[Congressional Record (Bound Edition), Volume 152 (2006), Part 9]
[House]
[Pages 12717-12724]
[From the U.S. Government Publishing Office, www.gpo.gov]




              SEASONED CUSTOMER CTR EXEMPTION ACT OF 2006

  Mr. BACHUS. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 5341) to amend section 5313 of title 31, United States Code, 
to reform certain requirements for reporting cash transactions, and for 
other purposes, as amended.
  The Clerk read as follows:

                               H.R. 5341

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

[[Page 12718]]



     SEC. 1. SHORT TITLE.

       This Act may be cited as the ``Seasoned Customer CTR 
     Exemption Act of 2006''.

     SEC. 2. EXCEPTION FROM CURRENCY TRANSACTION REPORTS FOR 
                   SEASONED CUSTOMERS.

       (a) Findings.--The Congress finds as follows:
       (1) The completion of and filing of currency transaction 
     reports under section 5313 of title 31, United States Code, 
     poses a compliance burden on the financial industry.
       (2) Due to the nature of the transactions or the persons 
     and entities conducting such transactions, some reports as 
     currently filed may not be relevant to the detection, 
     deterrence, or investigation of financial crimes, including 
     money laundering and the financing of terrorism.
       (3) However, the data contained in such reports can provide 
     valuable context for the analysis of other data derived 
     pursuant to subchapter II of chapter 53 of title 31, United 
     States Code, as well as investigative data, which provide 
     invaluable and indispensable information supporting efforts 
     to combat money laundering and other financial crimes.
       (4) An appropriate exemption process from the reporting 
     requirements for certain currency transactions that are of 
     little or no value to ongoing efforts of law enforcement 
     agencies, financial regulatory agencies, and the financial 
     services industry to investigate, detect, or deter financial 
     crimes would continue to fulfill the compelling need to 
     produce and provide meaningful information to policy-makers, 
     financial regulators, law enforcement, and intelligence 
     agencies, while potentially lowering the compliance burden 
     placed on financial institutions by the need to file such 
     reports.
       (5) The Secretary of the Treasury has by regulation, and in 
     accordance with section 5313 of title 31, United States Code, 
     implemented a process by which institutions may seek 
     exemptions from filing certain currency transaction reports 
     based on appropriate circumstances; however, the financial 
     industry has not taken full advantage of these provisions and 
     has contended that they are unduly burdensome.
       (6) The act of providing notice to the Secretary of the 
     Treasury of designations of exemption--
       (A) provides meaningful information to law enforcement 
     officials on exempt customers and enables law enforcement to 
     obtain account information through appropriate legal process; 
     and
       (B) complements other sections of title 31, United States 
     Code, whereby law enforcement can locate financial 
     institutions with relevant records relating to a person of 
     investigative interest, such as information requests made 
     pursuant to regulations implementing section 314(a) of the 
     USA PATRIOT Act of 2001.
       (7) A designation of exemption has no effect on 
     requirements for depository institutions to apply the full 
     range of anti-money laundering controls required under 
     subchapter II of chapter 53 of title 31, United States Code, 
     and related provisions of law, including the requirement to 
     apply the customer identification program pursuant to section 
     5326 of such title, and the requirement to identify, monitor, 
     and, if appropriate, report suspicious activity in accordance 
     with section 5318(g) of such title.
       (8) The Federal banking agencies and the Financial Crimes 
     Enforcement Network have recently provided guidance through 
     the Federal Financial Institutions Examination Council Bank 
     Secrecy Act/Anti-Money Laundering Examination Manual on 
     applying appropriate levels of due diligence and identifying 
     suspicious activity by the types of cash-intensive businesses 
     that generally will be subject to exemption.
       (b) Seasoned Customer Exemption.--Section 5313(e) of title 
     31, United States Code, is amended to read as follows:
       ``(e) Qualified Customer Exemption.--
       ``(1) In general.--Before the end of the 270-day period 
     beginning on the date of the enactment of the Seasoned 
     Customer CTR Exemption Act of 2006, the Secretary of the 
     Treasury shall prescribe regulations that exempt any 
     depository institution from filing a report pursuant to this 
     section in a transaction for the payment, receipt, or 
     transfer of United States coins or currency (or other 
     monetary instruments the Secretary of the Treasury 
     prescribes) with a qualified customer of the depository 
     institution.
       ``(2) Qualified customer defined.--For purposes of this 
     section, the term `qualified customer', with respect to a 
     depository institution, has such meaning as the Secretary of 
     the Treasury shall prescribe, which shall include any person 
     that--
       ``(A) is incorporated or organized under the laws of the 
     United States or any State, including a sole proprietorship 
     (as defined in 31 C.F.R. 103.22(d)(6)(vii), as in effect on 
     May 10, 2006), or is registered as and eligible to do 
     business within the United States or a State;
       ``(B) has maintained a deposit account with the depository 
     institution for at least 12 months; and
       ``(C) has engaged, using such account, in multiple currency 
     transactions that are subject to the reporting requirements 
     of subsection (a).
       ``(3) Regulations.--
       ``(A) In general.--The Secretary of the Treasury shall 
     prescribe regulations requiring a depository institution to 
     file a 1-time notice of designation of exemption for each 
     qualified customer of the depository institution.
       ``(B) Form and content of exemption notice.--The Secretary 
     shall by regulation prescribe the form, manner, content, and 
     timing of the qualified customer exemption notice and such 
     notice shall include information sufficient to identify the 
     qualified customer and the accounts of the customer.
       ``(C) Authority of secretary.--
       ``(i) In general.--The Secretary may suspend, reject, or 
     revoke any qualified customer exemption notice, in accordance 
     with criteria prescribed by the Secretary by regulation.
       ``(ii) Conditions.--The Secretary may establish conditions, 
     in accordance with criteria prescribed by regulation, under 
     which exempt qualified customers of an insured depository 
     institution that is merged with or acquired by another 
     insured depository institution will continue to be treated as 
     designated exempt qualified customers of the surviving or 
     acquiring institution.''.
       (c) 3-Year Review and Report.--Before the end of the 3-year 
     period beginning on the date of the enactment of this Act, 
     the Secretary of the Treasury, in consultation with the 
     Attorney General, the Secretary of Homeland Security, the 
     Federal banking agencies, the banking industry, and such 
     other persons as the Secretary deems appropriate, shall 
     evaluate the operations and effect of the provisions of the 
     amendment made by subsection (a) and make recommendations to 
     Congress as to any legislative action with respect to such 
     provision as the Secretary may determine to be appropriate.

     SEC. 3. PERIODIC REVIEW OF REPORTING THRESHOLD AND ADJUSTMENT 
                   FOR INFLATION.

       Section 5318 of title 31, United States Code, is amended by 
     adding at the end the following new subsection:
       ``(o) Periodic Review of Reporting Threshold and Adjustment 
     for Inflation.--
       ``(1) In general.--Before the end of the 90-day period 
     beginning on the date of the enactment of the Seasoned 
     Customer CTR Exemption Act of 2006 and at least every 5 years 
     after the end of such period, the Secretary of the Treasury 
     shall--
       ``(A) review the continuing appropriateness, relevance, and 
     utility of each threshold amount or denomination established 
     by the Secretary, in the Secretary's discretion, for any 
     report required by the Secretary under this subchapter; and
       ``(B) adjust each such amount, at such time and in such 
     manner as the Secretary considers appropriate, for any 
     inflation that the Secretary determines has occurred since 
     the date any such amount was established or last adjusted, as 
     the case may be.
       ``(2) Report.--Before the end of the 60-day period 
     beginning upon the completion of any review by the Secretary 
     of the Treasury under paragraph (1), the Secretary shall 
     submit a report to the Congress containing the findings and 
     conclusions of the Secretary in connection with such review, 
     together with an explanation for any adjustment, or lack of 
     adjustment, of any threshold amount or denomination by the 
     Secretary as a result of such review, including the 
     adjustment for inflation.''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Alabama (Mr. Bachus) and the gentlewoman from New York (Mrs. Maloney) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Alabama.
  Mr. BACHUS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, for some 14 years the Congress of the United States has 
known and identified a problem, and that is the number of currency 
transaction reports required by the Bank Secrecy Act.
  The Internal Revenue Service, which administers this program, as 
early as 1993 made this statement. It said that 30 to 40 percent of 
these reports, and I quote, of routine deposits by large, well-
established retail businesses have no likelihood of identifying 
potential money laundering or other currency violations.
  The GAO in 1994 published a report which says, our analysis of CTR 
filing confirms that the volume of CTRs could be substantially reduced 
without jeopardizing law enforcement needs.

                              {time}  1200

  The GAO, the Internal Revenue, FinCEN, have all recommended that what 
we do to reduce the number of CTRs by 30 to 40 percent is simply to 
exempt large well-established customers, what are so-called ``seasoned 
customers.''
  In fact, I want to read into the Record and introduce into the Record 
a report by William Fox, who headed up FinCEN, the government's top law 
enforcement agency charged with coordinating money laundering and 
terrorist financing activities.
  Here is what he said: ``We know that some of the currency transaction 
reports filed by financial institutions are of little relevance in the 
investigation of financial crimes. We also know that depository 
institutions, especially our community banks, identify the time and 
expense of filing CTRs as the number one regulatory expense. It is 
clear that our efforts to encourage the exemption of routine filings on 
certain

[[Page 12719]]

customers has not brought about the reductions of filings that were 
sought.''
  Working with William Fox, members of this committee, Mr. Frank, Mrs. 
Maloney, myself, Mr. Hensarling, Mr. Moore, Ms. Hooley, and several 
others, we actually fashioned legislation which we introduced and have 
passed out of this House on two different occasions over the past year. 
That legislation has died or was not acted on in the Senate. In the 
last case, it was simply because it was included in part of the reg 
relief bill.
  So the purpose of this legislation is to break it out, isolate it 
into specific legislation dealing with that and nothing else, and send 
it over to the other body in hopes that they will save our financial 
institutions from what the GAO in 1994 said was a cost of up to $15 per 
report, maybe as little as $3, but as much as $15, and save our law 
enforcement agencies $2 to $3 per report, an overall savings of tens of 
millions of dollars which will allow law enforcement and our financial 
institutions to concentrate on the bad guys, not well-established 
routine business transactions by their customers.
  Mr. Speaker, at this time I reserve the balance of my time.
  Mrs. MALONEY. Mr. Speaker, I yield myself such time as I may consume.
  I rise in strong support of H.R. 5341, the Seasoned Customer CTR 
Exemption Act of 2006. This bill is similar to an amendment I authored 
with Congressman Renzi at the committee markup of H.R. 3505, the 
regulatory relief bill that the House passed overwhelmingly in March. 
Because the Senate version of regulatory relief does not include this 
provision, we are passing it as a separate bill.
  I am delighted to be a cosponsor of this bill along with my 
colleagues, Congressman Bachus and Ranking Member Frank. With 22 
bipartisan cosponsors, it is a good example of the cooperative work of 
the Financial Services Committee.
  This bill is intended to relieve financial institutions from 
unnecessary filings of currency transactions. This provision would 
reduce CTR filings by 70 to 90 percent for most financial institutions, 
saving many, many hours each year. By freeing financial institutions 
from filing useless CTRs, this bill enables them to concentrate on the 
more useful suspicious activity reports, which are those reports that 
financial institutions file when they believe a particular transaction 
of any sort or size warrants further review by law enforcement. More 
important, this also enables the regulators to concentrate on the 
important SAR filings, rather than CTRs from repeat trusted customers.
  The bill would require banks to provide a one-time notice to FinCEN, 
the lead money laundering agency, of a proposed exemption for a 
particular well-known customer, and to describe the customer's 
relationship with the bank as the grounds for such exemption if FinCEN 
feels that the customer should not be in the reports or CTRs.
  At present, a CTR must be filed for every single transaction of over 
$10,000, which results in more than 13 million CTRs being filed 
annually. Many of these CTRs, particularly those from business 
customers well known to the banks, are of absolutely no use to law 
enforcement. It is a waste of the bank's time and of law enforcement's 
time to file and to review them.
  The CTR filings that distract both the banks and regulators from 
using their resources to find terrorists and money launderers are 
counterproductive. To relieve this problem, this bill instructs the 
Secretary of the Treasury to prescribe regulations that exempt a 
depository institution from filing a CTR if the transaction is with a 
seasoned customer, that is, a business which has kept a deposit account 
at the bank for a year and is engaged in multiple currency transactions 
subject to the CTR requirements.
  The idea was first proposed by the Internal Revenue Department, and 
also in the GAO report that my colleague has cited in his remarks; and 
it was also proposed by the Treasury Department and law enforcement for 
exactly this reason. FinCEN Director Bill Fox strongly endorsed this 
seasoned customer exemption saying, and I quote, ``This change will 
make the exemption more effective, while still ensuring that currency 
transaction reporting identification, critical to identifying criminal 
financial activity, is made available to law enforcement.''
  The banking regulators also expressed strong support for this 
proposal. OCC and OTS both agreed with FinCEN that the CTR filing 
process had become counterproductive in terms of national security 
because so many CTRs are filed that important data is lost in the 
haystack.
  In the new Bank Secrecy Act provisions, we asked our financial 
institutions to take a front-line position in the war on money 
laundering and terrorist financing and we need to give them the ability 
to use their resources to their best advantage.
  As a Representative of New York City, which is both an important 
financial center of the United States and a city that is very concerned 
about terrorism, I am concerned not only about giving the regulators 
the proper tools which they need, but I am also concerned that burdens 
are not placed on financial institutions that are redundant, 
particularly for midsized and smaller banks.
  I know the vast majority of my colleagues on both sides of the aisle 
share this concern, and we worked hard together to pass carefully 
balanced legislation addressing it, so I urge my colleagues to continue 
that effort and vote for this underlying bill.
  I rise in support of H.R. 5341, the Seasoned Customer CTR Exemption 
Act of 2006.
  This bill is a reiteration of the amendment I offered with 
Congressman Renzi at the Committee markup of H.R. 3505, the reg relief 
bill that the House passed by a 415 to 2 vote in March. Because the 
Senate version of reg relief does not include this provision, we are 
passing it as a separate bill. I am delighted to cosponsor this bill 
with my colleague Congressman Bachus. With 22 bipartisan cosponsors, it 
is a good example of the bipartisan work of the Financial Services 
Committee.
  This bill is intended to relieve banks from unnecessary filings of 
Currency Transaction reports, or CTRs. At present, a CTR must be filed 
for every single transaction over $10,000, which results in more than 
13 million CTRs being filed annually. Many of these CTRs, particularly 
those from business customers well known to their banks, are of no use 
to law enforcement. It is a waste of the banks' time to file them and a 
waste of law enforcement time to review them. CTR filings that distract 
both the banks and regulators from using their resources to find 
terrorists and money launderers are counterproductive.
  To relieve this problem, this bill instructs the Secretary of the 
Treasury to prescribe regulations that exempt a depository institution 
from filing a CTR if the transaction is with a ``seasoned'' customer, 
that is, a business which has kept a deposit account at the bank for a 
year and has engaged in multiple currency transactions subject to the 
CTR requirements.
  This provision would reduce CTR filings by 70 to 90 percent for most 
banks, saving banks many hours each year.
  By freeing banks from filing useless CTRs, this bill enables them to 
concentrate on the more useful Suspicious Activity Reports, which are 
those reports bank file when they believe a particular transaction of 
any sort or size warrants further review by law enforcement.
  More important, this also enables the regulators to concentrate on 
the important SAR filings rather than CTRs from repeat customers.
  The bill would require banks to provide a one-time notice to FinCEN, 
the lead money laundering agency, of a proposed exemption for a 
particular well-known customer, and to describe the customer's 
relationship with the bank as the grounds for such exemption. If FinCEN 
feels that the customer should not be exempted, then it can reject the 
proposed exemption. And the exemption can be revoked by FinCEN at any 
time. The government remains in complete control of the exemption 
process.
  Indeed, this measure was proposed by the Treasury Department and law 
enforcement for exactly this reason. FinCEN Director Bill Fox strongly 
endorsed this seasoned customer exemption, stating that: ``This change 
will make the exemption more effective while still ensuring that 
currency transaction reporting information critical to identifying 
criminal financial activity is made available to law enforcement.''
  The banking regulators also expressed strong support for this 
proposal. OCC and OTS both agreed with FinCEN that the CTR filing 
process had become counterproductive in terms of national security 
because so many

[[Page 12720]]

CTRs are filed that important data is lost in the haystack.
  In the new Bank Secrecy Act provisions, we asked our financial 
institutions to take a frontline position in the war on money 
laundering and terrorist financing. We need to give them the ability to 
use their resources to best advantage.
  As a representative of New York City, the financial center of the 
United States, I am particularly concerned about the burdens the Bank 
Secrecy Act puts on our financial institutions, particularly those that 
are not mega-
institutions but are mid-size and smaller.
  I know the vast majority of my colleagues on both sides of the aisle 
share this concern and we worked hard together to pass carefully 
balanced legislation addressing it.
  I urge my colleagues to continue that effort and vote for this bill.
  Mr. Speaker, I reserve the balance of my time.
  Mr. BACHUS. Mr. Speaker, I would like to inquire as to how much time 
remains.
  The SPEAKER pro tempore. The gentleman from Alabama has 16 minutes 
remaining and the gentlewoman from New York has 14\1/2\ minutes 
remaining.
  Mr. BACHUS. Mr. Speaker, last September, William Fox, at that time 
head of FinCEN, made this statement at a hearing before the Financial 
Services Committee. He said: ``The Congress has in the past recognized 
the need to reduce the number of currency transaction reports that may 
not have a high degree of usefulness to law enforcement and ordered us 
to find a way to do so.''
  As a result of that hearing, Chairman Oxley, the chairman of the full 
committee, made as a priority the committee working in a bipartisan way 
to find a way, working with law enforcement, to reduce the number of 
CTRs. It was a result of that hearing and numerous statements by both 
law enforcement, by financial regulators, by financial institutions, 
and by Members of Congress in both bodies to work out a solution to 
this long-existing problem. So I would like to commend Chairman Oxley.
  As a result of those hearings, there was introduced 3505, the 
Financial Services Regulatory Relief Act, by Congressman Renzi and Mrs. 
Maloney, who of course just spoke on this bill. They included a 
provision that was specifically drafted by Mr. Frank, Mrs. Maloney, Mr. 
Hensarling and Mr. Moore, which included a seasoned customer exemption. 
We passed 3505 out of this body by a vote of 415-2 back in March.
  More recently, the bill before us, 5341, which has 22 bipartisan 
supporters on the Financial Services Committee, passed the Financial 
Services Committee on a unanimous vote, and H.R. 5341 seeks to reduce 
the regulatory burden caused by the Bank Secrecy Act. Specifically, the 
legislation requires that the regulators promulgate new regulations and 
streamline the process by which financial institutions may be exempted 
from filing CTRs for seasoned customers.
  CTRs are required to be filed for cash transactions of $10,000 or 
more. This filing is required even in the case of seasoned customers 
who are long-time bank customers that routinely file large volumes of 
cash and whose business dealings are well known and understood by the 
institution to the extent to rule out the possibility of money 
laundering or the financing of terror. Unfortunately, the current 
process by which a financial institution seeks an exemption under such 
a scenario is both cumbersome, hard to understand, and requires annual 
renewals.
  Mr. Speaker, at this time I would like to recognize the gentleman 
from Texas (Mr. Hensarling), who helped draft this legislation and the 
original legislation which was included in H.R. 3505, for such time as 
he may consume.
  Mr. HENSARLING. Mr. Speaker, I thank the gentleman for yielding, and 
I certainly thank him for his leadership in this area.
  I have the honor and privilege of representing the Fifth District of 
Texas here on the floor of the United States House. There are a lot of 
great communities, small communities, in east Texas that I represent, 
places like Canton, and Forney, and Athens. And part of the bedrock of 
these communities is their local financial institution, their small 
community bank or their credit union. Over the last decade, Mr. 
Speaker, we have seen the number of small community banks drop by 
almost a full third. By almost a full third. And the major reason that 
we have seen this incredible drop in the number of our community banks 
is because of the high cost of Federal regulation.
  The number one item that community bankers cite in the cost of 
regulation is the regulation associated with the Bank Secrecy Act. Now, 
nobody in the House will deny that clearly the number one priority of 
this institution is to fight and win the war on terror, and there is a 
very important role that the BSA, the Bank Secrecy Act, regime plays in 
that. But, Mr. Speaker, there has to be in the language of the statute 
itself a high degree of usefulness to law enforcement for all of these 
reports that are turned in. Sooner or later, there has to be a balance. 
There has to be a rule of reason.
  So what we see on the one hand with our local financial institutions 
is that every new Federal regulation somewhere at the margin is raising 
the cost of credit. That means some family is going to struggle in 
trying to send a child to college. It means some family is going to 
struggle and maybe they are not able to borrow the money and make a 
downpayment on that first home. Maybe some family that wants to live 
the American Dream and finally amass enough capital to start their own 
business, they can't do it.

                              {time}  1215

  They can't do it because of the imposition of a Bank Secrecy Act that 
many of us believe, and apparently by a count of 415-2, is duplicative.
  So, again, we have to ask ourselves, at what cost does this 
information come? For example, we received testimony from just one 
community banker.
  Mr. Speaker, I ask unanimous consent that the testimony of Mr. 
Bradley Rock of the Bank of Smithtown, New York, be entered into the 
Record.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Texas?
  There was no objection.

    Testimony of Bradley E. Rock on behalf of the American Bankers 
Association before the Committee on Financial Services Subcommittee on 
   Financial Institutions and Consumer Credit United States House of 
                     Representatives, May 18, 2006

       Chairman Bacchus and members of the Committee, my name is 
     Bradley Rock. I am Chairman, President, and CEO of Bank of 
     Smithtown, a $950 million community bank located in 
     Smithtown, New York, founded in 1910. I am also the Vice 
     Chairman of the American Bankers Association (ABA). ABA, on 
     behalf of the more than two million men and women who work in 
     the nation's banks, brings together all categories of banking 
     institutions to best represent the interests of this rapidly 
     changing industry. Its membership--which includes community, 
     regional and money center banks and holding companies, as 
     well as savings associations, trust companies and savings 
     banks--makes ABA the largest banking trade association in the 
     country.
       I have been honored to testify before this committee on 
     prior occasions to present the views of the ABA on the need 
     to eliminate unnecessary, redundant, or inefficient 
     regulatory burdens that increase costs for banks, reduce the 
     amount of credit available to our communities and fail to 
     make meaningful contributions to the welfare of our citizens. 
     Among the largest of regulatory burdens is the regime of 
     surveillance and reporting on the financial activity of our 
     customers that has been imposed on banks under the Bank 
     Secrecy Act and subsequent anti-money laundering statutes and 
     regulations. I therefore welcome the opportunity to appear 
     again before you--this time to address the particular issues 
     of regulatory cost versus policy benefit that attend the 
     current state of currency transaction reporting (CTR)--and to 
     advocate for your consideration an overdue option to reform 
     the system for the mutual advantage of bankers, law 
     enforcement and the American public we all serve.
       We support a simplified, meaningful seasoned business 
     customer exemption. We commend you, Mr. Chairman, and the 
     members of this Committee for adopting that straightforward 
     approach as part of H.R. 3505, the Financial Services 
     Regulatory Relief Act, adopted by the House of 
     Representatives on March 8, 2006, by a vote of 415-2. We 
     congratulate you on continuing to pursue this sensible and 
     timely reform in the legislation being considered today, 
     Seasoned Customer CTR Exemption Act of 2006, H.R. 5341.

[[Page 12721]]

       From the Bank Secrecy Act passed a generation ago to Title 
     III of the USA PATRIOT Act adopted in the wake of the heinous 
     terrorist attacks of September 11, 2001, legislation has 
     united bankers and the government in the battle to combat 
     abuse of our financial system by those who would pervert it 
     to commit criminal offenses, to launder the proceeds of 
     illegal conduct or, more recently, to support the means and 
     ends of terrorism. The ABA and its members share the policy 
     goals of Congress in passing these laws. However, 
     increasingly complex or redundant compliance requirements 
     render these laws far less effective than they might be 
     otherwise.
       When establishing the BSA regulatory regime, Congress 
     sought to require reports or records when they have, in the 
     Act's very words, ``a high degree of usefulness'' for the 
     prosecution and investigation of criminal activity, money 
     laundering, counter-intelligence and international terrorism.
       Unfortunately, in the focus on systems, programs, and 
     procedures, the standard of ``high degree of usefulness'' 
     seems to have been neglected. The result has been more 
     reports and paper, with declining usefulness. ABA and its 
     members strongly believe that the current CTR requirements 
     have long departed from this standard of utility and in large 
     measure serve more to distract and impede efforts against 
     crooks and terrorists than to help to expose and stop them.
       In my testimony, I would like to make three key points:
       Congress has already recognized that the original currency 
     transaction reporting obligations imposed on banks have 
     become unduly burdensome, generate voluminous data on 
     legitimate routine business transactions adding little to law 
     enforcement's efforts at meaningful analysis, and therefore 
     need to be refocused to restore the reports to a level of 
     value more closely approximating ``a high degree of 
     usefulness.''
       Previously enacted relief to reduce reporting to a more 
     useful volume has been unsuccessful. While Congress wisely 
     recognized that banks don't need to collect, and the 
     government does not need to receive and process volumes of 
     records on legitimate business activity by well-known 
     customers, the reform has not been successful in practice 
     because procedures to exercise it are cumbersome and carry 
     significant procedural and supervisory risks.
       Evolution of the BSA reporting regime has further reduced 
     the purpose and value of currency transaction reporting. 
     Requirements for rigorous customer identification programs, 
     suspicious activity reporting, and the availability of 
     focused and detailed information under section 314(a) of the 
     PATRIOT Act leave little value to be added by collecting 
     millions of CTRs on legitimate routine business activity.

  Congress Endorses and Law Enforcement Recognizes the Need To Reduce 
               Reporting on Legitimate Business Activity

       In 1994, Congress included in the Money Laundering 
     Suppression Act a statutory exemption system for currency 
     transaction reporting. The new two-phase system was intended 
     to address concerns that the number of CTRs being filed for 
     routine business activity adversely affected law 
     enforcement's ability to use the data. As the GAO's testimony 
     in March 1994 stated, ``CTRs that report normal business 
     transactions are of no value to law enforcement and 
     regulatory agencies in detecting money laundering activity.'' 
     Expectations at the time anticipated that a revised exemption 
     process would result in a reduction of CTR filings in the 
     range of 30%. Unfortunately, we should all be disturbed that 
     time has witnessed the number of CTRs overall grow from 
     slightly more than 11 million in 1994, when the two-phase 
     exemption process was passed, to the latest estimate of over 
     13 million annually, with no signs of abating.
       Using FinCEN's conservative estimate of around 25 minutes 
     per report for filing and record-keeping, the banking 
     industry as a whole devoted around 5\1/2\ million staff hours 
     of work to handling CTRs in 2005. Our review of ABA members 
     indicates that three-quarters of the filings were for 
     business customers who had been with the bank for over a 
     year. That means that the industry spent around four million 
     staff hours last year filing notices on well-established 
     customers! A similar story can surely be told by the 
     government agencies that receive and process these reports.
       In my bank, during the past year, we filed 2,766 CTRs, and 
     we do not have any public companies as customers. In fact, 
     most of these CTRs were flied for ordinary transactions by an 
     ice cream parlor, a clam bar, a restaurant and a high-volume 
     Amoco dealer, all of whom have done business with us for 
     many, many years. My tellers spent more than 460 hours in the 
     branches preparing the CTR forms, and one person in our main 
     office spent more than 1,000 hours checking the forms for 
     accuracy, checking them against computer printouts, and 
     filing the forms with the appropriate government office. 
     Having watched this process for years, and being thoroughly 
     familiar with the businesses that are the subject of these 
     filings, I can tell you with firm assurance that all of this 
     time and paper did absolutely nothing to advance our 
     collective efforts to thwart money laundering and terrorism.
       This trend is only likely to accelerate and demand more and 
     more staff to report on more and more harmless transactions, 
     further burying the real needles of money laundering under an 
     exponentially growing mound of the hay of legitimate business 
     transactions mindlessly recorded at great expense and 
     increasing opportunity cost. Surely neither business nor the 
     government can afford this wasted effort.
       We have passed the time of studying what to do--GAO did 
     that in 1994 and concluded then, as we all would now, that 
     unnecessary reporting is taking place. It is about time to 
     take effective action to make the system better. We must find 
     a way to realize the policy objective of focusing on 
     reporting with ``a high degree of usefulness,'' and to 
     successfully exempt reports on the financial transactions of 
     law-abiding American businesses.

    The Current Exemption Process Is Irretrievably Mired in Red Tape

       ABA worked cooperatively with FinCEN and the federal 
     banking regulators to encourage institutions to make better 
     use of statutory exemptions when they were changed in the 
     late 1990's. Our Association did extensive outreach to our 
     members, and while some institutions adjusted their CTR 
     filing policies and utilized the two-tier exemption process, 
     the general response was lukewarm at best.
       Unfortunately, the compliance technicalities for, and 
     examiner second-guessing of, banker use of the exemption and 
     the renewal processes have discouraged many institutions from 
     utilizing the discretionary exemptions. The current Phase II 
     exemptions make distinctions among types of cash intensive 
     businesses or exemptible accounts and require statutorily 
     mandated annual reviews plus resubmission obligations. These 
     specifications generate difficulties in determining whether a 
     customer is eligible for exemption, produce fear of 
     regulatory retribution for misapplying criteria and incur 
     costly additional due diligence. ABA has even received 
     reports from members that examiners have threatened penalties 
     and other formal criticisms for simple late filing of 
     biennial renewal forms, a regulatory climate that shouts, 
     ``Warning'' more than it does ``Welcome.'' There should be 
     little wonder then that banks are reluctant to try swimming 
     in these waters.
       We have heard it suggested that bankers do not use the 
     exemption process because they have computerized systems that 
     make filing CTRs a snap. I am here to tell you that the snap 
     you hear is the floor boards in my file room straining under 
     the load of my required five years worth of retained CTRs and 
     related BSA compliance records. First, let me note for the 
     record that not all banks can afford computerized CTR filing 
     systems. Second, adopting technological efficiency in the 
     cause of compliance may have value as a cost control effort, 
     but it is no virtue when it only expedites filing useless 
     data about legitimate business activity. Indeed, the 
     suggestion to automate demonstrates a recognition that the 
     vast majority of these reports are repetitive and routine and 
     therefore likely to be of small value in combating money 
     laundering.
       A reporting regime that presents us with the choice of 
     suffering the gauntlet of exemption qualification paperwork 
     and concomitant auditor or examiner second-guessing or 
     instead filing numerous useless CTRs, is not sound public 
     policy. That is why tinkering with the current exemption 
     process will not make an appreciable dent in the overwhelming 
     number of CTRs filed each year. As FinCEN conceded in its 
     Report to Congress in October 2002, recommendations for 
     improving the exemption process regulatorily are at best 
     incremental. Instead, we must start anew an updated 
     Congressional mandate that clears away the convoluted 
     structure of the present exemption process and substitutes a 
     direct and simplified standard.

  Newer Tools Allow Us To Eliminate CTR Filings for Seasoned Customers

       The current cash transaction reporting program has been 
     rendered virtually obsolete by several developments: enhanced 
     customer identification programs, more robust suspicious 
     activity reporting, and the use of the more focused and 
     intensive 314(a) inquiry/response process.
       In light of these developments, to continue to require CTR 
     filings for business customers whose identity has been 
     verified under a bank's Customer Identification Program (CIP) 
     and tested under a period of experience with the bank and 
     that remain subject to risk-based suspicious activity 
     reporting is an inefficient use of limited resources by 
     bankers and law enforcement. In the field, it diverts scarce 
     examiner resources, focusing on compliance with technical 
     reporting standards rather than carefully evaluating bank 
     programs for detecting transactions that possess a likelihood 
     of involving money laundering and terrorist financing.

                  Exempt Seasoned Customers From CTRs

       Accordingly, we support H.R. 5341, embodying the 
     recognition that the best way to improve the utility of cash 
     transaction reporting is to eliminate the valueless reports 
     being filed on legitimate transactions by

[[Page 12722]]

     law-abiding American businessmen and businesswomen. This 
     improvement can be achieved by establishing a seasoned 
     customer exemption for business entities, including sole 
     proprietorships, as endorsed by FinCEN last year in testimony 
     before Congress and now embodied in H.R. 5341. (ABA proposed 
     a similar concept in its response of May 4, 2005 to the 
     banking agencies' request for comment for burden reduction 
     suggestions under the Economic Growth and Regulatory 
     Paperwork Reduction Act.)
       The exemption, as proposed in the bill and supported by 
     ABA, is comprised of three elements: Existence as an 
     authorized business, maintenance of a deposit account at a 
     depository institution for 12 months, and use of the account 
     to engage in multiple reportable currency transactions. The 
     simplicity of this standard avoids the unnecessary compliance 
     barbs that have previously snagged past efforts to make 
     effective use of prior exemption systems. This 
     straightforward definition is essential for the exemption to 
     work and to reduce filing reports on routine business 
     activity.
       It is important to remember that cash transaction data will 
     not be lost, but rather will continue to reside in the bank 
     account records. It will, therefore, be available to law 
     enforcement whenever sought in connection with a targeted 
     inquiry from government enforcement entities. In particular, 
     by using the USA PATRIOT Act 314(a) inquiry process, law 
     enforcement will be able to locate transaction data and other 
     relevant information on a broad range of accounts of 
     suspects. That more targeted approach is working and 
     producing tangible results today.
       As FinCEN reported on April 25, the 314(a) process has been 
     used by fifteen federal agencies from November 2002 to April 
     2006 covering over 500 significant money laundering or 
     terrorist financing cases identifying more than 4,000 
     subjects of interest. The 314(a) process has yielded the 
     identification of 1,932 new accounts, leading to 1196 Grand 
     Jury Subpoenas, producing 90 indictments, 79 arrests and 10 
     convictions. Although the process has been in place less than 
     four years and many money laundering or terrorist financing 
     cases take several years to develop before they are actually 
     prosecuted, the indictments, arrests and convictions are 
     impressive. To put it mildly, there are no comparable 
     measures of success for cases initiated through CTRs.
       It has been suggested that the 314(a) process is flawed 
     because it ``can only be used on the most significant 
     terrorism and money laundering investigations.'' However, ABA 
     believes that requirement is one of its great strengths 
     because it better matches the benefit of the information 
     collected with the burden imposed on the banks. At least now 
     when banks are called on every two weeks under 314(a) to 
     search for and report all accounts maintained by a subject of 
     interest, they are doing so for an investigation that is 
     considered a significant terrorism or money laundering 
     matter--not a fishing expedition.
       As H.R. 5341 makes clear, all seasoned business customers 
     would continue to be subject to suspicious activity 
     monitoring and reporting. SARs provide precise account and 
     related transaction information as well as extensive 
     narrative detail not available in CTRs. This reporting 
     enables law enforcement to focus resources on conduct or 
     activities where there is a greater likelihood of genuine 
     risk and where investigative resources can be used more 
     productively. In addition, the SAR procedures permit law 
     enforcement to obtain the bank's entire supporting 
     investigative file upon request, without needing a subpoena.
       As FinCEN reported in 2002, SARs have replaced CTRs as the 
     primary tool for identifying suspicious activity. CTRs are 
     now used to locate financial activity of already identified 
     subjects of interest--the same purpose for which 314(a) 
     inquiries are made. Although there have been examples cited 
     by law enforcement of the continued use of CTRs, they do not 
     specifically rebut the wisdom of a seasoned customer 
     exemption. Talk about ``connecting the dots'' amounts to 
     nothing more than anecdotal illustrations of how spotty the 
     utility of CTRs on American businesses has become. They do 
     not demonstrate that CTRs on seasoned customers meet the 
     statutory requirement of ``a high degree of usefulness.''
       After all, CTRs on non-seasoned entities would still be 
     filed, reporting the movement of cash that does not go 
     through an established business account relationship. In 
     addition, law enforcement will have all the identifying 
     information in the seasoned customer designation wherever and 
     whenever that business has seasoned status. In other words, 
     law enforcement will continue to have access to information 
     on where subjects of interest are conducting their financial 
     affairs.
       As former FinCEN Director William Fox stated in a September 
     2005 testimony on the seasoned customer proposal before this 
     Subcommittee, ``We believe this language addresses many of 
     the issues with our current exemption regime that were 
     causing it not to have its intended effect. Due to its 
     complexity and the burden involved in exempting customers, 
     financial institutions were not taking advantage of the 
     exemption regime. This proposal seeks to streamline the 
     exemption process by focusing on a one-time notice to 
     [FinCEN] of an exemption and focusing on the customer's 
     relationship with the bank as the grounds for such exemption. 
     We believe that these changes will make the exemptions more 
     effective while still ensuring that currency transaction 
     reporting information critical to identifying criminal 
     financial activity is made available to law enforcement.'' 
     ABA joins in those sentiments and strongly supports the 
     Seasoned Customer CTR Exemption Act, H.R. 5341 that seeks to 
     follow through on former Director Fox's endorsement.

                               Conclusion

       Eliminating CTR filings for seasoned customers would have 
     the following benefits:
       The vast majority of the over 13 million CTRs filed 
     annually would stop, saving the time, money, and labor 
     expended by businesses to fill out forms, and consumed by law 
     enforcement to process them.
       There would be an improvement in the quality of SARs, 
     eliminating those that are filed today in connection with 
     innocent, idiosyncratic deposit activity. Banks would be able 
     to focus their energies on detecting genuinely suspicious 
     currency transactions, regardless of artificial thresholds.
       We would make an enormous stride forward in focusing our 
     anti-money laundering efforts--by both law enforcement and 
     the banking industry--on the real crooks and terrorists with 
     far greater likelihood of detecting and stopping their 
     activities.
       I thank the Chairman and his colleagues for their 
     commitment to improving the BSA system and assure you that 
     ABA and its members share that commitment. We are all 
     striving to make the system work best, to protect the 
     security of our banking system from abuse by money launderers 
     and terrorists, and to safeguard the confidence that our 
     customers have that the integrity of their legitimate 
     business conduct is respected.

  Mr. HENSARLING. Quoting from his testimony, Mr. Speaker, ``In my bank 
during the past year, we filed 2,766 cash transaction reports, and we 
do not have any public companies as customers. In fact, most of these 
CTRs were filed for ordinary transactions by an ice cream parlor, a 
clam bar, a restaurant and a high-volume Amoco dealer, all of whom have 
done business with us for many, many years. My tellers spent more than 
460 hours in the branches preparing the CTR forms, and one person in 
our main office spent more than 1,000 hours checking the forms for 
accuracy, checking them against computer printouts, and filing the 
forms with the appropriate government office. Having watched this 
process for years, and being thoroughly familiar with the businesses 
that are the subject of these filings, I can tell you with firm 
assurance that all of this time and paper did absolutely nothing to 
advance our collective efforts to thwart money laundering and 
terrorism.''
  That is just one small community banker in America. We know they are 
spread throughout the Nation. In fact, it was over a decade ago, Mr. 
Speaker, that the GAO concluded that unnecessary reporting was taking 
place. I am sorry to say that, 10 years later, it still is taking 
place.
  So many of these banks are filing these cash transaction reports 
defensively, and yet we know that we still have the know-your-customer 
regime that is in place. The suspicious activity reports are still in 
place, and these are better enforcement tools for law enforcement than 
the CTRs.
  In addition, by passing this particular piece of legislation, the 
information doesn't disappear. It is still available for law 
enforcement. The cash transaction data will continue to reside in bank 
account records and be available to law enforcement when they need it, 
when they are following up a lead. We have heard from law enforcement 
itself that, in many cases, what we see is that they are searching for 
a needle in a haystack. The excessive CTR reports are putting more hay 
on the haystack.
  As former FinCEN Director William Fox stated, quote, we believe this 
language, really talking about the legislation at hand, addresses many 
of the issues with our current exemption regime that were causing it 
not to have its intended effect.
  In many respects, Mr. Speaker, I think we are going to be able, by 
passing this legislation, to really help in two different areas. Number 
one, make sure law enforcement has the right amount of information in 
the proper form that they need to do their job, but, at the same time, 
to make sure

[[Page 12723]]

that we don't drive any more of our community banks out of business, 
the lifeblood, at least in my district, of our rural communities that 
are out there creating the jobs necessary to sustain those rural 
communities.
  So the House has really spoken on this matter once before in a very 
resounding fashion, in a very resounding bipartisan fashion. I 
certainly want to thank Ranking Member Frank for his leadership in this 
area as well.
  But we need a rule of reason. It is a question of balance. 
Particularly when we have our know-your-customer routine, when the 
suspicious activity report requirements are still in place, the CTR 
process as presently envisioned is not working, and that is why it is 
so necessary that we pass the legislation brought to us by the chairman 
and the gentleman from Alabama; and I commend him for his work.
  Mrs. MALONEY. Mr. Speaker, there are no further speakers on our side 
of the aisle, and I yield back the balance of my time.
  Mr. BACHUS. Mr. Speaker, in conclusion, I simply want to say to the 
Members who may be listening to this discussion, what we are talking 
about here is a restaurant, a movie theater, a corner drugstore, a 
retail establishment. These are businesses that have been in the 
community for years and years. As a matter of course, every week, 
sometimes every day, they file large sums of cash.
  The very idea that we would impose, as we did in the Bank Safety Act, 
a requirement that the banks, every time this happens, file a report. 
As FinCEN estimated last year, it takes 25 minutes to prepare these 
reports, to review them, to catalog them and to file them. Then it 
takes the FBI or others, IRS, who administers this program, 5 to 6 
minutes. So you are talking about, for the average small bank in a 
medium-sized town, as Mr. Hensarling said, you are talking about 
hundreds of hours of wages, not to speak of the time.
  As we have been hearing for 10 or 12 years, these reports have 
absolutely no usefulness in identifying money laundering, serious 
financial crimes, terrorist financing. It is past time that this 
Congress lifts what is a multimillion dollar burden on our financial 
institutions and, at the same time, allows law enforcement, directs law 
enforcement, in fact, to go after the bad guys. Focus attention on 
those nonroutine, nonstandard transactions.
  Remember, the banks still must require, any time something is out of 
the ordinary to the routine, causes any type of questions, they 
actually have rules and regulations where they are required, in those 
cases, even if it is an established customer, if it is an out-of-the-
ordinary transaction or raises suspicion, they have to file a report. 
That is the purpose of this legislation, to streamline that process.
  Mr. Speaker, in closing, for the record, I would like to introduce 
the September 2005 testimony of William J. Fox, Director of the 
Financial Crimes Enforcement Network at the United States Department of 
Treasury.

  Statement of William J. Fox, Director, Financial Crimes Enforcement 
           Network, United States Department of the Treasury

       Chairman Bachus, Ranking Member Sanders and distinguished 
     members of the Subcommittee, I appreciate the opportunity to 
     appear before you today to discuss your efforts to balance 
     the burdens imposed on the financial industry by the 
     requirements of the Bank Secrecy Act of 1970, specifically, 
     providing the government with highly relevant information 
     that assists law enforcement in making our financial system 
     more transparent and our country safer. I am the Director of 
     the Financial Crimes Enforcement Network, which has been 
     delegated the responsibility by the Secretary of the Treasury 
     to administer the Bank Secrecy Act. The Financial Crimes 
     Enforcement Network is part of Treasury's new Office of 
     Terrorism and Financial Intelligence, led by Under Secretary 
     Stuart Levey. The creation of this office has greatly 
     enhanced Treasury's efforts and accomplishments on issues 
     relating to money laundering, terrorist financing and other 
     financial crime.
       As the administrator of the Bank Secrecy Act, we bear 
     responsibility for ensuring that the Bank Secrecy Act is 
     implemented in a way that achieves the policy aim intended by 
     the Congress, which is, simply stated, to safeguard the 
     United States financial system from the abuses of financial 
     crime, including money laundering and terrorist or other 
     illicit financing. This is a day-to-day challenge in a 
     financial system where we generally promote the unfettered, 
     free-flow of commerce and where criminals strive to 
     manipulate the system with the same ingenuity and 
     sophistication of the very best in the industry.
       Ensuring that we strike the right balance between the cost 
     and benefit of this regulatory regime is, in my view, a 
     central responsibility for my agency. While I do not believe 
     this cost/benefit analysis can be reduced to a mathematical 
     formula, I believe we must constantly study how we can more 
     effectively tailor this regime to minimize the costs and 
     other burdens imposed on our financial institutions while at 
     the same time ensuring that the law enforcement community 
     receives the information it needs to combat financial crime 
     and terrorism.
       This effort is particularly important because I am more 
     certain than ever that compliance with the Bank Secrecy Act's 
     regulatory regime is a critical component to our country's 
     ability to utilize financial information to combat terrorism, 
     terrorist financing, money laundering, and other serious 
     financial crime. Moreover, the systems and programs that are 
     mandated by the Bank Secrecy Act make our financial system 
     safer and more transparent.
       Over the past year I have traveled quite a bit around the 
     country listening to the frustrations members of the 
     financial industry have with the Bank Secrecy Act. Many of 
     those frustrations relate to how the Act is being 
     implemented. Many in the financial industry complained about 
     the lack of clarity in requirements and consistency in 
     examination. At the same time, the Congress has questioned 
     the effectiveness of our collective ability to implement this 
     regime in light of several highly publicized and significant 
     regulatory failures by certain financial institutions. Mr. 
     Chairman, I am pleased to report that by working diligently 
     with my colleagues at this table, we have made significant 
     progress on these issues. In the past year:
       We have signed groundbreaking information-sharing 
     agreements with the five Federal Banking Agencies, the 
     Internal Revenue Service and thirty-three (33) state 
     authorities. We are working to finalize similar agreements 
     with the Securities and Exchange Commission and the 
     Commodities Futures Trading Commission.
       We have assisted the Federal Banking Agencies with the 
     development of a comprehensive Bank Secrecy Act examination 
     manual that we believe will ensure greater consistency in 
     examinations for depository institutions, and will provide a 
     significant source of guidance and help for those 
     institutions.
       We are together issuing more and better guidance to ensure 
     greater clarity and consistency of regulatory policy. A good 
     example of this is the recent guidance we issued jointly with 
     the Federal Banking Agencies on the provision of banking 
     services to money services businesses.
       We have created and staffed an Office of Compliance within 
     our Regulatory Division to ensure better clarity and 
     consistency in how the Bank Secrecy Act is implemented and 
     provide us with an assessment of the overall success of our 
     Bank Secrecy Act Regulatory Program.
       We are--for the first time--devoting nearly 25 percent of 
     our analytic muscle to regulatory issues and programs. These 
     analysts are not only identifying compliance problems and 
     targeting problematic institutions for examination, they will 
     also develop and provide information to the financial 
     industry to help them better understand and assess the risks 
     posed by their business lines and customer base.
       We believe these steps and the steps we have planned have 
     helped improve the overall implementation and effectiveness 
     of the Bank Secrecy Act. Ensuring that we present the 
     financial industry with regulatory requirements that are both 
     clear and consistent is, in my view, one of the best ways we 
     can reduce the burden associated with Bank Secrecy Act 
     compliance.
       Consistency is a crucial element of the effective 
     implementation of the Bank Secrecy Act, and, indeed, is one 
     of our core objectives. While we, of course, stand ready to 
     assist the Committee and this Congress by examining any 
     aspect of the Bank Secrecy Act, I would emphasize that over 
     the past year, the level of cooperation between my agency and 
     the Federal Banking Agencies has grown significantly. As 
     reflected in the steps we have taken together, we all 
     recognize the need for a consistent voice on these important 
     regulatory issues, and are building the necessary 
     coordination mechanisms.
       The focus of my testimony before the subcommittee today is 
     on H.R. 3505, specifically, how that bill would affect the 
     Bank Secrecy Act. I would like to focus on one key concept in 
     this legislation; your effort to reduce the burden imposed on 
     the financial industry of filing Currency Transaction 
     Reports. We have been grappling with the issue of how to 
     improve the Currency Transaction Report regime for some time. 
     We know that Currency Transaction Reports are valuable to law 
     enforcement. These reports--often coupled with other 
     information--are used every day to identify and locate 
     criminals and terrorists. However, we also know that some of

[[Page 12724]]

     the Currency Transaction Reports filed by financial 
     institutions are of little relevance in the investigation of 
     financial crime. We also know that depository institutions, 
     especially our community banks, identify the time and expense 
     of filing Currency Transaction Reports as the number one 
     regulatory expense. Indeed, the Congress has in the past 
     recognized the need to reduce the number of Currency 
     Transaction Reports that may not have a high degree of 
     usefulness to law enforcement, ordering us to find a way to 
     do so. However, it is clear that our efforts to encourage the 
     exemption of routine filings on certain customers have not 
     brought about the reductions in filing that were sought.
       Two years ago we turned to the Bank Secrecy Act Advisory 
     Group, bringing in the viewpoints of the industry, law 
     enforcement, and regulatory communities, to address this 
     question. Through this process, we learned that our 
     colleagues in law enforcement have made significant strides 
     recently in their ability to utilize currency transaction 
     reporting data, marrying this data with other law enforcement 
     data to maximize its benefit. We also have enhanced our 
     analytic capability to exploit this data source on both micro 
     and macro levels. Such innovations enhance the utility of our 
     analysis, and it is essential that we not reduce the flow of 
     critical information just as the technical firepower to 
     exploit this information is reaching new heights.
       This Committee now is considering language that would amend 
     current exemptions by allowing banks to qualify certain 
     customers as exempt from routine currency transaction 
     reporting. We believe this language addresses many of the 
     issues with our current exemption regime that were causing it 
     not to have its intended effect. Due to its complexity and 
     the burden involved in exempting customers, financial 
     institutions were not taking advantage of the exemption 
     regime. This proposal seeks to streamline the exemption 
     process by focusing on a one-time notice to my agency of an 
     exemption and focusing on the customer's relationship with 
     the bank as the grounds for such exemption. We believe that 
     these changes will make the exemptions more effective while 
     still ensuring that currency transaction reporting 
     information critical to identifying criminal financial 
     activity is made available to law enforcement.
       However, we also recognize that we need to monitor these 
     changes to ensure that they do not result in a reduction in 
     information that would be highly useful to our law 
     enforcement clients, and accordingly the proposal contains a 
     wise requirement to conduct a study after some time has 
     elapsed to ensure that we are striking the proper balance.
       In conclusion, Mr. Chairman, I hope that my testimony today 
     conveys the sense of commitment, energy, and balance with 
     which all of us at the Financial Crimes Enforcement Network 
     are addressing the challenging issues that confront our 
     administration of the Bank Secrecy Act. The importance of 
     your personal and direct support of these efforts cannot be 
     overstated. Your oversight will ensure that we meet the 
     challenges that we are facing. I know how critical it is that 
     we do so, and we hope you know how committed we are to 
     meeting those challenges. Thank you.

  Mr. BACHUS. Mr. Speaker, I yield back the balance of my time and urge 
all Members to vote in favor of this legislation.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Alabama (Mr. Bachus) that the House suspend the rules 
and pass the bill, H.R. 5341, 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.
  A motion to reconsider was laid on the table.

                          ____________________