[Congressional Record Volume 146, Number 100 (Thursday, July 27, 2000)]
[Senate]
[Pages S7886-S7888]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself, Mr. Grassley, Mr. Sarbanes, Mr. Levin, 
        and Mr. Rockefeller):
  S. 2972. A bill to combat international money laundering and protect 
the United States financial system, and for other purposes; to the 
Committee on Banking, Housing, and Urban Affairs.


 the international counter-money laundering and foreign anticorruption 
                              act of 2000

  Mr. KERRY. Mr. President, I believe the United States must do more to 
stop international criminals from washing the blood off their profits 
from the sale of drugs, from terror or from organized crime by 
laundering money into the United States financial system.
  That is why today, along with Senators Grassley, Sarbanes, Levin, and 
Rockefeller, I am introducing the International Counter-Money 
Laundering and Foreign Anticorruption Act of 2000 which will give the 
Secretary of the Treasury the tools to crack down on international 
money laundering havens and protect the integrity of the U.S. financial 
system from the influx of tainted money from abroad.
  I very much appreciate work of the Secretary of Treasury Lawrence 
Summers in the development of this legislation. Secretary Summers has 
been a leader in bringing the issue of money laundering to the 
attention of the American public and the Congress. Earlier this year, 
Secretary Summers said, ``The attack on money laundering is an 
essential front in the war on narcotics and the broader fight against 
organized crime worldwide. Money laundering may look like a polite form 
of white collar crime, but it is the companion of brutality, deceit and 
corruption.''
  I am deeply saddened that I will not have the pleasure of working 
with Senator Paul Coverdell, who was to be the primary cosponsor of 
this legislation. His passing is a tremendous loss to the both to the 
American people and the U.S. Senate.
  Money laundering is the financial side of international crime. It 
occurs when criminals seek to disguise money that was illegally 
obtained. It allows terrorists, drug cartels, organized crime groups, 
corrupt foreign government officials and others to preserve the profit 
from their illegal activities and to finance new crimes. It provides 
the fuel that allows criminal organizations to conduct their ongoing 
affairs. It has a corrosive effect on international markets and 
financial institutions. Money launderers rely upon the existence of 
jurisdictions outside the United States that offer bank secrecy and 
special tax or regulatory advantages to non-residents, and often 
complement those advantages with weak financial supervision and 
regulatory regimes.
  Today, the global volume of laundered money is estimated to be 2-5 
percent of global Gross Domestic Product, between $600 billion and $1.5 
trillion. The effects of money laundering extend far beyond the 
parameters of law enforcement, creating international political issues 
while generating domestic political crises.
  International criminals have taken advantage of the advances in 
technology and the weak financial supervision in some jurisdictions to 
place their illicit funds into the United States financial system. 
Globalization and advances in communications and technologies allow 
criminals to move their illicit gains faster and farther than ever 
before. The result has been a proliferation of international money 
laundering havens. The ability to launder money into the United States 
through these jurisdictions has allowed corrupt foreign officials to 
systemically divert public assets to their personal use, which in turn 
undermines U.S. efforts to promote democratic institutions and stable, 
vibrant economies abroad.
  In February, State and Federal regulators formally sanctioned the 
Bank of New York for ``deficiencies'' in its anti-money laundering 
practices including lax auditing and risk management procedures 
involving their international banking business. The sanctions were 
based on the Bank of New York's involvement in an alleged money 
laundering scheme where more than $7 billion in funds were transmitted 
from Russia into the bank. Federal investigators are 
currently attempting to tie the $7 billion to criminal activities in 
Russia such as corporate theft, political graft or racketeering.

  In November 1999, the minority staff of the Senate Governmental 
Affairs Subcommittee on Investigations released a report on private 
banking and money laundering. The report describes a number of 
incidences where high level government officials have used private 
banking accounts with U.S. financial institutions to launder millions 
of dollars from foreign governments. The report details how Raul 
Salinas, brother of former President of Mexico, Carlos Salinas, used 
private bank accounts to launder money out of Mexico. Representatives 
from Citigroup testified at a Subcommittee hearing that the bank had 
been slow to correct controls over their private banking accounts.
  During the 1980's, as chairman of the Senate Permanent Subcommittee 
on Investigations, I began an investigation of the Bank of Credit and 
Commerce International (BCCI), and uncovered a complex money laundering 
scheme. Unlike any ordinary bank, BCCI was from its earliest days made 
up of multiplying layers of entities, related to one another through an 
impenetrable series of holding companies, affiliates, subsidiaries, 
banks-within-banks, insider dealings, and nominee relationships.
  By fracturing corporate structure, record keeping, regulatory review, 
and audits, the complex BCCI family of entities was able to evade 
ordinary legal restrictions on the movement of capital and goods as a 
matter of daily practice and routine. In creating BCCI as a vehicle 
fundamentally free of government control, its creators developed an 
ideal mechanism for facilitating illicit activity by others.
  BCCI's used this complex corporate structure to commit fraud 
involving billions of dollars; and launder money for their clients in 
Europe, Africa, Asia and the Americas. Fortunately, we were able to 
bring many of those involved in BCCI to justice. However, my 
investigation clearly showed that rogue financial institutions have the 
ability to circumvent the laws designed to stop financial crimes.
  In recent years, the United States and other well-developed financial 
centers have been working together to improve their antimoney 
laundering regimes and to set international anti-

[[Page S7887]]

money laundering standards. Back in 1988, I included a provision in the 
State Department Reauthorization bill that requires major money 
laundering countries to adopt laws similar to our own on reporting 
currency, or face sanctions if they did not. Panama and Venezuela wound 
up negotiating what were called Kerry agreements with the United States 
and became less vulnerable to the placement of U.S. currency by drug 
traffickers in the process.
  Unfortunately, other nations--some small, remote islands--have moved 
in the other direction. Many have passed laws that provide for 
excessive bank secrecy, anonymous company incorporation, economic 
citizenship, and other provisions that directly conflict with well-
established international anti-money laundering standards. In doing so, 
they have become money laundering havens for international criminal 
networks. Some even blatantly advertise the fact that their laws 
protect anyone doing business from U.S. law enforcement.
  Just last month, the Financial Action Task Force, an 
intergovernmental body developed to develop and promote policies to 
combat financial crime, released a report naming fifteen 
jurisdictions--including the Bahamas, The Cayman Islands, Russia, 
Israel, Panama, and the Philippines--that have failed to take adequate 
measures to combat international money laundering. This is a clear 
warning to financial institutions in the United States that they must 
begin to scrutinize many of their financial transactions with customers 
in these countries as possibly being linked to crime and money 
laundering. Soon, the Financial Action Task Force will develop bank 
advisories and criminal sanctions that will have the effect of driving 
legitimate financial business from these nations, depriving them of a 
lucrative source of tax revenue. This report has provided important 
information that governments and financial institutions around the 
world should learn from in developing their own anti-money laundering 
laws and policies.

  The Financial Stability Forum has recently released a report that 
categorizes offshore financial centers according to their perceived 
quality of supervision and degree of regulatory cooperation. The 
Organization of Economic Cooperation and Development (OECD) has begun a 
new crackdown on harmful tax competition. Members of the European Union 
has reached an agreement in principle on sweeping changes to bank 
secrecy laws, intended to bring cross-border investment income within 
the net of tax authorities.
  The actions by the Financial Action Task Force, the European Union 
and others show a renewed international focus and commitment to curbing 
financial abuse around the world. I believe the United States has a 
similar obligation to use this new information to update our anti-money 
laundering status.
  The International Counter-Money Laundering and Anticorruption Act of 
2000 which I am introducing today would provide the tools the U.S. 
needs to crack down on international money laundering havens and 
protect the integrity of the U.S. financial system from the influx of 
tainted money from abroad. The bill provides for actions that will be 
graduated, discretionary, and targeted, in order to focus actions on 
international transactions involving criminal proceeds, while allowing 
legitimate international commerce to continue to flow unimpeded. It 
will give the Secretary of the Treasury--acting in consultation with 
other senior government officials and the Congress--the authority to 
designate a specific foreign jurisdiction, foreign financial 
institution, or class of international transactions as being of 
``primary money laundering concern.'' Then, on a case-by-case basis, 
the Secretary will have the option to use a series of new tools to 
combat the specific type of foreign money laundering threat we face. In 
some cases, the Secretary will have the option to require banks to 
pierce the veil of secrecy that foreign criminals hide behind. In other 
cases, the Secretary will have the option to require the identification 
of those using a foreign bank's correspondent or payable-through 
accounts. And if these transparency provisions were deemed to be 
inadequate to address the specific problem identified, the Secretary 
will have the option to restrict or prohibit U.S. banks from continuing 
correspondent or payable-through banking relationships with money 
laundering havens and rogue foreign banks. Through these steps, the 
Secretary will help prevent laundered money from slipping undetected 
into the U.S. financial system and, as a result, increase the pressure 
on foreign money laundering havens to bring their laws and practices 
into line with international anti-money laundering standards. The 
passage of this legislation will make it much more difficult for 
international criminal organizations to launder the proceeds of their 
crimes into the United States.
  This bill fills in the current gap between bank advisories and 
International Emergency Economic Powers Act (IEEPA) sanctions by 
providing five new intermediate measures. Under current law, the only 
counter-money laundering tools available to the federal governments are 
advisories, an important but relatively limited measure instructing 
banks to pay close attention to transactions that involve a given 
country, and full-blown economic sanctions under the IEEPA. This 
legislation gives five additional measures to increase the government's 
ability to apply pressure against targeted jurisdictions or 
institutions.
  This legislation will in no way jeopardize the privacy of the 
American public. The focus is on foreign jurisdictions, financial 
institutions and classes of transactions that present a threat to 
the United States, not on American citizens. The actions that the 
Secretary of the Treasury is authorized to take are designated solely 
to combat the abuse of our banks by specifically identified foreign 
money laundering threats. This legislation is in no way similar to the 
Know-Your-Customer regulations that were proposed by the regulators 
last year. Further, the intent of this legislation is not to add 
additional regulatory burdens on financial institutions, but, to give 
the Secretary of the Treasury the ability to take action against 
existing money laundering threats.

  Let me repeat, this legislation only gives the discretion to use 
these tools to the Secretary of the Treasury. There is no automatic 
trigger which forces action whenever evidence of money laundering is 
uncovered. Before any action is taken, the Secretary of the Treasury, 
in consultation with other key government officials, must first 
determine whether a specific country, financial institution or type of 
transaction is of primary money laundering concern. Then, a calibrated 
response will be developed that will consider the effectiveness of the 
measure to address the threat, whether other countries are taking 
similar steps, and whether the response will cause harm to U.S. 
financial institutions and other firms.
  This legislation will strengthen the ability of the Secretary to 
combat the international money laundering and help protect the 
integrity of the U.S. financial system. This bill is supported by the 
heads of all the major federal law enforcement agencies. The House 
Banking Committee recently reported out this legislation with a 
bipartisan 33-1 vote. I believe this legislation deserves consideration 
by the Senate during the 106th Congress.
  Today, advances in technology are bringing the world closer together 
than ever before and opening up new opportunities for economic growth. 
However, with these new advantages come equally important obligations. 
We must do everything possible to insure that the changes in technology 
do not give comfort to international criminals by giving them new ways 
to hide the financial proceeds of their crimes. I believe that this 
legislation is a first step toward limiting the scourge of money 
laundering will help stop the development of international criminal 
organizations.
  Mr. SARBANES. Mr. President, I am pleased to join Senators Kerry, 
Grassley, Levin, and Rockefeller in introducing the Clinton/Gore 
administration's International Counter-Money Laundering and Foreign 
Anti-Corruption Act of 2000 (``ICMLA''). Money laundering poses an 
ongoing threat to the financial stability of the United States. It is 
estimated by the Department of the Treasury that the global volume of 
laundered money accounts for between 2-5 percent of the global GDP.
  The ICMLA is designed to bolster the United States ability to counter 
the

[[Page S7888]]

laundering of the proceeds of drug trafficking, organized crime, 
terrorism, and official corruption from abroad. The bill broadens the 
authority of the Secretary of the Treasury, ensures that banking 
transactions and financial relationships do not contravene the purposes 
of current antimoney laundering statutes, provides a clear mandate for 
subjecting foreign jurisdictions that facilitate money laundering to 
special scrutiny, and enhances reporting of suspicious activities. The 
bill similarly strengthens current measures to prevent the use of the 
U.S. financial system for personal gain by corrupt foreign officials 
and to facilitate the repatriation of any stolen assets to the citizens 
of countries to whom such assets belong.
  First, section 101 of the ICMLA gives the Secretary of the Treasury, 
in consultation with other key government officials, discretionary 
authority to impose five new ``special measures'' against foreign 
jurisdictions and entities that are of ``primary money laundering 
concern'' to the United States. Under current law, the only counter-
money laundering tools available to the federal government are 
advisories, an important but relatively limited measure instructing 
banks to pay close attention to transactions that involve a given 
country, and full-blown economic sanctions under the International 
Emergency Economic Powers Act (``IEEPA''). The five new intermediate 
measures will increase the government's ability to apply well-
calibrated pressure against targeted jurisdictions or institutions. 
These new measures include: (1) requiring additional record keeping/
reporting on particular transactions, (2) requiring the identification 
of the beneficial foreign owner of a U.S. bank account, (3) requiring 
the identification of those individuals using a U.S. bank account 
opened by a foreign bank to engage in banking transactions (a 
``payable-through account''), (4) requiring the identification of those 
using a U.S. bank account established to receive deposits and make 
payments on behalf of a foreign financial institution (a 
``correspondent account''), and (5) restricting or prohibiting the 
opening or maintaining of certain correspondent accounts.
  Second, the bill seeks to enhance oversight into illegal activities 
by clarifying that the ``safe harbor'' from civil liability for filing 
a Suspicious Activity Report (``SAR'') applies in any litigation, 
including suit for breach of contract or in an arbitration proceeding. 
Under the Bank Secrecy Act (``BSA''), any financial institution or 
officer, director, employee, or agent of a financial institution is 
protected against private civil liability for filing a SAR. Section 201 
of the bill amends the BSA to clarify the prohibition on disclosing 
that a SAR has been filed. These reports are the cornerstone of our 
nation's money-laundering efforts because they provide the information 
necessary to alter law enforcement to illegal activity.
  Third, the bill enhances enforcement of Geographic Targeting Orders 
(``GTOs''). These orders lower the dollar thresholds for reporting 
transactions within a defined geographic area. Section 202 of the bill 
clarifies that civil and criminal penalties for violations of the Bank 
Secrecy Act and its regulations also apply to reports required by 
GTO's. In addition, the section clarifies that structuring a 
transaction to avoid a reporting requirement by a GTO is a criminal 
offense and extends the presumptive GTO period from 60 to 180 days.
  Fourth, section 203 of the bill permits a bank, upon request of 
another bank, to include suspicious illegal activity in written 
employment references. Under this provision, banks would be permitted 
to share information concerning the possible involvement of a current 
or former officer or employee in potentially unlawful activity without 
fear of civil liability for sharing the information.
  Finally, title III of the bill addresses corruption by foreign 
officials and ruling elites. Pursuant to a sense of Congress, the 
Secretary of the Treasury, in consultation with the Attorney General 
and the financial services regulators, is mandated to issue guidelines 
to financial institutions operating in the United States on appropriate 
practices and procedures to reduce the likelihood that such 
institutions could facilitate proceeds expropriated by or on behalf of 
foreign senior government officials.
  The ICMLA addresses many of the shortcomings of current law. The 
Secretary of Treasury is granted additional authority to require 
greater transparency of transactions and accounts as well as to 
narrowly target penalties and sanctions. The reporting and collection 
of additional information on suspected illegal activity will greatly 
enhance the ability of bank regulators and law enforcement to combat 
the laundering of drug money, proceeds from corrupt regimes, and other 
illegal activities.
  Mr. President, the House Banking Committee passed the identical 
antimoney laundering bill by a vote of 31 to 1 on June 8, 2000. I hope 
that we can move this legislation expeditiously in the Senate.
                                 ______