a financial institution that 
opens or maintains a U.S. account for a foreign entity to identify and 
maintain a record in the U.S. of the identity of each direct or 
beneficial owner of the account. The bill would further help banks in 
verifying customers' identities by making it illegal to misrepresent 
the true ownership of an account to a bank. The bill also imposes a 
``48-hour rule'' under which, within 48 hours of a request by a federal 
banking agency, a financial institution would have to provide account 
information and documentation to the agency.

  Our investigation into private banking has shown that money 
launderers may launder their transactions by commingling the proceeds 
in so-called ``concentration accounts'' and aggregate the funds from 
multiple customers and transactions. The bill curtails the illicit use 
of these accounts by prohibiting institutions from using these accounts 
anonymously. The bill also prohibits U.S. financial institutions from 
opening or maintaining correspondent accounts with so-called ``brass 
plate'' banks--most often in off-shore locations--that are not licensed 
to provide services in their home countries and are not subject to 
comprehensive home country supervision on a consolidated basis, 
reducing the likelihood that U.S.-based institutions will receive funds 
that may derive from illicit sources.
  The bill would also eliminate significant gaps in current U.S. law by 
expanding the list of crimes committed on foreign soil that can serve 
as predicate offenses for money laundering prosecutions in the U.S., 
including corruption and the misappropriation of IMF funds. It would 
expand the jurisdiction of U.S. courts, by including transactions in 
which money is laundered through a foreign bank as a U.S. crime if the 
transaction has a ``nexus'' in the United States. The bill addresses 
the reality that governmental corruption weakens economies

[[Page S14570]]

and causes political instability and when U.S. banks profit from the 
fruits of such corruption they run counter to U.S. interests in ending 
such corruption.
  Another problem that we have encountered repeatedly in our 
investigation is that many private banks have written policies that 
repeatedly stress that the banker must know a customer's identity and 
source of funds. Yet in practice, many private bankers do not comply 
with their own bank's policies. To rectify this, the bill requires 
financial institutions to develop and apply due diligence standards for 
accounts for private banking customers to verify the customers' 
identity and source of wealth, both when opening such accounts and on 
an ongoing basis.
  Finally, the bill would authorize funding for FinCEN to develop an 
automated ``alert database.'' FinCEN, an arm of the Department of the 
Treasury, tracks Currency Transaction Reports and Suspicious Activity 
Reports, important tools in fighting money laundering. However, FinCEN 
officials have told me that they lack a database which will 
automatically alert them to patterns of suspicious activity that could 
indicate money laundering or other illicit activity. Such a database is 
imperative to enable FinCEN to adequately serve the law enforcement 
bodies that it supplies information to.
  This bill will close gaps in our anti-money-laundering laws and 
regulations. I ask unanimous consent that the bill and a summary of the 
bill be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1920

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Money Laundering Abatement 
     Act of 1999''.

     SEC. 2. FINDINGS AND PURPOSE.

       (a) Findings.--Congress makes the following findings:
       (1) Money laundering is a serious problem that enables 
     criminals to reap the rewards of their crimes by hiding the 
     criminal source of their profits.
       (2) When carried out by using banks, money laundering 
     erodes the integrity of our financial institutions.
       (3) United States financial institutions are a critical 
     link in our efforts to combat money laundering.
       (4) In addition to organized crime enterprises, corrupt 
     government officials around the world increasingly employ 
     sophisticated money laundering schemes to conceal wealth they 
     have plundered or extorted from their nations or received as 
     bribes, and these practices weaken the legitimacy of foreign 
     states, threaten the integrity of international financial 
     markets, and harm foreign populations.
       (5) Private banking is a growing activity among financial 
     institutions based in and operating in the United States.
       (6) The high profitability, competition, high level of 
     secrecy, and close relationships of trust developed between 
     private bankers and their clients make private banking 
     vulnerable to money laundering.
       (7) The use by United States bankers of financial centers 
     located outside of the United States that have weak financial 
     regulatory and reporting regimes and no transparency 
     facilitates global money laundering.
       (b) Purpose.--The purpose of this Act is to eliminate the 
     weaknesses in Federal law that allow money laundering to 
     flourish, particularly in private banking activities.

     SEC. 3. IDENTIFICATION OF ACTUAL OR BENEFICIAL OWNERS OF 
                   ACCOUNTS.

       (a) Transactions and Accounts With or on Behalf of Foreign 
     Entities.--Subchapter II of chapter 53 of title 31, United 
     States Code, is amended by adding at the end the following:

     ``Sec. 5331. Requirements relating to transactions and 
       accounts with or on behalf of foreign entities

       ``(a) Definitions.--Notwithstanding any other provision of 
     this subchapter, in this section the following definitions 
     shall apply:
       ``(1) Account.--The term `account'--
       ``(A) means a formal banking or business relationship 
     established to provide regular services, dealings, and other 
     financial transactions; and
       ``(B) includes a demand deposit, savings deposit, or other 
     asset account and a credit account or other extension of 
     credit.
       ``(2) Correspondent account.--The term `correspondent 
     account' means an account established to receive deposits 
     from and make payments on behalf of a correspondent bank.
       ``(3) Correspondent bank.--The term `correspondent bank' 
     means a depository institution that accepts deposits from 
     another financial institution and provides services on behalf 
     of such other financial institution.
       ``(4) Depository institution.--The term `depository 
     institution' has the same meaning as in section 19(b)(1)(A) 
     of the Federal Reserve Act.
       ``(5) Foreign banking institution.--The term `foreign 
     banking institution' means a foreign entity that engages in 
     the business of banking, and includes foreign commercial 
     banks, foreign merchant banks, and other foreign institutions 
     that engage in banking activities usual in connection with 
     the business of banking in the countries where they are 
     organized or operating.
       ``(6) Foreign entity.--The term `foreign entity' means an 
     entity that is not organized under the laws of the Federal 
     Government of the United States, any State of the United 
     States, the District of Columbia, or the Commonwealth of 
     Puerto Rico.
       ``(b) Prohibition on Opening or Maintaining Accounts 
     Belonging to or for the Benefit of Unidentified Owners.--A 
     depository institution or a branch of a foreign bank (as 
     defined in section 1 of the International Banking Act of 
     1978) may not open or maintain any account in the United 
     States for a foreign entity or a representative of a foreign 
     entity, unless--
       ``(1) for each such account, the institution completes and 
     maintains in the United States a form or record identifying, 
     by a verifiable name and account number, each person having a 
     direct or beneficial ownership interest in the account; or
       ``(2) some or all of the shares of the foreign entity are 
     publicly traded.
       ``(c) Prohibition on Opening or Maintaining Correspondent 
     Accounts or Correspondent Bank Relationship With Certain 
     Foreign Banks.--A depository institution, or branch of a 
     foreign bank, as defined in section 1 of the International 
     Banking Act of 1978, may not open or maintain a correspondent 
     account in the United States for or on behalf of a foreign 
     banking institution, or establish or maintain a correspondent 
     bank relationship with a foreign banking institution (other 
     than in the case of an affiliate of a branch of a foreign 
     bank), that--
       ``(1) is organized under the laws of a jurisdiction outside 
     of the United States; and
       ``(2) is not subject to comprehensive supervision or 
     regulation on a consolidated basis by the appropriate 
     authorities in such jurisdiction.
       ``(d) 48-Hour Rule.--Not later than 48 hours after 
     receiving a request by the appropriate Federal banking agency 
     (as defined in section 3 of the Federal Deposit Insurance 
     Act) for information related to anti-money laundering 
     compliance by a financial institution or a customer of that 
     institution, a financial institution shall provide to the 
     requesting agency, or make available at a location specified 
     by the representative of the agency, information and account 
     documentation for any account opened, maintained, or managed 
     in the United States by the financial institution.''.
       (b) Technical and Conforming Amendment.--The table of 
     sections for subchapter II of chapter 53 of title 31, United 
     States Code, is amended by inserting after the item relating 
     to section 5330 the following:

``5331. Requirements relating to transactions and accounts with or on 
              behalf of foreign entities.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply--
       (1) with respect to any account opened on or after the date 
     of enactment of this Act, as of such date; and
       (2) with respect to any account opened before the date of 
     enactment of this Act, as of the end of the 6-month period 
     beginning on such date.

     SEC. 4. PROPER MAINTENANCE OF CONCENTRATION ACCOUNTS AT 
                   FINANCIAL INSTITUTIONS.

       Section 5318(h) of title 31, United States Code, is amended 
     by adding at the end the following:
       ``(3) Availability of certain account information.--The 
     Secretary shall prescribe regulations under this subsection 
     that govern maintenance of concentration accounts by 
     financial institutions, in order to ensure that such accounts 
     are not used to prevent association of the identity of an 
     individual customer with the movement of funds of which the 
     customer is the direct or beneficial owner, which regulations 
     shall, at a minimum--
       ``(A) prohibit financial institutions from allowing clients 
     to direct transactions that move their funds into, out of, or 
     through the concentration accounts of the financial 
     institution;
       ``(B) prohibit financial institutions and their employees 
     from informing customers of the existence of, or means of 
     identifying, the concentration accounts of the institution; 
     and
       ``(C) require each financial institution to establish 
     written procedures governing the documentation of all 
     transactions involving a concentration account, which 
     procedures shall ensure that, any time a transaction 
     involving a concentration account commingles funds belonging 
     to 1 or more customers, the identity of, and specific amount 
     belonging to, each customer is documented.''.

     SEC. 5. DUE DILIGENCE REQUIRED FOR PRIVATE BANKING.

       The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) 
     is amended by inserting after section 10 the following:

     ``SEC. 5A. DUE DILIGENCE.

       ``(a) Private Banking.--In fulfillment of its anti-money 
     laundering obligations under section 5318(h) of title 31, 
     United States Code, each depository institution that engages 
     in private banking shall establish due

[[Page S14571]]

     diligence procedures for opening and reviewing, on an ongoing 
     basis, accounts of private banking customers.
       ``(b) Minimum Standards.--The due diligence procedures 
     required by paragraph (1) shall, at a minimum, ensure that 
     the depository institution knows and verifies, through 
     probative documentation, the identity and financial 
     background of each private banking customer of the 
     institution and obtains sufficient information about the 
     source of funds of the customer to meet the anti-money 
     laundering obligations of the institution.
       ``(c) Compliance Review.--The appropriate Federal banking 
     agencies shall review compliance with the requirements of 
     this section as part of each examination of a depository 
     institution under this Act.
       ``(d) Regulations.--The Board of Governors of the Federal 
     Reserve System shall, after consultation with the other 
     appropriate Federal banking agencies, define the term 
     `private banking' by regulation for purposes of this 
     section.''.

     SEC. 6. SUPPLEMENTATION OF CRIMES CONSTITUTING MONEY 
                   LAUNDERING.

       Section 1956(c)(7)(B) of title 18, United States Code, is 
     amended--
       (1) by striking clause (ii) and inserting the following:
       ``(ii) any conduct constituting a crime of violence;''; and
       (2) by adding at the end the following:
       ``(iv) fraud, or any scheme to defraud, committed against a 
     foreign government or foreign governmental entity under the 
     laws of that government or entity;
       ``(v) bribery of a foreign public official, or the 
     misappropriation, theft, or embezzlement of public funds by 
     or for the benefit of a foreign public official under the 
     laws of the country in which the subject conduct occurred or 
     in which the public official holds office;
       ``(vi) smuggling or export control violations involving 
     munitions listed in the United States Munitions List or 
     technologies with military applications, as defined in the 
     Commerce Control List of the Export Administration 
     Regulations;
       ``(vii) an offense with respect to which the United States 
     would be obligated by a multilateral treaty either to 
     extradite the alleged offender or to submit the case for 
     prosecution, if the offender were found within the territory 
     of the United States; or
       ``(viii) the misuse of funds of, or provided by, the 
     International Monetary Fund in contravention of the Articles 
     of Agreement of the Fund or the misuse of funds of, or 
     provided by, any other international financial institution 
     (as defined in section 1701(c)(2) of the International 
     Financial Institutions Act) in contravention of any 
     international treaty or other international agreement to 
     which the United States is a party, including any articles of 
     agreement of the members of such international financial 
     institution;''.

     SEC. 7. PROHIBITION ON FALSE STATEMENTS TO FINANCIAL 
                   INSTITUTIONS CONCERNING THE IDENTITY OF A 
                   CUSTOMER.

       (a) In General.--Chapter 47 of title 18, United States Code 
     (relating to fraud and false statements), is amended by 
     inserting after section 1007 the following:

     ``Sec. 1008. False statements concerning the identity of 
       customers of financial institutions

       ``(a) In General.--Whoever knowingly in any manner--
       ``(1) falsifies, conceals, or covers up, or attempts to 
     falsify, conceal, or cover up, the identity of any person in 
     connection with any transaction with a financial institution;
       ``(2) makes, or attempts to make, any materially false, 
     fraudulent, or fictitious statement or representation of the 
     identity of any person in connection with a transaction with 
     a financial institution;
       ``(3) makes or uses, or attempts to make or use, any false 
     writing or document knowing the same to contain any 
     materially false, fictitious, or fraudulent statement or 
     entry concerning the identity of any person in connection 
     with a transaction with a financial institution; or
       ``(4) uses or presents, or attempts to use or present, in 
     connection with a transaction with a financial institution, 
     an identification document or means of identification the 
     possession of which is a violation of section 1028;

     shall be fined under this title, imprisoned not more than 5 
     years, or both.
       ``(b) Definitions.--In this section:
       ``(1) Financial institution.--In addition to the meaning 
     given to the term `financial institution' by section 20, the 
     term `financial institution' also has the meaning given to 
     such term in section 5312(a)(2) of title 31.
       ``(2) Identification document and means of 
     identification.--The terms `identification document' and 
     `means of identification' have the meanings given to such 
     terms in section 1028(d).''.
       (b) Technical and Conforming Amendments.--
       (1) Title 18, united states code.--Section 1956(c)(7)(D) of 
     title 18, United States Code, is amended by striking ``1014 
     (relating to fraudulent loan'' and inserting ``section 1008 
     (relating to false statements concerning the identity of 
     customers of financial institutions), section 1014 (relating 
     to fraudulent loan''.
       (2) Table of sections.--The table of sections for chapter 
     47 of title 18, United States Code, is amended by inserting 
     after the item relating to section 1007 the following:

``1008. False statements concerning the identity of customers of 
              financial institutions.''.

     SEC. 8. APPROPRIATION FOR FINCEN TO IMPLEMENT SAR/CTR ALERT 
                   DATABASE.

       There is authorized to be appropriated $1,000,000, to 
     remain available until expended, for the Financial Crimes 
     Enforcement Network of the Department of the Treasury to 
     implement an automated database that will alert law 
     enforcement officials if Currency Transaction Reports or 
     Suspicious Activity Reports disclose patterns that may 
     indicate illegal activity, including any instance in which 
     multiple Currency Transaction Reports or Suspicious Activity 
     Reports name the same individual within a prescribed period 
     of time.

     SEC. 9. LONG-ARM JURISDICTION OVER FOREIGN MONEY LAUNDERERS.

       Section 1956(b) of title 18, United States Code, is 
     amended--
       (1) by redesignating paragraphs (1) and (2) as 
     subparagraphs (A) and (B), respectively;
       (2) by inserting ``(1)'' after ``(b)'';
       (3) by inserting ``, or section 1957'' after ``or (a)(3)''; 
     and
       (4) by adding at the end the following:
       ``(2) For purposes of adjudicating an action filed or 
     enforcing a penalty ordered under this section, the district 
     courts shall have jurisdiction over any foreign person, 
     including any financial institution authorized under the laws 
     of a foreign country, that commits an offense under 
     subsection (a) involving a financial transaction that occurs 
     in whole or in part in the United States, if service of 
     process upon such foreign person is made under the Federal 
     Rules of Civil Procedure or the laws of the country in which 
     the foreign person is found.
       ``(3) The court may issue a pretrial restraining order or 
     take any other action necessary to ensure that any bank 
     account or other property held by the defendant in the United 
     States is available to satisfy a judgment under this 
     section.''.

     SEC. 10. 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--
       ``(A) any financial institution described in section 
     5312(a)(2) of title 31, or the regulations promulgated 
     thereunder; and
       ``(B) any foreign bank, as defined in section 1(b)(7) of 
     the International Banking Act of 1978 (12 U.S.C. 3101(7)).''.

     SEC. 11. EFFECTIVE DATE.

       Except as otherwise specifically provided in this Act, this 
     Act and the amendments made by this Act shall take effect 90 
     days after the date of enactment of this Act.
                                  ____


         Summary of the Money Laundering Abatement Act of 1999

       A United States depository institution or a United States 
     branch of a foreign institution could not open or maintain an 
     account in the United States for a foreign entity unless the 
     owner of the account was identified on a form or record 
     maintained in the United States.
       A United States depository institution or branch of a 
     foreign institution in the United States could not maintain a 
     correspondent account for a foreign institution unless the 
     foreign institution was subject to comprehensive supervision 
     or regulation.
       Within 48 hours of receiving a request from a federal 
     banking agency, a financial institution would be required to 
     provide account information and documentation to the 
     requesting agency.
       The Secretary of the Treasury would be required to issue 
     regulations to ensure that customer funds flowing through a 
     concentration account (which comingles funds of an 
     institution's customers) were earmarked to each customer.
       The list of crimes that are predicates to money laundering 
     would be broadened to include, among other things, corruption 
     or fraud by or against a foreign government under that 
     government's laws or the laws of the country in which the 
     conduct occurred, and misappropriation of funds provided by 
     the IMF or similar organizations.
       Institutions that engage in private banking would be 
     required to implement due diligence procedures encompassing 
     verification of private banking customers' identities and 
     source of funds.
       It would be a federal crime to knowingly falsify or conceal 
     the identity of a financial institution customer.
       An appropriation would be authorized for FinCEN, which 
     tracks reports filed by financial institutions under the Bank 
     Secrecy Act, to establish an automated system of alerting 
     authorities when multiple reports are filed regarding the 
     same customer.
       United States courts would be given ``long-arm'' 
     jurisdiction over foreign persons and institutions that 
     commit money laundering offenses that occur in whole or part 
     in the United States.
       The definition of money laundering in current statutes 
     would be expanded to include laundering money through foreign 
     banks.

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