[Congressional Record Volume 147, Number 24 (Tuesday, February 27, 2001)]
[Senate]
[Pages S1628-S1631]
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. 398. A bill to combat international money laundering and to 
protect the United States financial system, and for other purposes; to 
the Committee on Banking, Housing, and Urban Affairs.
  Mr. KERRY. Mr. President, I believe the United States must do more to 
stop international criminals from legitimizing 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 2001, 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. During the 106th 
Congress, the House Banking Committee reported out this legislation 
with a bipartisan 33-1 vote.
  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. Money 
laundering 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 
smuggle 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 ability to launder money into the United States through 
these jurisdictions has allowed corrupt

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foreign officials to systematically divert public assets for their 
personal use, which in turn undermines U.S. efforts to promote stable 
democratic institutions and vibrant economies abroad.
  In December 2000, a federal interagency working group in support of 
the President's International Crime Control Strategy released an 
International Crime Threat Assessment. This report states that 
international banking and financial systems are currently being used to 
legitimize and transfer criminal proceeds and that huge sums of money 
are laundered in the world's largest financial markets including the 
United States. The report warns that international criminal groups will 
use changes in technology and the world economy to enhance their 
capability to launder and move money and may be able to cause 
significant disruption to international financial systems.
  In October 2000, the General Accounting Office determined that Euro-
American Corporate Services, Inc. had formed more than 2,000 
corporations for Russian brokers. From 1991 through January 2000, more 
than $1.4 billion in wire transfer transactions was deposited into 236 
accounts for these corporations opened at two United States banks. More 
than half of these funds were then transferred out of the U.S. banking 
system. The GAO believes that these banking activities raise questions 
about whether the U.S. banks were used to launder money.
  In February 2000, 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.
  Earlier this month, the Minority Staff of the U.S. Senate Permanent 
Subcommittee on Investigations, headed by Senator Carl Levin, released 
a report that reveals that most U.S. banks lack appropriate anti-money 
laundering safeguards on their correspondent accounts. This report 
proves that high risk foreign banks that are denied their own 
correspondent accounts at U.S. banks can get the same access by opening 
correspondent accounts at other foreign banks that have U.S. accounts. 
The report recommends that U.S. regulators and law enforcement offer 
increased assistance to help banks identify high-risk foreign banks.
  During the 1980s, 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 designing 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 U.S. and other well-developed financial centers 
have been working together to improve their anti-money laundering 
regimes and to set international anti-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. This 
provision led to Panama and Venezuela negotiating what were called 
Kerry agreements with the United States decreasing their vulnerability 
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.

  Last year, the Financial Action Task Force, an intergovernmental body 
established to develop and promote policies to combat financial crime, 
released a report naming fifteen jurisdictions--including the Bahamas, 
The Cayman Islands, Russia, Israel, 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. Soon, the 
Financial Action Task Force will develop bank advisories and criminal 
sanctions that effectively drive 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.
  Last year, the Financial Stability Forum 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) began a new 
crackdown on harmful tax competition. Members of the European Union 
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 statutes.
  The International Counter-Money Laundering and Anticorruption Act of 
2001, 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.''

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 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 behind which 
foreign criminals hide. In other cases, the Secretary will have the 
option to require the identification those using a foreign bank's 
correspondent or payable-through accounts. If these transparency 
provisions were deemed to be inadequate to address the specific problem 
identified, the Secretary would 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 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 IEEPA. This 
legislation gives five additional measures to increase the government's 
ability to apply pressure effectively 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 bank regulators in 
1999. 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 that forces action whenever evidence of money laundering is 
determined. 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. The Treasury 
Secretary will develop a calibrated response 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 international money laundering and help protect the integrity of 
the U.S. financial system. This bill has been supported by the heads of 
all the major federal law enforcement agencies.
  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. This legislation is a 
first step toward limiting the scourge of money laundering and will 
help stop the development of international criminal organizations. I 
believe this legislation deserves consideration by the Senate during 
the 107th Congress.
  Mr. SARBANES. Mr. President, I am pleased to join Senators Kerry, 
Grassley, and Levin in introducing the International Counter-Money 
Laundering and Foreign Anti-Corruption Act of 2001, ``ICMLA''. This 
legislation is identical to a bill I co-sponsored last year.
  Money laundering poses an ongoing threat to the financial stability 
of the U.S. 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. Although serious efforts to combat international money 
laundering began in the mid-1980's, recent scandals about the 
involvement of some the most prominent U.S. banks in money laundering 
schemes have highlighted key weaknesses in current laws.
  The ICMLA is designed to bolster the United States' ability to 
counter the 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 relationship do not contravene the purposes 
of current anti-money 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. The Democratic staff of the Permanent 
Subcommittee on Investigations of the Senate Governmental Affairs 
Committee recently completed an investigation and published results 
critical of certain correspondent banking activities.
  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 alert law enforcement to illegal activity.
  Third, the bill enhances enforcement of Geographic Targeting Orders, 
``GTO''. 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

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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. Earlier this year, the Secretary of the 
Treasury, in consultation with the Attorney General and the financial 
services regulators, issued guidelines to financial institutions 
operating in the U.S. 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. 
Title III would help build upon efforts to combat corruption by foreign 
officials and ruling elites. It provides that the U.S. government 
should make clear that it will take all steps necessary to identify the 
proceeds of foreign government corruption which have been deposited in 
U.S. financial institutions and return such proceeds to the citizens of 
the country to whom such assets belong. It also encourages the U.S. to 
continue to actively and publicly support the objectives of the 
Financial Action Task Force on Money Laundering with regard to 
combating international money laundering.
  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.
  The House Banking Committee passed the identical anti-money 
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.
                                 ______