[House Report 106-728]
[From the U.S. Government Publishing Office]



106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     106-728

======================================================================



 
 INTERNATIONAL COUNTER-MONEY LAUNDERING AND FOREIGN ANTICORRUPTION ACT 
                                OF 2000

                                _______
                                

 July 11, 2000.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

   Mr. Leach, from the Committee on Banking and Financial Services, 
                        submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 3886]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Banking and Financial Services, to whom was 
referred the bill (H.R. 3886) to combat international money 
laundering, and for other purposes, having considered the same, 
report favorably thereon with amendments and recommend that the 
bill as amended do pass.
  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``International 
Counter-Money Laundering and Foreign Anticorruption Act of 2000''.
  (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.

        TITLE I--INTERNATIONAL COUNTER-MONEY LAUNDERING MEASURES

Sec. 101. Special measures for jurisdictions, financial institutions, 
or international transactions of primary money laundering concern.

    TITLE II--CURRENCY TRANSACTION REPORTING AMENDMENTS AND RELATED 
                              IMPROVEMENTS

Sec. 201. Amendments relating to reporting of suspicious activities.
Sec. 202. Penalties for violations of geographic targeting orders and 
certain recordkeeping requirements, and lengthening effective period of 
geographic targeting orders.
Sec. 203. Authorization to include suspicions of illegal activity in 
written employment references.
Sec. 204. Bank Secrecy Act Advisory Group.
Sec. 205. Agency reports on reconciling penalty amounts.

                   TITLE III--ANTICORRUPTION MEASURES

Sec. 301. Corruption of foreign governments and ruling elites.
Sec. 302. Support for the Financial Action Task Force on Money 
Laundering.

SEC. 2. FINDINGS AND PURPOSES.

  (a) Findings.--The Congress finds as follows:
          (1) Money laundering, estimated by the International Monetary 
        Fund to amount to between 2 and 5 percent of global gross 
        domestic product which is at least $600,000,000,000 annually, 
        provides the financial fuel that permits transnational criminal 
        enterprises to conduct and expand their operations to the 
        detriment of the safety and security of American citizens.
          (2) Money launderers subvert legitimate financial mechanisms 
        and banking relationships by using them as protective covering 
        for the movement of criminal proceeds and, by so doing, can 
        undermine the integrity of our financial institutions and of 
        the global financial and trading systems upon which our 
        prosperity and growth depend.
          (3) Money launderers rely upon the existence and use of 
        certain jurisdictions outside the United States that offer bank 
        secrecy and special tax or regulatory advantages to 
        nonresidents, and often complement those advantages with weak 
        financial supervisory and regulatory regimes.
          (4) Certain kinds of transactions involving such offshore 
        jurisdictions--for example, those transactions specifically 
        designed to offer anonymity or the avoidance of regulatory 
        scrutiny--make it difficult for law enforcement officials and 
        regulators to follow the trail of money earned by criminals and 
        organized international criminal enterprises that undermine 
        United States national interests and traffic in human misery, 
        whether they are narcotics dealers, terrorists, arms smugglers, 
        traffickers in human beings, or those whose frauds prey upon 
        law abiding citizens.
          (5) Certain banking relationships between financial 
        institutions in the United States and financial institutions 
        located in such offshore jurisdictions, such as correspondent 
        and payable-through accounts, are particularly vulnerable to 
        abuse because of the difficulty in obtaining accurate 
        information about the beneficial owners whose funds pass 
        through such accounts.
          (6) The ability to mount effective counter-measures to 
        international money launderers requires national, as well as 
        bilateral and multilateral action, using tools specially 
        designed for that effort.
          (7) The Basle Committee on Banking Regulation and Supervisory 
        Practices and the Financial Action Task Force on Money 
        Laundering, both of which the United States is a member, have 
        each adopted international anti-money laundering principles and 
        recommendations.
  (b) Purposes.--The purposes of this Act are as follows:
          (1) To ensure that banking transactions and financial 
        relationships, the conduct of such transactions and 
        relationships, or both, do not contravene the purposes of 
        subchapter II of chapter 53 of title 31, United States Code, 
        section 21 of the Federal Deposit Insurance Act, and chapter 2 
        of title I of Public Law 91-508, or facilitate the evasion of 
        any such provision, to ensure that the purposes of such 
        subchapter II continue to be fulfilled, and to guard against 
        international money laundering and other financial crimes.
          (2) To provide a clear national mandate for subjecting to 
        special scrutiny those foreign jurisdictions, financial 
        institutions operating outside the United States, and classes 
        of international transactions that pose particular, 
        identifiable opportunities for money laundering.
          (3) To provide the Secretary of the Treasury with broad 
        discretionary authority to take certain measures tailored to 
        the particular money laundering problems presented by specific 
        foreign jurisdictions, financial institutions operating outside 
        the United States, and classes of international transactions.
          (4) To provide domestic financial institutions with guidance 
        on particular foreign jurisdictions, financial institutions 
        operating outside the United States, and classes of 
        international transactions that are of primary money laundering 
        concern to the United States government.
          (5) To clarify the terms of the safe harbor from civil 
        liability for filing suspicious activity reports.
          (6) To strengthen the Secretary's authority to issue and 
        administer geographic targeting orders, and to clarify that 
        violations of such orders or anyother requirement imposed under 
the authority contained in chapter 2 of title I of Public Law 91-508 
and subchapters II and III of chapter 53 of title 31, United States 
Code, may result in criminal and civil penalties.
          (7) To strengthen the ability of financial institutions to 
        maintain the integrity of their employee population.
          (8) To strengthen measures to prevent the use of the United 
        States 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.

        TITLE I--INTERNATIONAL COUNTER-MONEY LAUNDERING MEASURES

SEC. 101. SPECIAL MEASURES FOR JURISDICTIONS, FINANCIAL INSTITUTIONS, 
                    OR INTERNATIONAL TRANSACTIONS OF PRIMARY MONEY 
                    LAUNDERING CONCERN.

  (a) In General.--Subchapter II of chapter 53 of title 31, United 
States Code, is amended by inserting after section 5318 the following 
new section:

``Sec. 5318A. Special measures for jurisdictions, financial 
                    institutions, or international transactions of 
                    primary money laundering concern

  ``(a) International Counter-Money Laundering Requirements.--
          ``(1) In general.--The Secretary may require domestic 
        financial institutions and domestic financial agencies to take 
        1 or more of the special measures described in subsection (b) 
        if the Secretary finds that reasonable grounds exist for 
        concluding that a jurisdiction outside the United States, 1 or 
        more financial institutions operating outside the United 
        States, or 1 or more classes of transactions within, or 
        involving, a jurisdiction outside the United States is of 
        primary money laundering concern, in accordance with subsection 
        (c).
          ``(2) Form of requirement.--The special measures described in 
        subsection (b) may be imposed by regulation, order, or 
        otherwise as permitted by law, and in such sequence or 
        combination, as the Secretary shall determine.
          ``(3) Process For Selecting Special Measures.--
                  ``(A) Consultation.--In selecting which special 
                measure or measures to take under this subsection, the 
                Secretary shall consult with the Chairman of the Board 
                of Governors of the Federal Reserve System and, in the 
                Secretary's sole discretion, such other agencies and 
                interested parties as the Secretary may find to be 
                appropriate.
                  ``(B) Factors.--The Secretary also shall consider--
                          ``(i) whether similar action has been or is 
                        being taken by other nations or multilateral 
                        groups;
                          ``(ii) whether the imposition of any 
                        particular special measure would create a 
                        significant competitive disadvantage, including 
                        any undue cost or burden associated with 
                        compliance, for financial institutions 
                        organized or licensed in the United States; and
                          ``(iii) the extent to which the action would 
                        have a significant adverse systemic impact on 
                        the international payment, clearance and 
                        settlement system, or on legitimate business 
                        activities involving the particular 
                        jurisdiction, institution, or class of 
                        transactions.
          ``(4) No limitation on other authority.--This section shall 
        not be construed as superseding or otherwise restricting any 
        other authority granted to the Secretary, or to any other 
        agency, by this subchapter or otherwise.
  ``(b) Special Measures.--The special measures referred to in 
subsection (a), with respect to a jurisdiction outside the United 
States, financial institution operating outside the United States, or 
class of transaction within, or involving, a jurisdiction outside the 
United States, are as follows:
          ``(1) Recordkeeping and reporting of certain financial 
        transactions.--
                  ``(A) In general.--The Secretary may require any 
                domestic financial institution or domestic financial 
                agency to maintain records, file reports, or both, 
                concerning the aggregate amount of transactions, or 
                concerning each transaction, with respect to a 
                jurisdiction outside the United States, 1 or more 
                financial institutions operating outside the United 
                States, or 1 or more classes of transactions within, or 
                involving, a jurisdiction outside the United States, if 
                the Secretary finds any such jurisdiction, institution, 
                or class of transactions to be of primary money 
                laundering concern.
                  ``(B) Form of records and reports.--Such records and 
                reports shall be made and retained at such time, in 
                such manner, and for such period of time, as the 
                Secretary shall determine, and shall include such 
                information as the Secretary may determine, including--
                          ``(i) the identity and address of the 
                        participants in a transaction or relationship, 
                        including the identity of the originator of any 
                        funds transfer;
                          ``(ii) the legal capacity in which a 
                        participant in any transaction is acting;
                          ``(iii) information concerning the beneficial 
                        ownership of the funds involved in any 
                        transaction, in accordance with steps the 
                        Secretary has determined to be reasonable and 
                        practicable to obtain and retain such 
                        information; and
                          ``(iv) a description of any transaction.
          ``(2) Information relating to beneficial ownership.--In 
        addition to any other requirement under any other law, the 
        Secretary may require any domestic financial institution or 
        domestic financial agency to take such steps as the Secretary 
        may determine to be reasonable and practicable to obtain and 
        retain information concerning the beneficial ownership of any 
        account opened or maintained in the United States by a foreign 
        person (other than a foreign entity whose shares are subject to 
        public reporting requirements or are listed and traded on a 
        regulated exchange or trading market), or a representative of 
        such a foreign person, that involves a jurisdiction outside the 
        United States, 1 or more financial institutions operating 
        outside the United States, or 1 or more classes of transactions 
        within, or involving, a jurisdiction outside the United States, 
        if the Secretary finds any such jurisdiction, institution, or 
        transaction to be of primary money laundering concern.
          ``(3) Information relating to certain payable-through 
        accounts.--If the Secretary finds a jurisdiction outside the 
        United States, 1 or more financial institutions operating 
        outside the United States, or 1 or more classes of transactions 
        within, or involving, a jurisdiction outside the United States 
        to be of primary money laundering concern, the Secretary may 
        require any domestic financial institution or domestic 
        financial agency that opens or maintains a payable-through 
        account in the United States for a foreign financial 
        institution involving any such jurisdiction or any such 
        financial institution operating outside the United States, or a 
        payable-through account through which any such transaction may 
        be conducted, as a condition of opening or maintaining such 
        account, to--
                  ``(A) identify each customer (and representative of 
                such customer) of such financial institution who is 
                permitted to use, or whose transactions are routed 
                through, such payable-through account; and
                  ``(B) obtain, with respect to each such customer (and 
                each such representative), the same information that 
                the depository institution obtains in the ordinary 
                course of business with respect to its customers 
                residing in the United States.
          ``(4) Information relating to certain correspondent 
        accounts.--If the Secretary finds a jurisdiction outside the 
        United States, 1 or more financial institutions operating 
        outside the United States, or 1 or more classes of transactions 
        within, or involving, a jurisdiction outside the United States 
        to be of primary money laundering concern, the Secretary may 
        require any domestic financial institution or domestic 
        financial agency that opens or maintains a correspondent 
        account in the United States for a foreign financial 
        institution involving any such jurisdiction or any such 
        financial institution operating outside the United States, or a 
        correspondent account through which any such transaction may be 
        conducted, as a condition of opening or maintaining such 
        account, to--
                  ``(A) identify each customer (and representative of 
                such customer) of any such financial institution who is 
                permitted to use, or whose transactions are routed 
                through, such correspondent account; and
                  ``(B) obtain, with respect to each such customer (and 
                each such representative), the same information that 
                the depository institution obtains in the ordinary 
                course with respect to its customers residing in the 
                United States.
          ``(5) Prohibitions or conditions on opening or maintaining 
        certain correspondent or payable-through accounts.--If the 
        Secretary finds a jurisdiction outside the United States, 1 or 
        more financial institutions operating outside the United 
        States, or 1 or more classes of transactions within, or 
        involving, a jurisdiction outside the United States to be of 
        primary money launderingconcern, the Secretary, in consultation 
with the Secretary of State, the Attorney General, and the Chairman of 
the Board of Governors of the Federal Reserve System, may prohibit, or 
impose conditions upon, the opening or maintaining in the United States 
of a correspondent account or payable-through account by any domestic 
financial institution or domestic financial agency for or on behalf of 
a foreign banking institution if such correspondent account or payable-
through account involves any such jurisdiction or institution, or if 
any such transaction may be conducted through such correspondent 
account or payable-through account.
  ``(c) Consultations and Information To Be Considered in Finding 
Jurisdictions, Institutions, or Transactions To Be of Primary Money 
Laundering Concern.--
          ``(1) In general.--In making a finding that reasonable 
        grounds exist for concluding that a jurisdiction outside the 
        United States, 1 or more financial institutions operating 
        outside the United States, or 1 or more classes of transactions 
        within, or involving, a jurisdiction outside the United States 
        is of primary money laundering concern so as to authorize the 
        Secretary to invoke 1 or more of the special measures of 
        subsection (b), the Secretary shall consult with the Secretary 
        of State, the Attorney General, the Secretary of Commerce, and 
        the United States Trade Representative.
          ``(2) Information.--The Secretary also shall consider such 
        information as the Secretary considers to be relevant, 
        including the following potentially relevant factors:
                  ``(A) In the case of a particular jurisdiction--
                          ``(i) the extent to which that jurisdiction 
                        or financial institutions operating therein 
                        offer bank secrecy or special tax or regulatory 
                        advantages to nonresidents or nondomiciliaries 
                        of such jurisdiction;
                          ``(ii) the substance and quality of 
                        administration of that jurisdiction's bank 
                        supervisory and counter-money laundering laws;
                          ``(iii) the relationship between the volume 
                        of financial transactions occurring in that 
                        jurisdiction and the size of the jurisdiction's 
                        economy;
                          ``(iv) the extent to which that jurisdiction 
                        is characterized as a tax haven or offshore 
                        banking or secrecy haven by credible 
                        international organizations or multilateral 
                        expert groups;
                          ``(v) whether the United States has a mutual 
                        legal assistance treaty with that jurisdiction, 
                        and the experience of United States law 
                        enforcement officials, regulatory officials, 
                        and tax administrators in obtaining information 
                        about transactions originating in or routed 
                        through or to such jurisdiction; and
                          ``(vi) the extent to which that jurisdiction 
                        is characterized by high levels of official or 
                        institutional corruption.
                  ``(B) In the case of a decision to apply 1 or more of 
                the special measures described in subsection (b) only 
                to a financial institution or institutions, or to a 
                transaction or class of transactions, or to both, 
                within, or involving, a particular jurisdiction--
                          ``(i) the extent to which such financial 
                        institutions or transactions are used to 
                        facilitate or promote money laundering in or 
                        through the jurisdiction;
                          ``(ii) the extent to which such institutions 
                        or transactions are used for legitimate 
                        business purposes in such jurisdiction; and
                          ``(iii) the extent to which such action is 
                        sufficient to ensure, with respect to 
                        transactions involving such jurisdiction and 
                        institutions operating in such jurisdiction, 
                        that the purposes of this subchapter continue 
                        to be fulfilled, and to guard against 
                        international money laundering and other 
                        financial crimes.
  ``(d) Notification of Special Measures Invoked By the Secretary.--
Within 10 days after the date of any action taken by the Secretary 
under subsection (a)(1), the Secretary shall notify, in writing, the 
Committee on Banking and Financial Services of the House of 
Representatives and the Committee on Banking, Housing, and Urban 
Affairs of the Senate of any such action.
  ``(e) Definitions.--Notwithstanding any other provision of this 
subchapter, for purposes of this section, the following definitions 
shall apply:
          ``(1) Defined terms.--
                  ``(A) Bank definitions.--The following definitions 
                shall apply with respect to a bank:
                          ``(i) Account.--The term `account'--
                                  ``(I) means a formal banking or 
                                business relationship established to 
                                provide regular services, dealings, and 
                                other financial transactions; and
                                  ``(II) includes a demand deposit, 
                                savings deposit, or other transaction 
                                or asset account and a credit account 
                                or other extension of credit.
                          ``(ii) Correspondent account.--The term 
                        `correspondent account' means an account 
                        established to receive deposits from and make 
                        payments on behalf of a foreign financial 
                        institution.
                          ``(iii) Payable-through account.--The term 
                        `payable-through account' means an account, 
                        including a transaction account (as defined in 
                        section 19(b)(1)(C) of the Federal Reserve 
                        Act), opened at a depository institution by a 
                        foreign financial institution by means of which 
                        the foreign financial institution permits its 
                        customers to engage, either directly or through 
                        a sub-account, in banking activities usual in 
                        connection with the business of banking in the 
                        United States.
                  ``(B) Definitions applicable to institutions other 
                than banks.--With respect to any financial institution 
                other than a bank, the Secretary shall define, by 
                regulation, order, or otherwise as permitted by law, 
                the term `account' and shall include within the meaning 
                of such term arrangements similar to payable-through 
                and correspondent accounts.
          ``(2) Other terms.--The Secretary may, by regulation, order, 
        or otherwise as permitted by law, further define the terms in 
        paragraph (1) and define other terms for the purposes of this 
        section, as the Secretary deems appropriate.''.
  (b) Clerical Amendment.--The table of sections for subchapter II of 
chapter 53 of title 31, United States Code, is amended by inserting 
after the item relating to section 5318 the following new item:

``5318A. Special measures for jurisdictions, financial institutions, or 
international transactions of primary money laundering concern.''.

    TITLE II--CURRENCY TRANSACTION REPORTING AMENDMENTS AND RELATED 
                              IMPROVEMENTS

SEC. 201. AMENDMENTS RELATING TO REPORTING OF SUSPICIOUS ACTIVITIES.

  (a) Amendment Relating to Civil Liability Immunity for Disclosures.--
Section 5318(g)(3) of title 31, United States Code, is amended to read 
as follows:
          ``(3) Liability for disclosures.--
                  ``(A) In general.--Any financial institution that 
                makes a voluntary disclosure of any possible violation 
                of law or regulation to a government agency or makes a 
                disclosure pursuant to this subsection or any other 
                authority, and any director, officer, employee, or 
                agent of such institution who makes, or requires 
                another to make any such disclosure, shall not be 
                liable to any person under any law or regulation of the 
                United States, any constitution, law, or regulation of 
                any State or political subdivision of any State, or 
                under any contract or other legally enforceable 
                agreement (including any arbitration agreement), for 
                such disclosure or for any failure to provide notice of 
                such disclosure to the person who is the subject of 
                such disclosure or any other person identified in the 
                disclosure.
                  ``(B) Rule of construction.--Subparagraph (A) shall 
                not be construed as creating--
                          ``(i) any inference that the term `person', 
                        as used in such subparagraph, may be construed 
                        more broadly than its ordinary usage so to 
                        include any government or agency of government; 
                        or
                          ``(ii) any immunity against, or otherwise 
                        affecting, any civil or criminal action brought 
                        by any government or agency of government to 
                        enforce any constitution, law, or regulation of 
                        such government or agency.''.
  (b) Prohibition on Notification of Disclosures.--Section 5318(g)(2) 
of title 31, United States Code, is amended to read as follows:
          ``(2) Notification prohibited.--
                  ``(A) In general.--If a financial institution or any 
                director, officer, employee, or agent of any financial 
                institution, voluntarily or pursuant to this section or 
                any other authority, reports a suspicious transaction 
                to a government agency--
                          ``(i) the financial institution, director, 
                        officer, employee, or agent may not notify any 
                        person involved in the transaction that the 
                        transaction has been reported; and
                          ``(ii) no officer or employee of the Federal 
                        Government or of any state, local, tribal, or 
                        territorial government within the United 
                        States, who has any knowledge that such report 
                        was made may disclose to any person involved in 
                        the transaction that the transaction has been 
                        reported other than as necessary to fulfill the 
                        official duties of such officer or employee.
                  ``(B) Disclosures in certain employment references.--
                Notwithstanding the application of subparagraph (A) in 
                any other context, subparagraph (A) shall not be 
                construed as prohibiting any financial institution, or 
                any director, officer, employee, or agent of such 
                institution, from including, in a written employment 
                reference that is provided in accordance with section 
                18(v) of the Federal Deposit Insurance Act in response 
                to a request from another financial institution or a 
                written termination notice or employment reference that 
                is provided in accordance with the rules of the self-
                regulatory organizations registered with the Securities 
                and Exchange Commission, information that was included 
                in a report to which subparagraph (A) applies, but such 
                written employment reference may not disclose that such 
                information was also included in any such report or 
                that such report was made.''.

SEC. 202. PENALTIES FOR VIOLATIONS OF GEOGRAPHIC TARGETING ORDERS AND 
                    CERTAIN RECORDKEEPING REQUIREMENTS, AND LENGTHENING 
                    EFFECTIVE PERIOD OF GEOGRAPHIC TARGETING ORDERS.

  (a) Civil Penalty for Violation of Targeting Order.--Section 
5321(a)(1) of title 31, United States Code, is amended--
          (1) by inserting ``or order issued'' after ``subchapter or a 
        regulation prescribed''; and
          (2) by inserting ``, or willfully violating a regulation 
        prescribed under section 21 of the Federal Deposit Insurance 
        Act or section 123 of Public Law 91-508,'' after ``section 5314 
        and 5315)''.
  (b) Criminal Penalties for Violation of Targeting order.--Section 
5322 of title 31, United States Code, is amended--
          (1) in subsection (a)--
                  (A) by inserting ``or order issued'' after 
                ``willfully violating this subchapter or a regulation 
                prescribed''; and
                  (B) by inserting ``, or willfully violating a 
                regulation prescribed under section 21 of the Federal 
                Deposit Insurance Act or section 123 of Public Law 91-
                508,'' after ``under section 5315 or 5324)'';
          (2) in subsection (b)--
                  (A) by inserting ``or order issued'' after 
                ``willfully violating this subchapter or a regulation 
                prescribed''; and
                  (B) by inserting ``or willfully violating a 
                regulation prescribed under section 21 of the Federal 
                Deposit Insurance Act or section 123 of Public Law 91-
                508,'' after ``under section 5315 or 5324),''.
  (c) Structuring Transactions To Evade Targeting Order or Certain 
Recordkeeping Requirements.--Section 5324(a) of title 31, United States 
Code, is amended--
          (1) by inserting a comma after ``shall'';
          (2) by striking ``section--'' and inserting ``section, the 
        reporting or 
        recordkeeping requirements imposed by any order issued under 
        section 5326, or the recordkeeping requirements imposed by any 
        regulation prescribed under section 21 of the Federal Deposit 
        Insurance Act or section 123 of Public 
        Law 91-508--'';
          (3) in paragraph (1) by inserting ``, to file a report or to 
        maintain a record required by an order issued under section 
        5326, or to maintain a record required pursuant to any 
        regulation prescribed under section 21 of the Federal Deposit 
        Insurance Act or section 123 of Public Law 91-508'' after 
        ``regulation prescribed under any such section''; and
          (4) in paragraph (2) by inserting ``, to file a report or to 
        maintain a record required by any order issued under section 
        5326, or to maintain a record required pursuant to any 
        regulation prescribed under section 5326, or to maintain a 
        record required pursuant to any regulation prescribed under 
        section 21 of the Federal Deposit Insurance Act or section 123 
        of Public Law 91-508,'' after ``regulation prescribed under any 
        such section''.
  (d) Lengthening Effective Period of Geographic Targeting Orders.--
Section 5326(d) of title 31, United States Code, is amended by striking 
``60'' after ``shall be effective for more than'' and inserting 
``180''.

SEC. 203. AUTHORIZATION TO INCLUDE SUSPICIONS OF ILLEGAL ACTIVITY IN 
                    WRITTEN EMPLOYMENT REFERENCES.

  Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is 
amended by adding at the end the following new paragraph:
  ``(v) Written Employment References May Contain Suspicions of 
Involvement in Illegal Activity.--
          ``(1) In general.--Notwithstanding any other provision of 
        law, any insured depository institution, and any director, 
        officer, employee, or agent of such institution, may disclose 
        in any written employment reference relating to a current or 
        former institution-affiliated party of such institution which 
        is provided to another insured depository institution in 
        response to a request from such other institution, information 
        concerning the possible involvement of such institution-
        affiliated party in potentially unlawful activity.
          ``(2) Definition.--For purposes of this subsection, the term 
        `insured depository institution' includes any uninsured branch 
        or agency of a foreign bank.''.

SEC. 204. BANK SECRECY ACT ADVISORY GROUP.

  Section 1564 of the Annunzio-Wylie Anti-Money Laundering Act (31 
U.S.C. 5311 note) is amended--
          (1) in subsection (a), by inserting ``, of nongovernmental 
        organizations advocating financial privacy,'' after ``Drug 
        Control Policy''; and
          (2) in subsection (c), by inserting ``, other than 
        subsections (a) and (d) of such Act which shall apply'' before 
        the period at the end.

SEC. 205. AGENCY REPORTS ON RECONCILING PENALTY AMOUNTS.

  Before the end of the 1-year period beginning on the date of the 
enactment of this Act, the Secretary of the Treasury and the Federal 
banking agencies (as defined in section 3 of the Federal Deposit 
Insurance Act) shall each submit their respective reports to the 
Congress containing recommendations on possible legislation to conform 
the penalties imposed on depository institutions (as defined in section 
3 of the Federal Deposit Insurance Act) for violations of subchapter II 
of chapter 53 of title 31, United States Code, to the penalties imposed 
on such institutions under section 8 of the Federal Deposit Insurance 
Act.

                   TITLE III--ANTICORRUPTION MEASURES

SEC. 301. CORRUPTION OF FOREIGN GOVERNMENTS AND RULING ELITES.

  (a) Sense of the Congress.--It is the sense of the Congress that, in 
deliberations between the United States Government and any other 
country on money laundering and corruption issues, the United States 
Government should--
          (1) emphasize an approach that addresses not only the 
        laundering of the proceeds of traditional criminal activity but 
        also the increasingly endemic problem of governmental 
        corruption and the corruption of ruling elites;
          (2) encourage the enactment and enforcement of laws in such 
        country to prevent money laundering and systemic corruption;
          (3) make clear that the United States will take all steps 
        necessary to identify the proceeds of foreign government 
        corruption which have been deposited in United States financial 
        institutions and return such proceeds to the citizens of the 
        country to whom such assets belong; and
          (4) advance policies and measures to promote good government 
        and to prevent and reduce corruption and money laundering, 
        including through instructions to the United States Executive 
        Director of each international financial institution (as 
        defined in section 1701(c) of the International Financial 
        Institutions Act) to advocate such policies as a systematic 
        element of economic reform programs and advice to member 
        governments.
  (b) Guidance to Financial Institutions Operating in the United States 
on Transactions By or On Behalf of Corrupt Foreign Officials.--The 
Secretary of the Treasury, in consultation with the Attorney General of 
the United States and the Federal functional regulators (as defined in 
section 509(2) of the Gramm-Leach-Bliley Act), shall, before the end of 
the 180-day period beginning on the date of the enactment of this Act, 
issue guidance to financial institutions operating in the United States 
on appropriate practices and procedures to reduce the risk that such 
institutions may become depositories for, or transmitters of, the 
proceeds of corruption by or on behalf of senior foreign officials and 
their close associates.

SEC. 302. SUPPORT FOR THE FINANCIAL ACTION TASK FORCE ON MONEY 
                    LAUNDERING.

  It is the sense of the Congress that--
          (1) the United States should continue to actively and 
        publicly support the objectives of the Financial Action Task 
        Force on Money Laundering (hereafter in this section referred 
        to as the ``FATF'') with regard to combating international 
        money laundering;
          (2) the FATF should identify noncooperative jurisdictions in 
        as expeditious a manner as possible and publicly release a list 
        directly naming those jurisdictions identified;
          (3) the United States should support the public release of 
        the list naming noncooperative jurisdictions identified by the 
        FATF;
          (4) the United States should encourage the adoption of the 
        necessary international action to encourage compliance by the 
        identified noncooperative jurisdictions; and
          (5) the United States should take the necessary 
        countermeasures to protect the United States economy against 
        money of unlawful origin and encourage other nations to do the 
        same.
  Amend the title so as to read:

    A bill to combat international money laundering and protect the 
United States financial system, and for other purposes.

                          Purpose and Summary

    The purpose of H.R. 3886, the International Counter-Money 
Laundering and Foreign Anticorruption Act of 2000, is to 
provide the United States with new tools to combat foreign 
money laundering threats and to prevent the use of the domestic 
financial system by money launderers and corrupt foreign 
officials.
    The bill, as amended by the Committee, does the following: 
(1) authorizes the Secretary of the Treasury to impose one or 
more of five new special measures upon finding a jurisdiction, 
financial institution operating outside the United States, or 
class of international transactions to be of ``primary money 
laundering concern''; (2) requires the Secretary, in selecting 
a measure, to consult with the Federal Reserve and consider 
several factors of concern to domestic financial institutions; 
(3) outlines the special measures to include enhanced 
recordkeeping and reporting; collection of information on 
beneficial ownership of certain accounts; conditions on opening 
so-called payable-through and correspondent accounts; and 
prohibition of payable-through or correspondent accounts; (4) 
requires the Secretary to consult with selected Federal 
officials and consider a number of factors in making a finding 
relative to a primary money laundering concern; (5) requires 
the Secretary to notify Congress within 10 days of taking a 
special measure; (6) authorizes banks to share suspicions of 
employee misconduct in employment references with other banks 
without fear of civil liability, and clarifies prohibitions 
against disclosure of a suspicious activity report to the 
subject of the report; (7) clarifies penalties for violating 
Geographic Targeting Orders issued by the Secretary to combat 
money laundering in designated geographical areas; (8) requires 
the Bank Secrecy Act Advisory Group to include a privacy 
advocate among its membership and to operate under the 
``sunshine'' provisions of the Federal Advisory Committee Act; 
(9) requires reports from the Treasury Department and banking 
agencies regarding penalties for Bank Secrecy Act and safety-
and-soundness violations; (10) expresses the sense of the 
Congress that the U.S. should press foreign governments to take 
action against money laundering and corruption, and make clear 
that the United States will work to return the proceeds of 
foreign corruption to the citizens of countries to whom such 
assets belong; (11) requires the Secretary of the Treasury to 
issue guidance to domestic financial institutions on how to 
avoid transactions involving foreign corruption; and (12) 
expresses the sense of the Congress that the U.S. should 
support the efforts of the Financial Action Task Force, an 
international anti-money laundering organization, to identify 
jurisdictions that do not cooperate with international efforts 
to combat money laundering.

                  Background and Need for Legislation

    A former Managing Director of the International Monetary 
Fund has estimated that the scale of global money laundering is 
between two and five percent of global gross domestic product, 
or at least $600 billion annually. Any meaningful strategy for 
combating international narcotics dealers, terrorists, arms 
smugglers, traffickers in human beings and other global 
criminal enterprises must include strong legal mechanisms for 
detecting andseizing the flows of their illicit proceeds. Left 
unchecked, money laundering has debilitating consequences for the 
integrity and stability of financial and governmental institutions 
around the world.
    The vulnerability of the U.S. financial system to dirty 
money was underscored by revelations in August of last year 
that Federal investigators were reviewing the flow of billions 
of dollars of suspicious origin through the Bank of New York, 
one of America's oldest and most venerated financial 
institutions. The Committee convened two days of hearings on 
the Bank of New York matter in September 1999, as part of its 
ongoing review of issues related to global corruption and money 
laundering.
    According to testimony elicited by the Committee and court 
papers filed in connection with the Federal criminal probe, a 
substantial portion of the $7 billion that passed through the 
Bank of New York pipeline was routed through accounts 
maintained in so-called offshore secrecy jurisdictions. For 
example, in pleading guilty to money laundering and other 
charges, the central figures in the Bank of New York case 
acknowledged that banks registered in various remote South 
Pacific islands were used as ``fronts to facilitate the illegal 
transfer of money out of Russia,'' and to conceal the Russian 
provenance of the money flowing through the Bank of New York.
    Astonishingly, the deputy chairman of the Russian central 
bank was later quoted as estimating that in 1998 alone, $70 
billion was transferred from Russian banks to accounts of banks 
chartered in the tiny South Pacific island of Nauru (population 
10,850), one of the jurisdictions named in the Bank of New York 
guilty pleas as a conduit for the laundering. Nauru's non-
resident banks, operating under strict secrecy laws and subject 
to minimal regulatory oversight, were described in a 2000 State 
Department report as ``ideal mechanisms in money laundering 
schemes.''
    As illustrated by the Bank of New York case and other 
recent evidence, offshore bank secrecy jurisdictions exist 
which exert little or no supervisory control over their 
financial sectors, permit banks and other corporate entities to 
operate in almost total secrecy, and refuse cooperation with 
law enforcement inquiries by authorities in other countries. 
These jurisdictions play a prominent role in international 
money laundering schemes and the serious crimes that underlie 
them. Particularly troublesome from an anti-money laundering 
standpoint are so-called ``brass plate'' banks and other 
corporate vehicles designed to provide anonymity to their 
owners and customers and insulation from legitimate law 
enforcement and regulatory scrutiny.
    ``Brass plate'' banks often consist of nothing more than a 
nameplate on an office suite, a computer modem, and, 
increasingly, an Internet site. Such institutions are typically 
barred from accepting deposits from residents of the 
jurisdiction in which they are licensed, existing purely to 
service non-residents. What makes such offshore banks 
especially attractive to those seeking a platform from which to 
enter illicit proceeds into the global financial system are the 
legal regimes in many offshore havens that criminalize the 
release of any information about a customer's identity or 
transactions to law enforcement or regulatory authorities. U.S. 
investigators who follow money trails to some of these offshore 
bank secrecy jurisdictions thus often run into ``dead ends''; 
even in those instances where cooperation from the local 
authorities is ultimately forthcoming, it is typically only 
achieved after a period of delay and foot-dragging sufficient 
to permit the target of the investigation to transfer the 
relevant assets and records to another secrecy haven.
    A related corporate creature of the offshore market is the 
so-called international business corporation (IBC) or personal 
(or private) investment company (PIC)--shell companies that use 
nominees as shareholders, officers, and directors, thereby 
concealing the beneficial ownership of the entity from law 
enforcement and regulatory authorities. As with brass-plate 
banks, IBCs are typically exempt from both taxation and any 
meaningful regulatory constraints in the licensing 
jurisdiction. By cloaking their ownership and activities in 
almost complete anonymity, IBCs provide an ideal vehicle for 
those seeking to conceal assets from creditors in other 
countries and launder money generated from drug trafficking, 
international terrorism, financial fraud, corruption and other 
criminal activity.
    The existence of jurisdictions that have stubbornly 
resisted calls for greater transparency and legal cooperation 
with other countries creates a sizable ``black hole'' in the 
international anti-money laundering regime. Although estimates 
vary--and some of the offending secrecy jurisdictions are 
reluctant to disclose data about the scale of the activities 
taking place under their auspices--it is apparent that the past 
decade has witnessed an explosion in both legal and illegal 
commerce taking place offshore. For example, the Cayman 
Islands, with an extremely large offshore sector and strict 
confidentiality, is now believed to be the fifth largest 
financial center in the world--eclipsed only by New York, 
London, Tokyo and Hong Kong. According to the State 
Department's 2000 report cited above, there are ``approximately 
584 offshore banks on the Islands, including a number of the 
world's 50 largest banks.'' It is reported that such banks 
maintain in the neighborhood of $600 billion in deposits from 
foreign banks. The State Department report also discloses that 
more than 44,000 IBCs are registered in the Caymans, and that 
its financial sector provides a wide range of services, 
including private banking, brokering, mutual funds, and trusts.
    Unfortunately, as the Bank of New York case boldly 
underscores, the U.S. banking system is hardly immune from the 
dirty money that flows all too freely through the global 
economy. For someone seeking to confer the appearance of 
legitimacy on illicitly derived profits, the U.S. and other 
established financial centers are attractive destinations. 
Indeed, there is little doubt that funds representing the 
proceeds of foreign crime, corruption, or illegal flight 
capital enter the U.S. system in large volumes on a daily 
basis.
    The methods by which criminals and others use offshore 
secrecy havens to access the U.S. financial system were 
described in detail at a March 9, 2000, Committee hearing by 
Kenneth Rijock, a former career criminal who assisted major 
narco-trafficking organizations in laundering the profits of 
their operations. Rijock, now a financial crime consultant to 
law enforcement, testified how offshore banks have served as 
conduits for drug and other criminal money seeking entry to the 
U.S. financial system:

          The offshore banks, shielded from American law 
        enforcement inquiry, have operated with impunity, and 
        with great success due to one feature: they all have 
        correspondent relationships with many of New York's 
        major banks, allowing them to deposit obscene amounts 
        of cash anonymously, and in the offshore bank's name. 
        The faceless client is never identified.

    Where U.S. financial institutions accept sizable deposits 
and wire transfers from overseas, particularly where those 
transactions originate in countries with minimal regulatory 
controls or high levels of private or public corruption, it is 
critically important that U.S. financial institutions exercise 
due diligence in knowing who their customers are and 
determining whether their transactions are legitimate. To do 
otherwise risks making the western financial system complicit 
in international drug trafficking, terrorism, other crimes, and 
the endemic corruption that has victimized so many across the 
globe.
    Because of the ease by which criminal and corrupt funds can 
traverse the globe, there is increasing recognition in the 
international community of the importance of transparency and 
openness in the global financial system. This growing consensus 
is reflected, for example, in a statement of anti-money 
laundering principles issued by the Basle Committee on Banking 
Regulations and Supervisory Practices. The highly regarded 
Basle Committee was established in 1974 by the central bank 
governors of the Group of Ten industrialized countries, 
including the United States. Similarly, the ``Forty 
Recommendations'' issued by the 26-member nation Financial 
Action Task Force on Money Laundering (FATF), to which the 
United States and the other major financial center countries of 
Europe, North America, and Asia belong, provide an effective 
framework for anti-money laundering efforts, covering issues 
related to law enforcement, financial institution supervision, 
and international cooperation.
    Not all offshore financial centers are havens for money 
laundering, of course, and indeed, there are many legitimate 
reasons for corporations and citizens from other countries to 
transact business in such jurisdictions, including minimization 
of tax exposure, freedom from exchange controls, and concerns 
over personal privacy or security. Offshore financial centers 
are also an integral part of a capital markets system in which 
funds are transferred electronically around the globe in search 
of the highest rate of return. For example, many U.S. banks 
wire funds daily to accounts in the Cayman Islands and other 
offshore financial centers, as a way of avoiding a Federal 
Reserve requirement that a certain percentage of deposits held 
in the U.S. must be placed in a non-interest bearing Federal 
Reserve account each evening.
    To their credit, some offshore jurisdictions have, in 
recent years, responded to international pressure to introduce 
transparency and openness into their offshore financial 
sectors. Some countries, previously notorious for offering safe 
haven to criminal proceeds, have executed Mutual Legal 
Assistance Treaties with the United States, authorizing the 
exchange of information and evidence in criminal 
investigations. A growing number of offshore jurisdictions have 
enacted meaningful anti-money laundering statutes that conform 
to internationally recognized standards. But even with laws on 
the books, the poor record of enforcement among some 
jurisdictions raises serious questions as to whether there 
exists either the political will or the legal and judicial 
infrastructure to ensure an effective anti-money laundering 
regime, particularly given the sheer volume of activity being 
conducted offshore.
    It is self-evident that in an interdependent global economy 
with lightning-speed technology and declining barriers to 
capital flows, an international anti-money laundering regime is 
only as strong as its weakest link. Accordingly, the U.S. and 
its allies in the anti-money laundering effort must embrace 
aggressive multilateral and bilateral strategies to encourage 
the adoption of necessary anti-money laundering legal reforms 
and the dedication of adequate law enforcement and supervisory 
resources to tracking suspicious fund flows.
    H.R. 3886 is designed to supplement and reinforce existing 
U.S. money laundering laws by expanding the strategies the 
United States can employ to combat international money 
laundering threats. Under this proposal, the Treasury Secretary 
would have the discretion to take new measures to address 
threats emanating from a rogue jurisdiction, a corrupt foreign 
financial institution, or a type of international transaction 
that is being abused by money launderers. The measures include 
imposing transparency requirements on domestic institutions 
that are doing business with the affected entity, and barring 
domestic institutions from opening or maintaining correspondent 
accounts with countries or institutions determined to be of 
primary money laundering concern. The approach taken in H.R. 
3886 is designed to fill a gap in existing law between Treasury 
Advisories, which call on financial institutions to apply 
enhanced scrutiny to certain identified transactions, and 
blocking orders under the International Emergency Economic 
Powers Act (IEEPA), which require a Presidential finding of a 
national emergency and which broadly bar Americans from 
engaging in trade or financial transactions with designated 
entities. This intermediate approach allows the United States 
to target major money laundering threats while, at the same 
time, minimizing any collateral burden on domestic financial 
institutions or interference with legitimate financial 
activities.
    H.R. 3886 is drawn from a bipartisan bill--H.R. 2896, the 
Foreign Money Laundering Deterrence and Anticorruption Act--
introduced in September 1999, by Chairman Leach and Ranking 
Member LaFalce, and cosponsored by 13 other members of the 
Committee.

                                Hearings

    The full Committee held a series of three hearings on money 
laundering, the first two of which focused on allegations of 
Russian money laundering and the Bank of New York. Witnesses at 
the first hearing, held on September 21, 1999, included the 
Honorable Lawrence Summers, Secretary of the Treasury; James 
Woolsey, Shea and Gardner, former Director of Central 
Intelligence; Fritz W. Ermarth, former CIA chief Russian 
analyst andNational Security Council official; Paul Saunders, 
Director of the Nixon Center; Vladimir Brovkin, American University 
professor, Transnational Crime and Corruption Center; Yuri Shvets, 
consultant, former KGB agent; Ann Williamson, author; Arnaud de 
Borchgrave, Center for Strategic and International Studies; and Richard 
Palmer, Cachet International, Inc., and a former CIA station chief. 
Written statements were also submitted by Carla del Ponte, Federal 
Prosecutor of the Swiss Confederation; and Yuri Skuratov, Prosecutor-
General of the Russian Federation.
    The second hearing was held on September 22, 1999, and 
featured the following witnesses: the Honorable James Robinson, 
Assistant Attorney General, Criminal Division, U.S. Department 
of Justice; Yuri Shchekochikhin, Member of the Russian Duma and 
editor of Moscow newspaper Novaya Gazeta; Thomas Renyi, 
Chairman and CEO of Bank of New York; Anne Vitale, Managing 
Director and Deputy General Counsel, Republic National Bank of 
New York; and Karon von Gerhke-Thompson, First Columbia 
Company, Inc.
    On March 9, 2000, the Committee held a hearing that focused 
on the money laundering vulnerabilities associated with 
offshore secrecy jurisdictions and on H.R. 3886. Witnesses at 
this third hearing included the Honorable Stuart Eizenstat, 
Deputy Secretary of the Treasury; Senator Charles E. Schumer; 
Raymond Baker, Guest Scholar, Brookings Institution; the 
Honorable Robert E. Bauman, former Member of Congress; Kenneth 
W. Rijock, former money launderer; and Jonathan Winer, Alston & 
Bird, former Deputy Assistant Secretary, Bureau of 
International Narcotics and Law, Department of State.

                   Committee Consideration and Votes

    On June 8, 2000, the full Committee met in open session to 
mark up H.R. 3886. The Committee called up a Committee Print as 
original text for purposes of amendment.
    The Committee Print, developed in close consultation with 
Ranking Member LaFalce and representatives of the Treasury 
Department, closely followed the original text of H.R. 3886, 
but with the following modifications: (1) changed the title of 
the bill to include foreign corruption as well as money 
laundering; (2) added a finding on multilateral anti-money 
laundering initiatives; (3) added, as one of the purposes, 
strengthening measures to prevent the use of the U.S. financial 
system by corrupt foreign officials; (4) authorized the 
Secretary of the Treasury to consult with agencies and 
interested parties besides the Federal Reserve on special 
measures to counter money laundering threats posed by foreign 
jurisdictions; (5) explicitly provided that in selecting which 
special measures to take, the Secretary shall consider the 
compliance costs or burdens on domestic financial institutions; 
(6) modified the special measure relating to beneficial 
ownership information for accounts held by foreign persons to 
make clear that the Secretary will require steps that are 
``reasonable'' and ``practicable''; (7) added the Secretary of 
Commerce and the U.S. Trade Representative to the list of those 
to be consulted on decisions by the Secretary to find a foreign 
jurisdiction, institution, or class of transactions to be of 
primary money laundering concern; (8) added corruption as a 
factor that the Secretary must consider in determining whether 
a foreign jurisdiction represents a primary money laundering 
concern; (9) required the Secretary to notify Congress within 
10 days of special measures taken under this bill; (10) added a 
definition of the term ``payable-through account''; (11) 
dropped provisions relating to suspicious activity reports 
filed by independent auditors; (12) added a title III to the 
bill on anti-corruption measures, to include a sense of the 
Congress that the United States should emphasize to foreign 
governments the need to prevent public corruption and make 
clear that the United States will work to return any proceeds 
of foreign corruption that are deposited in domestic financial 
institutions to the citizens to whom those proceeds belong, and 
to require the Secretary to issue guidance to domestic 
financial institutions on how to reduce the risk that they will 
become depositories for the proceeds of corruption by foreign 
officials.
    During the markup, several amendments were offered. 
Chairman Leach offered a manager's amendment consisting of 
technical corrections as well as language to clarify that 
before imposing the special measures to combat primary money 
laundering threats, the Secretary of the Treasury should 
consider any potential competitive disadvantages to 
unincorporated, but separately licensed, U.S. branches and 
agencies of international banks. The amendment also clarified 
that uninsured branches and agencies of international banks 
would be entitled to the same protection as depository 
institutions when sharing information concerning potentially 
illegal conduct by a former employee in an employment reference 
situation. The manager's amendment was adopted by voice vote.
    An amendment offered by Messrs. Campbell, Paul, Barr, and 
Metcalf included three provisions: (1) a sense of the Congress 
that the term ``know your customer'' should be stricken from 
the Bank Secrecy Act examination manuals used by the federal 
banking agencies; (2) a requirement that a financial privacy 
advocate from a non-governmental organization be included among 
the members of the Bank Secrecy Act Advisory Group, and that 
the Group be subject to the ``sunshine'' provisions of the 
Federal Advisory Committee Act; and (3) a directive to the 
Secretary of the Treasury and the federal banking agencies to 
submit reports to Congress containing recommendations on 
possible legislation to conform BSA penalties to those imposed 
for safety and soundness violations. Following Committee debate 
on the germaneness of the first provision concerning the term 
``know your customer,'' Congressman Campbell withdrew that 
portion of the amendment and the Committee proceeded to adopt 
the remaining two provisions by voice vote.
    An amendment offered by Mrs. Roukema making it a criminal 
offense to smuggle bulk currency in excess of $10,000 into or 
out of the United States was withdrawn.
    Mrs. Roukema and Mr. Bereuter offered an amendment 
expressing the sense of the Congress that the United States 
should support an initiative undertaken by the 26-nation 
Financial Action Task Force on Money Laundering to identify 
noncooperative jurisdictions and publicly release a list of 
such jurisdictions. The amendment was adopted by voice vote.
    The Committee Print, as amended, was adopted by voice vote. 
Subsequently, H.R. 3886, as amended, was ordered reported by a 
vote of 31-1.
        YEAS                          NAYS
Mr. Leach                           Dr. Paul
Mrs. Roukema
Mr. Bereuter
Mr. Bachus
Mr. Castle
Mr. Campbell
Mr. Lucas
Mr. Metcalf
Mr. Ryun
Mr. Riley
Mrs. Biggert
Mr. Terry
Mr. Green
Mr. LaFalce
Mr. Kanjorski
Ms. Waters
Mr. Sanders
Mrs. Maloney
Ms. Velazquez
Mr. Watt
Mr. Bentsen
Mr. Maloney
Ms. Hooley
Mr. Wygand
Mr. Sherman
Ms. Lee
Mr. Inslee
Ms. Schakowsky
Mr. Moore
Mr. Gonzalez
Mr. Capuano

                      Committee Oversight Findings

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
that the findings and recommendations of the Committee, based 
on oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

         Committee on Government Reform and Oversight Findings

    No findings and recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 2(l)(3)(D) of rule XI of the Rules of the House of 
Representatives.

                        Constitutional Authority

    In compliance with clause 2(l)(4) of rule XI of the Rules 
of the House of the Representatives, the constitutional 
authority for Congress to enact this legislation is derived 
from the interstate commerce clause (Clause 3, Section 8, 
Article I) and the foreign commerce clause (Clause 3, Section 
8, Article I). In addition, the power ``to provide for the 
punishment of counterfeiting . . . current coin of the U.S.'' 
(Clause 6, Section 8, Article I) and to ``coin money'' and 
``regulate the value thereof'' (Clause 5, Section 8, Article I) 
has been broadly construed to allow for the Federal regulation 
of the provision of credit, financial institutions and money.

               New Budget Authority and Tax Expenditures

    Clause 2(l)(3)(B) of rule XI of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                    Congressional Accountability Act

    The reporting requirement under section 102(b)(3) of the 
Congressional Accountability Act (P.L.104-1) is inapplicable 
because this legislation does not relate to terms and 
conditions of employment or access to public services or 
accommodations.

    Congressional Budget Office Cost Estimate and Unfunded Mandates 
                                Analysis

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, July 6, 2000.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services, House of 
        Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3886, the 
International Counter-Money Laundering and Foreign 
Anticorruption Act of 2000.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Mark Hadley 
(for federal costs) and Patrice Gordon (for the private-sector 
impact).
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

               congressional budget office cost estimate

H.R. 3886--International Counter-Money Laundering and Foreign 
        Anticorruption Act of 2000

    Summary: H.R. 3886 would authorize the Secretary of the 
Treasury to impose special measures on U.S. financial 
institutions if the Secretary suspects the transactions of 
their foreign clients are tied to money laundering. Such 
measures could include increasing recordkeeping and reporting 
requirements and regulating or prohibiting certain types of 
financial accounts. The Office of the Comptroller of the 
Currency (OCC), the Board of Governors of the Federal Reserve 
System, the Federal Deposit Insurance Corporation (FDIC), the 
Office of Thrift Supervision (OTS), the National Credit Union 
Administration (NCUA), the Commodity Futures Trading Commission 
(CFTC), and the Securities and Exchange Commission (SEC) would 
enforce the provisions of H.R. 3886 as it applies to the 
financial institutions that those agencies now regulate.
    The bill would impose criminal and civil fines on violators 
of recordkeeping requirements in Geographic Targeting Orders 
(GTOs) that may be issued by the Secretary of the Treasury 
under current law. The bill also would impose criminal and 
civil penalties on individuals or firms for structuring 
currency transactions to evade certain financial reporting 
requirements.
    CBO estimates that implementing H.R. 3886 would cost about 
$2 million a year over the 2001-2005 period. Such costs would 
be subject to the availability of appropriated funds. H.R. 3886 
would affect direct spending and receipts; therefore, pay-as-
you-go procedures would apply, but CBO estimates that any such 
effects would be less than $500,000 a year over the 2001-2005 
period.
    H.R. 3886 contains intergovernmental mandates as defined in 
the Unfunded Mandates Reform Act (UMRA) because it would place 
certain requirements on some state and local agencies. CBO 
estimates that the cost of complying with these mandates would 
be small,and would not exceed the statutory threshold of that 
act ($55 million in 2000, adjusted annually for inflation).
    H.R. 3886 also would impose private-sector mandates, as 
defined by UMRA, on financial institutions and other financial 
organizations as defined in the bill. CBO expects that the 
direct costs of those mandates would not exceed the annual 
threshold established by UMRA for private-sector mandates ($109 
million in 2000, adjusted for inflation) for any of the first 
five years that mandates are in effect. Because the costs of 
complying with new requirements on financial institutions would 
depend on specific measures that would be established by the 
Secretary of the Treasury, CBO cannot make that determination 
with confidence.
    Estimated cost to the Federal Government: For this 
estimate, CBO assumes that the bill be enacted by or near the 
start of fiscal year 2001 and that the necessary amounts will 
be appropriated for each year. The estimated budgetary impact 
of H.R. 3886 is shown in the following table. The costs of this 
legislation fall within budget function 370 (commerce and 
housing credit).

----------------------------------------------------------------------------------------------------------------
                                                                      By fiscal year, in million of dollars
                                                               -------------------------------------------------
                                                                  2001      2002      2003      2004      2005
----------------------------------------------------------------------------------------------------------------
                                CHANGES IN SPENDING SUBJECT TO APPROPRIATION \1\

Estimated authorization level.................................         2         2         2         2         2
Estimated outlays.............................................         2         2         2         2         2
----------------------------------------------------------------------------------------------------------------
\1\ The bill also would affect direct spending and revenues, but CBO estimates that those changes would each be
  less than $500,000 a year.

                           basis of estimate

    CBO estimates that implementing H.R. 3886 would increase 
administrative costs at agencies that regulate financial 
institutions by about $2 million a year. In addition to this 
effect on discretionary spending, the bill also would have a 
negligible effect on the collection and spending of civil and 
criminal penalties. Finally, the legislation would have a small 
effect on the operating costs of the FDIC.

Spending subject to appropriation

    H.R. 3886 would authorize the Secretary of the Treasury to 
impose special measures on U.S. financial institutions if the 
Secretary suspects the transaction of their foreign clients are 
tied to money laundering. Because we expect few such measures 
would be imposed, CBO estimates that implementing H.R. 3886 
would increase the costs of the Department of the Treasury, the 
SEC, the CFTC, and the NCUA by a total of about $2 million a 
year over the 2001-2005 period. Such costs would primarily be 
for the SEC to provide guidance to the National Association of 
Securities Dealers on examining the records of brokers of 
securities for transactions that may involve money laundering.
    Under current law, the Secretary of the Treasury may impose 
more stringent recordkeeping requirements on financial service 
providers within a specified geographic area by issuing GTOs. 
H.R. 3886 would impose criminal penalties for violating GTOs, 
or structuring currency transactions to evade federal reporting 
requirements. As a result, the federal government would be able 
to pursue cases that it otherwise would not be able to 
prosecute. CBO expects that the government probably would not 
pursue many such cases, so we estimate that any increase in 
federal costs for law enforcement, court proceedings, or prison 
operations would not be significant. Any such additional costs 
would be subject to the availability of appropriated funds.

Direct spending and revenues

    Both the OTS and the OCC charge fees to cover all their 
administrative costs; therefore, any additional spending by 
these agencies to implement the bill would have no net budget 
effect. That is not the case with the FDIC, however, which uses 
deposit insurance premiums paid by all banks to cover the 
expenses it incurs to supervise state-chartered banks. The bill 
would cause a small increase in FDIC spending, but would 
probably not affect its premium income. In any case, CBO 
estimates that H.R. 3886 would increase direct spending and 
offsetting receipts for those agencies by less than $500,000 a 
year over the 2001-2005 period.
    Budgetary effects on the Federal Reserve are recorded as 
changes in revenues (governmental receipts). Based on 
information from the Federal Reserve, CBO estimates that 
enacting H.R. 3886 would reduce such revenues by less than 
$500,000 a year over the 2001-2005 period.
    Because those prosecuted and convicted under H.R. 3886 
could be subject to penalties, the federal government might 
collect additional fines if the bill is enacted. Collections of 
such fines are recorded in the budget as governmental receipts, 
which are deposited in the CrimeVictims Fund and spent in 
subsequent years. CBO expects that any additional collections from 
enacting H.R. 3886 would be negligible, however, because of the small 
number of cases likely to be involved. Because any increase in direct 
spending would equal the fines collected, the additional direct 
spending also would be negligible.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. CBO 
estimates that enacting H.R. 3886 would affect direct spending 
and governmental receipts but that there would be no 
significant impact in any year.
    Estimated impact on State, local, and tribal governments: 
Title I of the bill would place new reporting requirements on 
certain state and local agencies that act like financial 
institutions. Title II would prohibit employees of state, 
local, tribal, and territorial agencies from disclosing certain 
reported information to the individual involved in the report. 
The prohibition would be a mandate under UMRA because it would 
effectively be placed on the governmental employer as well as 
the employee. CBO estimates that the costs of complying with 
these mandates would be small, and would not exceed the 
statutory threshold established in UMRA ($55 million in 2000, 
adjusted annually for inflation).
    Estimated impact on the private sector: H.R. 3886 would 
impose private-sector mandates, as defined by UMRA, on 
financial institutions and other financial organizations as 
defined in the bill. CBO expects that the direct costs of those 
mandates would not exceed the annual threshold established by 
UMRA for private-sector mandates ($109 million in 2000, 
adjusted for inflation) for any of the first five years that 
mandates are in effect.
    H.R. 3886 would authorize the Secretary of the Treasury to 
impose new recordkeeping and recording requirements regarding 
the identity, beneficial ownership, and transaction record of 
accounts opened and maintained by foreign financial 
institutions and persons. In addition, the bill would, in 
extreme cases, allow the Secretary to impose conditions upon, 
or prohibit outright, the opening or maintaining of 
correspondent or payable-through accounts. (Payable-through 
accounts, as defined in the bill, allow customers of a foreign 
bank to conduct banking operations through a U.S. bank just as 
if they were its own customers.)
    According to industry sources, at least two aspects of the 
reporting requirements under H.R. 3886 could impose new burdens 
that could result in significant costs of compliance to the 
private sector. First, the bill would authorize the Secretary 
to require domestic financial institutions to take steps to 
obtain and retain information concerning the beneficial 
ownership of an account. This requirement could constitute a 
more stringent standard than current requirements, depending on 
how it was imposed by the Secretary, since it may require the 
institution to delve into the underlying ownership of the 
account. Financial institutions expect that they would have to 
make adjustments in current practices to comply with new 
standards regarding beneficial owners and are particularly 
concerned if such a standard would apply to trust departments. 
(Most securities are not registered in the name of beneficial 
holders but are held in securities depositories for banks and 
brokerage firms that hold securities for their customers.)
    Second, possible prohibitions and conditions on the opening 
or maintaining of correspondent and payable-through accounts 
could impose a direct loss of business and profit on the 
affected firms. The extent of these conditions and 
prohibitions, and hence the resulting cost, would hinge on the 
frequency and severity of their imposition. This in turn would 
depend on the number of foreign jurisdictions and institutions 
identified as primary money laundering concerns, the economic 
importance of these jurisdictions and institutions to domestic 
financial institutions, and the severity of the possible 
conditions.
    Based on information from the Department of the Treasury 
and industry experts in the area of money laundering, CBO 
expects that the likelihood that the Treasury would impose 
broad-based special measures on the industry is small. Most 
experts expect that a series of actions would be taken--
increased enforcement under the Bank Secrecy Act, consultations 
with various groups, and so forth--before the Secretary would 
impose new requirements under H.R. 3886. CBO believes that 
direct costs of the mandates in the bill would be below the 
annual threshold established in UMRA. Because compliance costs 
would depend directly on specific standards that would be 
established by the Secretary of the Treasury, CBO cannot make 
that determination with confidence.
    Estimate prepared by: Federal costs: Mark Hadley and Mark 
Grabowicz; revenues: Carolyn Lynch; impact on State, local, and 
tribal governments: Susan Sieg Thompkins; and impact on the 
private sector: Patrice Gordon.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                      Section-by-Section Analysis


Section 1. Short title; table of contents

    The short title of the bill is the ``International Counter-
Money Laundering and Foreign Anticorruption Act of 2000''.

Section 2. Findings and purposes

    The findings outline the impact that international money 
laundering has on U.S. national interests and the importance of 
multilateral as well as bilateral action in anti-money 
laundering efforts. The findings further note the role of 
offshore secrecy jurisdictions in facilitating international 
money laundering and the vulnerability of correspondent and 
payable-through accounts to abuse by money launderers.
    The purposes of the bill include ensuring the integrity of 
financial transactions and relationships, providing a clear 
mandate for taking bilateral action against international money 
laundering threats, clarifying existing law on Geographic 
Targeting Orders (GTOs) and Suspicious Activity Reports (SARs), 
and strengthening measures to prevent the use of the American 
banking system by corrupt foreign officials.

        Title I--International Counter-Money Laundering Measures


Section 101. Special measures for jurisdictions, financial 
        institutions, or international transactions of primary money 
        laundering concern

    Section 101 adds a new section 5318A to the Bank Secrecy 
Act, authorizing the Secretary of the Treasury to require 
domestic financial institutions and agencies to take one or 
more of five ``special measures'' if the Secretary finds that 
reasonable grounds exist to conclude that a foreign 
jurisdiction, a financial institution operating outside the 
United States, and/or a class of international transactions 
are/is of ``primary money laundering concern.'' The Secretary 
may impose the measure by regulation, order, or as otherwise 
permitted by law, and in any sequence or combination.
    Prior to invoking any of the special measures contained in 
Section 5318A(b), the Secretary is required by subsection 
5318A(a)(3)(A) to consult with the Chairman of the Board of 
Governors of the Federal Reserve System. Among other things, 
this consultation is designed to ensure that the Secretary 
possesses information on the effect that any particular special 
measure may have on the domestic and international banking 
system. Under this subsection, the Secretary is required also 
to consult with ``such other agencies and interested parties as 
the Secretary may find to be appropriate.'' Recognizing that it 
is not possible to predict what consultations will be 
appropriate in any particular circumstance, the Committee 
encourages the Secretary to consult with other Federal banking 
agencies as well as with Federal agencies that possess 
regulatory authority over institutions that will be affected by 
a particular special measure (for example, the Securities and 
Exchange Commission (SEC) if securities firms will be subject 
to a regulation or order issued by the Secretary, and the 
Commodity Futures Trading Commission (CFTC) if CFTC-registered 
firms will be affected) to better understand the impact of any 
particular special measure on those entities. In addition, the 
Committee encourages the Secretary to consult with non-
governmental ``interested parties,'' including, for example, 
the Bank Secrecy Act Advisory Group, to obtain input from those 
who may be subject to a regulation or order under Section 
5318A(b).
    Moreover, prior to invoking any of the special measures 
contained in Section 5318A(b), the Secretary shall consider 
three discrete factors, namely (i) whether other countries or 
multilateral groups are taking similar actions; (ii) whether 
the imposition of the measure would create a significant 
competitive disadvantage, including any significant cost or 
burden associated with compliance, for firms organized or 
licensed in the United States; and (iii) the extent to which 
the action would have an adverse systemic impact on the payment 
system or legitimate business transactions.
    Finally, subsection (a) makes clear that this new authority 
shall not be construed as superseding or restricting any other 
authority of the Secretary or any other agency.
    Subsection (b) of the new Section 5318A outlines the five 
``special measures'' the Secretary may invoke against a foreign 
jurisdiction, financial institution operating outside the U.S., 
and/or class of transaction within, or involving, a 
jurisdiction outside the U.S., that he finds to be of primary 
money laundering concern.
    The first such measure would require domestic financial 
institutions \1\ to maintain records and/or file reports on 
certain transactions involving the primary money laundering 
concern, to include any information the Secretary requires, 
such as the identity and address of participants in a 
transaction, the legal capacity in which the participant is 
acting, the beneficial ownership of the funds (in accordance 
with steps that the Secretary determines to be reasonable and 
practicable to obtain such information), and a description of 
the transaction. The records and/or reports authorized by this 
section must involve transactions from a foreign jurisdiction, 
a financial institution operating outside the United States, or 
class of international transactions within, or involving, a 
foreign jurisdiction, and are not to include transactions that 
both originate and terminate in, and only involve, domestic 
financial institutions.
---------------------------------------------------------------------------
    \1\ The term ``domestic financial institution'' means a financial 
institution, wherever organized, that operates in the United States, 
but only to the extent of its U.S. operations. See 31 U.S.C. 
Sec. 5312(b)(2).
---------------------------------------------------------------------------
    The second measure would require domestic financial 
institutions to take such steps as the Secretary determines to 
be ``reasonable'' and ``practicable'' to ascertain 
beneficialownership of accounts opened or maintained in the U.S. by a 
foreign person (excluding publicly traded foreign corporations) 
associated with what has been determined to be a primary money 
laundering concern.
    In both Section 5318A(b)(1)(B)(iii) and (b)(2), the 
Secretary is given the authority to require steps the Secretary 
determines to be ``reasonable and practicable'' to identify the 
``beneficial ownership'' of funds or accounts. Neither the 
phrase ``beneficial ownership'' nor the phrase ``reasonable and 
practicable steps'' is defined in the legislation, and there is 
no single accepted statutory or common-law meaning of either 
phrase that the legislation is meant to incorporate. As this 
legislation was being developed and at the Committee's markup 
of H.R. 3886, the concern was expressed that this lack of 
statutory definition conceivably could result in a rule or 
order under either Section 5318A(b)(1)(B)(iii) or (b)(2) that 
requires financial institutions to identify all beneficial 
owners of funds or of an account, which in turn might result in 
some circumstances in clearly excessive and unjustifiable 
burdens. The Committee is sensitive to this concern, and 
expects the Secretary to address it when implementing this Act, 
including when making determinations under the following 
provisions: (1) Section 5318A(a)(3)(B)(ii), which requires the 
Secretary to consider, in selecting which special measure to 
take, ``whether the imposition of any particular special 
measure would create a significant competitive disadvantage, 
including any undue cost or burden associated with compliance, 
for financial institutions organized or licensed in the United 
States;'' and (2) those above-referenced provisions that permit 
only those steps that the Secretary determines to be 
``reasonable and practicable'' to identify the beneficial 
ownership of accounts or funds, which provisions impose an 
enforceable constraint on the substance of any rule or order 
under either Section 5318A(b)(1)(B)(iii) or (b)(2).
    In addition, Section 5318A(e)(2) gives the Secretary the 
authority, inter alia, to ``define . . . terms for the purposes 
of'' Section 5318A ``by regulation, order or otherwise as 
permitted by law.'' The Secretary is encouraged to exercise 
this authority to define the meaning of the phrases 
``beneficial ownership'' and ``reasonable and practicable 
steps'' for the purposes of Sections 5318A(b)(1)(B)(iii) and 
(b)(2), either through formal notice-and-comment rulemaking or 
by the issuance of informal guidance, and to consult informally 
with interested parties in the event the Secretary takes the 
latter approach.
    In this regard, the Committee notes that several agencies 
have issued regulations or supervisory guidance defining the 
term ``beneficial owner'' or outlining what constitute 
reasonable steps to obtain beneficial ownership information, in 
each instance for the issuing agency's own purposes. See, e.g., 
17 C.F.R. Sec. 228.403; 26 C.F.R. Sec. 1.1441-1(c)(6); 28 
C.F.R. Sec. 9.2(e); Letter re: Public Securities Association 
(Sept. 29, 1995) (SEC staff ``no action'' letter addressing 17 
C.F.R. Sec. 240.10b-10); Guidance on Sound Risk Management 
Practices Governing Private Banking Activities, prepared by the 
Federal Reserve Bank of New York (July 1997); and Office of the 
Comptroller of the Currency Bank Secrecy Act Handbook 
(September 1996). These sources may be instructive for the 
Secretary in providing definitions of the phrases ``beneficial 
ownership'' and ``reasonable and practicable steps.''
    The third special measure the Secretary could impose in the 
case of a primary money laundering concern would require 
domestic financial institutions, as a condition of opening or 
maintaining a ``payable-through account'' for a foreign 
financial institution, to identify each customer (and 
representative of the customer) who is permitted to use or 
whose transactions flow through such an account, and to obtain 
for each customer (and representative) the same information 
that it would obtain with respect to its own customers. A 
``payable-through account'' is defined for purposes of the 
legislation as an account, including a transaction account (as 
defined in section 19(b)(1)(C) of the Federal Reserve Act), 
opened at a depository institution by a foreign financial 
institution by means of which the foreign financial institution 
permits its customers to engage, either directly or through a 
sub-account, in banking activities usual in connection with the 
business of banking in the United States.
    The fourth special measure the Secretary could impose in 
the case of a primary money laundering concern would require 
domestic financial institutions, as a condition of opening or 
maintaining a ``correspondent'' account for a foreign financial 
institution, to identify each customer (and representative of 
the customer) who is permitted to use or whose transactions 
flow through such an account, and to obtain for each customer 
(and representative) the same information that it would obtain 
with respect to its own customers. The term ``correspondent 
account'' means an account established to receive deposits from 
and make payments on behalf of a foreign financial institution.
    The fifth measure the Secretary could impose in the case of 
a primary money laundering concern would prohibit or impose 
conditions (beyond those already provided for in the third and 
fourth measures) on domestic financial institutions' 
correspondent or payable-through accounts with foreign banking 
institutions. In addition to the required consultation with the 
Chairman of the Board of Governors of the Federal Reserve, 
prior to imposing this measure the Secretary is also directed 
to consult with the Secretary of State and the Attorney 
General.
    Section 5318A(c) guides the Secretary's determination 
whether reasonable grounds exist to conclude that a 
jurisdiction, financial institution or class of international 
transactions is of ``primary money laundering concern.'' In 
determining whether reasonable grounds exist for reaching this 
conclusion regarding a particular jurisdiction, the Secretary 
is to consider such information as the Secretary considers to 
be relevant, including: (1) the extent to which the 
jurisdiction offers bank, tax or other regulatory advantages to 
nonresidents; (2) the quality of its bank supervision and anti-
money laundering laws; (3) the volume of financial transactions 
occurring in the jurisdiction relative to its economic size; 
(4) whether credible international entities characterize the 
jurisdiction as a tax or bank secrecy haven; (5) whether the 
United States has a mutual legal assistance treaty with the 
jurisdiction and what the U.S. experience in obtaining 
information from the jurisdiction has been; and (6) the extent 
to which the jurisdiction is characterized by high levels of 
official or institutional corruption.
    In deciding whether reasonable grounds exist to conclude 
that an institution and/or class of transactions represent a 
primary money laundering concern, the Secretary is to consider: 
(1) the extent to which the institution or transaction 
facilitates money laundering; (2) the extent to which either is 
used for legitimate business; and (3) the extent to which the 
finding will be effective in guarding against money laundering.
    To ensure that the Secretary is apprised of pertinent 
diplomatic, law enforcement, commercial, and trade implications 
of determinations made pursuant to this section, subsection 
(c)(1) requires the Secretary to consult with the Secretary of 
State, the Attorney General, the Secretary of Commerce and the 
United States Trade Representative. The Committee expects that 
the Secretary will not routinely determine that reasonable 
grounds exist to conclude that a jurisdiction, financial 
institution or class of international transactions is of 
primary money laundering concern, but instead will exercise 
this authority only to combat identified and significant money 
laundering threats.
    Subsection (d) of the new Section 5318A requires the 
Secretary to notify the Banking Committees in the House and 
Senate within 10 days of taking a special measure to address a 
primary money laundering concern.
    Subsection (e) of the new Section 5318A defines the terms 
``account,'' ``correspondent account,'' and ``payable-through 
account'' for banks, and requires the Secretary to define these 
terms for application to non-bank financial institutions.

          Title II--Bank Secrecy Act and Related Improvements


Section 201. Amendments relating to reporting of suspicious activities

    Subsection (a) of Section 201 makes certain technical and 
clarifying amendments to 31 U.S.C. Sec. 5318(g)(3), the Bank 
Secrecy Act's ``safe harbor'' provision, which protects 
financial institutions that disclose possible violations of law 
or regulation from civil liability for reporting their 
suspicions and for not alerting those identified in the 
reports. The safe harbor is directed at Suspicious Activity 
Reports (SARs) and similar reports to the government and 
regulatory authorities under the Bank Secrecy Act.
    First, Section 201(a) of the bill amends Section 5318(g)(3) 
to make clear that the safe harbor from civil liability applies 
in arbitration, as well as judicial, proceedings.
    Second, Section 201(a) of the bill amends Section 
5318(g)(3) to clarify the safe harbor's coverage of voluntary 
disclosures (that is, those not covered by the SAR regulatory 
reporting requirement). The language in Section 
5318(g)(3)(A)(i) and (ii) stating ``any financial institution 
that . . . makes a disclosure pursuant to . . . any other 
authority . . . shall not be liable to any person'' is not 
intended to avoid the application of the reporting and 
disclosure provisions of the federal securities laws to any 
person, or to insulate any issuers from private rights of 
actions for disclosures made under the federal securities laws.
    Subsection (b) of Section 201 amends Section 5318(g)(2) of 
Title 31--which currently prohibits notification of any person 
involved in a transaction reported in a SAR that a SAR has been 
filed--to clarify (1) that any government officer or employee 
who learns that a SAR has been filed may not disclose that fact 
to any person identified in the SAR, except as necessary to 
fulfill the officer or employee's official duties, and (2) that 
disclosure by a financial institution of potential wrongdoing 
in a written employment reference provided in response to a 
request from another financial institution pursuant to section 
18(v) of the Federal Deposit Insurance Act, or in a written 
termination notice or employment reference provided in 
accordance with the rules of a securities self-regulatory 
organization, is not prohibited simply because the potential 
wrongdoing was also reported in a SAR.

Section 202. Penalties for violations of geographic targeting orders 
        and certain recordkeeping requirements, and lengthening 
        effective period of geographic targeting orders

    This section clarifies the application of certain penalties 
to violations of Geographic Targeting Orders (GTOs) issued 
pursuant to authority granted the Secretary of the Treasury by 
31 U.S.C. Sec. 5326. A GTO allows the Secretary to impose 
stricter recordkeeping requirements--such as lower dollar 
thresholds--on specified financial services providers in a 
designated geographic area. Sections 5321 and 5322 of title 31 
impose civil and criminal penalties, respectively, for 
violations of the Bank Secrecy Act and attendant regulations. 
Section 5324 creates additional criminal offenses for failing 
to file a report, filing a false or incomplete report, and 
structuring currency transactions in order to evade a reporting 
requirement under the BSA. Those statutes, however, do not 
specifically refer to reports required by GTOs issued under 
section 5326. Subsections (a) and (b) of Section 202 eliminate 
any possible doubt concerning the applicability of section 5321 
and 5322 to GTOs by inserting specific references to section 
5326 in the necessary statutory sections.
    Subsection (c) of Section 202 also makes clear that 
structuring transactions to avoid a reporting requirement 
imposed by a GTO is a criminal offense.
    Subsection (d) extends the effective period for GTOs from 
60 to 180 days.

Section 203. Authorization to include suspicions of illegal activity in 
        written employment references

    This section deals with the same employment reference issue 
addressed in Section 201 but with respect to Title 12. 
Occasionally banks develop suspicions that a bank officeror 
employee has engaged in potentially unlawful activity. These suspicions 
typically result in the bank filing a SAR. Under present law, however, 
the ability of banks to share these suspicions in written employment 
references with other banks when such an officer or employee seeks new 
employment is unclear. Section 203 would amend 12 U.S.C. Sec. 1828 to 
permit a bank, upon request by another bank, to share information in a 
written employment reference 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.

Section 204. Bank Secrecy Advisory Group

    This section requires the membership of the Bank Secrecy 
Act (BSA) Advisory Group, established by statute in 1992, to 
include a financial privacy advocate from the non-governmental 
sector. The purpose of the BSA Advisory Group is, inter alia, 
to provide a means by which the Secretary of the Treasury may 
inform the private sector on how BSA reports have been used, 
and receive advice on the manner in which the reporting 
requirements of the BSA can be modified to benefit law 
enforcement authorities.
    This section also imposes on the BSA Advisory Group the 
same open meeting or ``sunshine'' standards applied to federal 
advisory committees under the Federal Advisory Committee Act 
(FACA). Whenever the BSA Advisory Group needs to consider 
sensitive information, existing law provides ample authority to 
close the meeting under exceptions in FACA relating to law 
enforcement matters, privileged and confidential financial 
information, pending agency actions, and the like. See 5 U.S.C. 
Sec. 552b.

Section 205. Agency reports on reconciling penalty amounts

    This section requires the Secretary of the Treasury and the 
federal banking agencies to submit reports to Congress within 
one year of enactment on legislative recommendations to conform 
the penalties for Bank Secrecy Act violations to penalties for 
violations of safety and soundness standards.

                   Title III. Anticorruption Measures


Section 301. Corruption of foreign governments and ruling elites

    Subsection (a) of this section states the sense of the 
Congress that in deliberations with foreign governments on 
money laundering and corruption issues, the United States 
should emphasize not only money laundering related to the 
proceeds of traditional criminal activity, but also laundering 
related to foreign corruption, and encourage the enactment and 
enforcement of laws on money laundering and corruption. It also 
expresses the sense of the Congress that the United States 
should make clear that it will take all steps necessary to 
identify the proceeds of foreign corruption that are deposited 
in domestic financial institutions and return such proceeds to 
the citizens of the country to whom such assets belong. 
Finally, the subsection expresses the sense of the Congress 
that the U.S. should advance policies to prevent corruption, 
including through instructions to its Executive Directors at 
the various international financial institutions.
    Subsection (b) requires the Secretary of the Treasury, in 
consultation with the Attorney General and the federal banking 
regulators, to issue guidance to domestic financial 
institutions within 180 days on how to reduce the risk that 
such institutions will become depositories or transfer agents 
for the proceeds of foreign corruption.

Section 302. Support for the financial action task force on money 
        laundering

    This section expresses the sense of the Congress that the 
Financial Action Task Force (FATF) should identify--and 
publicly release a list of--noncooperative jurisdictions in the 
fight against money laundering as expeditiously as possible, 
and that the United States should support FATF's efforts; 
encourage international action to prompt noncompliant 
jurisdictions to adhere to anti-money laundering standards; and 
take countermeasures to protect the United States economy 
against money of unlawful origin and encourage other nations to 
do the same.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

               CHAPTER 53 OF TITLE 31, UNITED STATES CODE


                   CHAPTER 53--MONETARY TRANSACTIONS

     * * * * * * *

 SUBCHAPTER II--RECORDS AND REPORTS ON MONETARY INSTRUMENTS TRANSACTIONS

5311.  Declaration of purpose.
     * * * * * * *
5318.   Compliance, exemptions, and summons authority.
5318A.  Special measures for jurisdictions, financial institutions, or 
          international transactions of primary money laundering 
          concern.

           *       *       *       *       *       *       *


SUBCHAPTER II--RECORDS AND REPORTS ON MONETARY INSTRUMENTS TRANSACTIONS

           *       *       *       *       *       *       *


Sec. 5318. Compliance, exemptions, and summons authority

  (a) * * *

           *       *       *       *       *       *       *

  (g) Reporting of Suspicious Transactions.--
          (1) * * *
          [(2) Notification prohibited.--A financial 
        institution, and a director, officer, employee, or 
        agent of any financial institution, who voluntarily 
        reports a suspicious transaction, or that reports a 
        suspicious transaction pursuant to this section or any 
        other authority, may not notify any person involved in 
        the transaction that the transaction has been reported.
          [(3) Liability for disclosures.--Any financial 
        institution that makes a disclosure of any possible 
        violation of law or regulation or a disclosure pursuant 
        to this subsection or any other authority, and any 
        director, officer, employee, or agent of such 
        institution, shall not be liable to any person under 
        any law or regulation of the United States or any 
        constitution, law, or regulation of any State or 
        political subdivision thereof, for such disclosure or 
        for any failure to notify the person involved in the 
        transaction or any other person of such disclosure.]
          (2) Notification prohibited.--
                  (A) In general.--If a financial institution 
                or any director, officer, employee, or agent of 
                any financial institution, voluntarily or 
                pursuant to this section or any other 
                authority, reports a suspicious transaction to 
                a government agency--
                          (i) the financial institution, 
                        director, officer, employee, or agent 
                        may not notify any person involved in 
                        the transaction that the transaction 
                        has been reported; and
                          (ii) no officer or employee of the 
                        Federal Government or of any state, 
                        local, tribal, or territorial 
                        government within the United States, 
                        who has any knowledge that such report 
                        was made may disclose to any person 
                        involved in the transaction that the 
                        transaction has been reported other 
                        than as necessary to fulfill the 
                        official duties of such officer or 
                        employee.
                  (B) Disclosures in certain employment 
                references.--Notwithstanding the application of 
                subparagraph (A) in any other context, 
                subparagraph (A) shall not be construed as 
                prohibiting any financial institution, or any 
                director, officer, employee, or agent of such 
                institution, from including, in a written 
                employment reference that is provided in 
                accordance with section 18(v) of the Federal 
                Deposit Insurance Act in response to a request 
                from another financial institution or a written 
                termination notice or employment reference that 
                is provided in accordance with the rules of the 
                self-regulatory organizations registered with 
                the Securities and Exchange Commission, 
                information that was included in a report to 
                which subparagraph (A) applies, but such 
                written employment reference may not disclose 
                that such information was also included in any 
                such report or that such report was made.
          (3) Liability for disclosures.--
                  (A) In general.--Any financial institution 
                that makes a voluntary disclosure of any 
                possible violation of law or regulation to a 
                government agency or makes a disclosure 
                pursuant to this subsection or any other 
                authority, and any director, officer, employee, 
                or agent of such institution who makes, or 
                requires another to make any such disclosure, 
                shall not be liable to any person under any law 
                or regulation of the United States, any 
                constitution, law, or regulation of any State 
                or political subdivision of any State, or under 
                any contract or other legally enforceable 
                agreement (including any arbitration 
                agreement), for such disclosure or for any 
                failure to provide notice of such disclosure to 
                the person who is the subject of such 
                disclosure or any other person identified in 
                the disclosure.
                  (B) Rule of construction.--Subparagraph (A) 
                shall not be construed as creating--
                          (i) any inference that the term 
                        ``person'', as used in such 
                        subparagraph, may be construed more 
                        broadly than its ordinary usage so to 
                        include any government or agency of 
                        government; or
                          (ii) any immunity against, or 
                        otherwise affecting, any civil or 
                        criminal action brought by any 
                        governmentor agency of government to 
enforce any constitution, law, or regulation of such government or 
agency.

           *       *       *       *       *       *       *


Sec. 5318A. Special measures for jurisdictions, financial institutions, 
                    or international transactions of primary money 
                    laundering concern

  (a) International Counter-Money Laundering Requirements.--
          (1) In general.--The Secretary may require domestic 
        financial institutions and domestic financial agencies 
        to take 1 or more of the special measures described in 
        subsection (b) if the Secretary finds that reasonable 
        grounds exist for concluding that a jurisdiction 
        outside the United States, 1 or more financial 
        institutions operating outside the United States, or 1 
        or more classes of transactions within, or involving, a 
        jurisdiction outside the United States is of primary 
        money laundering concern, in accordance with subsection 
        (c).
          (2) Form of requirement.--The special measures 
        described in subsection (b) may be imposed by 
        regulation, order, or otherwise as permitted by law, 
        and in such sequence or combination, as the Secretary 
        shall determine.
          (3) Process For Selecting Special Measures.--
                  (A) Consultation.--In selecting which special 
                measure or measures to take under this 
                subsection, the Secretary shall consult with 
                the Chairman of the Board of Governors of the 
                Federal Reserve System and, in the Secretary's 
                sole discretion, such other agencies and 
                interested parties as the Secretary may find to 
                be appropriate.
                  (B) Factors.--The Secretary also shall 
                consider--
                          (i) whether similar action has been 
                        or is being taken by other nations or 
                        multilateral groups;
                          (ii) whether the imposition of any 
                        particular special measure would create 
                        a significant competitive disadvantage, 
                        including any undue cost or burden 
                        associated with compliance, for 
                        financial institutions organized or 
                        licensed in the United States; and
                          (iii) the extent to which the action 
                        would have a significant adverse 
                        systemic impact on the international 
                        payment, clearance and settlement 
                        system, or on legitimate business 
                        activities involving the particular 
                        jurisdiction, institution, or class of 
                        transactions.
          (4) No limitation on other authority.--This section 
        shall not be construed as superseding or otherwise 
        restricting any other authority granted to the 
        Secretary, or to any other agency, by this subchapter 
        or otherwise.
  (b) Special Measures.--The special measures referred to in 
subsection (a), with respect to a jurisdiction outside the 
United States, financial institution operating outside the 
United States, or class of transaction within, or involving, a 
jurisdiction outside the United States, are as follows:
          (1) Recordkeeping and reporting of certain financial 
        transactions.--
                  (A) In general.--The Secretary may require 
                any domestic financial institution or domestic 
                financial agency to maintain records, file 
                reports, or both, concerning the aggregate 
                amount of transactions, or concerning each 
                transaction, with respect to a jurisdiction 
                outside the United States, 1 or more financial 
                institutions operating outside the United 
                States, or 1 or more classes of transactions 
                within, or involving, a jurisdiction outside 
                the United States, if the Secretary finds any 
                such jurisdiction, institution, or class of 
                transactions to be of primary money laundering 
                concern.
                  (B) Form of records and reports.--Such 
                records and reports shall be made and retained 
                at such time, in such manner, and for such 
                period of time, as the Secretary shall 
                determine, and shall include such information 
                as the Secretary may determine, including--
                          (i) the identity and address of the 
                        participants in a transaction or 
                        relationship, including the identity of 
                        the originator of any funds transfer;
                          (ii) the legal capacity in which a 
                        participant in any transaction is 
                        acting;
                          (iii) information concerning the 
                        beneficial ownership of the funds 
                        involved in any transaction, in 
                        accordance with steps the Secretary has 
                        determined to be reasonable and 
                        practicable to obtain and retain such 
                        information; and
                          (iv) a description of any 
                        transaction.
          (2) Information relating to beneficial ownership.--In 
        addition to any other requirement under any other law, 
        the Secretary may require any domestic financial 
        institution or domestic financial agency to take such 
        steps as the Secretary may determine to be reasonable 
        and practicable to obtain and retain information 
        concerning the beneficial ownership of any account 
        opened or maintained in the United States by a foreign 
        person (other than a foreign entity whose shares are 
        subject to public reporting requirements or are listed 
        and traded on a regulated exchange or trading market), 
        or a representative of such a foreign person, that 
        involves a jurisdiction outside the United States, 1 or 
        more financial institutions operating outside the 
        United States, or 1 or more classes of transactions 
        within, or involving, a jurisdiction outside the United 
        States, if the Secretary finds any such jurisdiction, 
        institution, or transaction to be of primary money 
        laundering concern.
          (3) Information relating to certain payable-through 
        accounts.--If the Secretary finds a jurisdiction 
        outside the United States, 1 or more financial 
        institutions operating outside the United States, or 1 
        or more classes of transactions within, or involving, a 
        jurisdiction outside the United States to be of primary 
        money laundering concern, the Secretary may require any 
        domestic financial institution or domestic financial 
        agency that opens or maintains a payable-through 
        account in the United States for a foreign financial 
        institution involving any such jurisdiction or any such 
        financial institution operating outside the United 
        States, or a payable-through accountthrough which any 
such transaction may be conducted, as a condition of opening or 
maintaining such account, to--
                  (A) identify each customer (and 
                representative of such customer) of such 
                financial institution who is permitted to use, 
                or whose transactions are routed through, such 
                payable-through account; and
                  (B) obtain, with respect to each such 
                customer (and each such representative), the 
                same information that the depository 
                institution obtains in the ordinary course of 
                business with respect to its customers residing 
                in the United States.
          (4) Information relating to certain correspondent 
        accounts.--If the Secretary finds a jurisdiction 
        outside the United States, 1 or more financial 
        institutions operating outside the United States, or 1 
        or more classes of transactions within, or involving, a 
        jurisdiction outside the United States to be of primary 
        money laundering concern, the Secretary may require any 
        domestic financial institution or domestic financial 
        agency that opens or maintains a correspondent account 
        in the United States for a foreign financial 
        institution involving any such jurisdiction or any such 
        financial institution operating outside the United 
        States, or a correspondent account through which any 
        such transaction may be conducted, as a condition of 
        opening or maintaining such account, to--
                  (A) identify each customer (and 
                representative of such customer) of any such 
                financial institution who is permitted to use, 
                or whose transactions are routed through, such 
                correspondent account; and
                  (B) obtain, with respect to each such 
                customer (and each such representative), the 
                same information that the depository 
                institution obtains in the ordinary course with 
                respect to its customers residing in the United 
                States.
          (5) Prohibitions or conditions on opening or 
        maintaining certain correspondent or payable-through 
        accounts.--If the Secretary finds a jurisdiction 
        outside the United States, 1 or more financial 
        institutions operating outside the United States, or 1 
        or more classes of transactions within, or involving, a 
        jurisdiction outside the United States to be of primary 
        money laundering concern, the Secretary, in 
        consultation with the Secretary of State, the Attorney 
        General, and the Chairman of the Board of Governors of 
        the Federal Reserve System, may prohibit, or impose 
        conditions upon, the opening or maintaining in the 
        United States of a correspondent account or payable-
        through account by any domestic financial institution 
        or domestic financial agency for or on behalf of a 
        foreign banking institution if such correspondent 
        account or payable-through account involves any such 
        jurisdiction or institution, or if any such transaction 
        may be conducted through such correspondent account or 
        payable-through account.
  (c) Consultations and Information To Be Considered in Finding 
Jurisdictions, Institutions, or Transactions To Be of Primary 
Money Laundering Concern.--
          (1) In general.--In making a finding that reasonable 
        grounds exist for concluding that a jurisdiction 
        outside the United States, 1 or more financial 
        institutions operating outside the United States, or 1 
        or more classes of transactions within, or involving, a 
        jurisdiction outside the United States is of primary 
        money laundering concern so as to authorize the 
        Secretary to invoke 1 or more of the special measures 
        of subsection (b), the Secretary shall consult with the 
        Secretary of State, the Attorney General, the Secretary 
        of Commerce, and the United States Trade 
        Representative.
          (2) Information.--The Secretary also shall consider 
        such information as the Secretary considers to be 
        relevant, including the following potentially relevant 
        factors:
                  (A) In the case of a particular 
                jurisdiction--
                          (i) the extent to which that 
                        jurisdiction or financial institutions 
                        operating therein offer bank secrecy or 
                        special tax or regulatory advantages to 
                        nonresidents or nondomiciliaries of 
                        such jurisdiction;
                          (ii) the substance and quality of 
                        administration of that jurisdiction's 
                        bank supervisory and counter-money 
                        laundering laws;
                          (iii) the relationship between the 
                        volume of financial transactions 
                        occurring in that jurisdiction and the 
                        size of the jurisdiction's economy;
                          (iv) the extent to which that 
                        jurisdiction is characterized as a tax 
                        haven or offshore banking or secrecy 
                        haven by credible international 
                        organizations or multilateral expert 
                        groups;
                          (v) whether the United States has a 
                        mutual legal assistance treaty with 
                        that jurisdiction, and the experience 
                        of United States law enforcement 
                        officials, regulatory officials, and 
                        tax administrators in obtaining 
                        information about transactions 
                        originating in or routed through or to 
                        such jurisdiction; and
                          (vi) the extent to which that 
                        jurisdiction is characterized by high 
                        levels of official or institutional 
                        corruption.
                  (B) In the case of a decision to apply 1 or 
                more of the special measures described in 
                subsection (b) only to a financial institution 
                or institutions, or to a transaction or class 
                of transactions, or to both, within, or 
                involving, a particular jurisdiction--
                          (i) the extent to which such 
                        financial institutions or transactions 
                        are used to facilitate or promote money 
                        laundering in or through the 
                        jurisdiction;
                          (ii) the extent to which such 
                        institutions or transactions are used 
                        for legitimate business purposes in 
                        such jurisdiction; and
                          (iii) the extent to which such action 
                        is sufficient to ensure, with respect 
                        to transactions involving such 
                        jurisdiction and institutions operating 
                        in such jurisdiction, that the purposes 
                        of this subchapter continue to be 
                        fulfilled, and to guard against 
                        international money laundering and 
                        other financial crimes.
  (d) Notification of Special Measures Invoked By the 
Secretary.--Within 10 days after the date of any action taken 
by theSecretary under subsection (a)(1), the Secretary shall 
notify, in writing, the Committee on Banking and Financial Services of 
the House of Representatives and the Committee on Banking, Housing, and 
Urban Affairs of the Senate of any such action.
  (e) Definitions.--Notwithstanding any other provision of this 
subchapter, for purposes of this section, the following 
definitions shall apply:
          (1) Defined terms.--
                  (A) Bank definitions.--The following 
                definitions shall apply with respect to a bank:
                          (i) Account.--The term ``account''--
                                  (I) means a formal banking or 
                                business relationship 
                                established to provide regular 
                                services, dealings, and other 
                                financial transactions; and
                                  (II) includes a demand 
                                deposit, savings deposit, or 
                                other transaction or asset 
                                account and a credit account or 
                                other extension of credit.
                          (ii) Correspondent account.--The term 
                        ``correspondent account'' means an 
                        account established to receive deposits 
                        from and make payments on behalf of a 
                        foreign financial institution.
                          (iii) Payable-through account.--The 
                        term ``payable-through account'' means 
                        an account, including a transaction 
                        account (as defined in section 
                        19(b)(1)(C) of the Federal Reserve 
                        Act), opened at a depository 
                        institution by a foreign financial 
                        institution by means of which the 
                        foreign financial institution permits 
                        its customers to engage, either 
                        directly or through a sub-account, in 
                        banking activities usual in connection 
                        with the business of banking in the 
                        United States.
                  (B) Definitions applicable to institutions 
                other than banks.--With respect to any 
                financial institution other than a bank, the 
                Secretary shall define, by regulation, order, 
                or otherwise as permitted by law, the term 
                ``account'' and shall include within the 
                meaning of such term arrangements similar to 
                payable-through and correspondent accounts.
          (2) Other terms.--The Secretary may, by regulation, 
        order, or otherwise as permitted by law, further define 
        the terms in paragraph (1) and define other terms for 
        the purposes of this section, as the Secretary deems 
        appropriate.

           *       *       *       *       *       *       *


Sec. 5321. Civil penalties

  (a)(1) A domestic financial institution, and a partner, 
director, officer, or employee of a domestic financial 
institution, willfully violating this subchapter or a 
regulation prescribed or order issued under this subchapter 
(except sections 5314 and 5315 of this title or a regulation 
prescribed under sections 5314 and 5315), or willfully 
violating a regulation prescribed under section 21 of the 
Federal Deposit Insurance Act or section 123 of Public Law 91-
508, is liable to the United States Government for a civil 
penalty of not more than the greater of the amount (not to 
exceed $100,000) involved in the transaction (if any) or 
$25,000. For a violation of section 5318(a)(2) of this title or 
a regulation prescribed under section 5318(a)(2), a separate 
violation occurs for each day the violation continues and at 
each office, branch, or place of business at which a violation 
occurs or continues.

           *       *       *       *       *       *       *


Sec. 5322. Criminal penalties

  (a) A person willfully violating this subchapter or a 
regulation prescribed or order issued under this subchapter 
(except section 5315 or 5324 of this title or a regulation 
prescribed under section 5315 or 5324), or willfully violating 
a regulation prescribed under section 21 of the Federal Deposit 
Insurance Act or section 123 of Public Law 91-508, shall be 
fined not more than $250,000, or imprisoned for not more than 
five years, or both.
  (b) a person willfully violating this subchapter or a 
regulation prescribed or order issued under this subchapter 
(except section 5315 or 5324 of this title or a regulation 
prescribed under section 5315 or 5324), or willfully violating 
a regulation prescribed under section 21 of the Federal Deposit 
Insurance Act or section 123 of Public Law 91-508, while 
violating another law of the United States or as part of a 
pattern of any illegal activity involving more than $100,000 in 
a 12-month period, shall be fined not more than $500,000, 
imprisoned for not more than 10 years, or both.

           *       *       *       *       *       *       *


Sec. 5324. Structuring transactions to evade reporting requirement 
                    prohibited

  (a) Domestic Coin and Currency Transactions.--No person 
shall, for the purpose of evading the reporting requirements of 
section 5313(a) or 5325 or any regulation prescribed under any 
such [section--] section, the reporting or recordkeeping 
requirements imposed by any order issued under section 5326, or 
the recordkeeping requirements imposed by any regulation 
prescribed under section 21 of the Federal Deposit Insurance 
Act or section 123 of Public Law 91-508--
          (1) cause or attempt to cause a domestic financial 
        institution to fail to file a report required under 
        section 5313(a) or 5325 or any regulation prescribed 
        under any such section, to file a report or to maintain 
        a record required by an order issued under section 
        5326, or to maintain a record required pursuant to any 
        regulation prescribed under section 21 of the Federal 
        Deposit Insurance Act or section 123 of Public Law 91-
        508;
          (2) cause or attempt to cause a domestic financial 
        institution to file a report required under section 
        5313(a) or 5325 or any regulation prescribed under any 
        such section, to file a report or to maintain a record 
        required by any order issued under section 5326, or to 
        maintain a record required pursuant to any regulation 
        prescribed under section 5326, or to maintain a record 
        required pursuant to any regulation prescribed under 
        section 21 of the Federal Deposit Insurance Act or 
        section 123of Public Law 91-508, that contains a 
material omission or misstatement of fact; or

           *       *       *       *       *       *       *


Sec. 5326. Records of certain domestic coin and currency transactions

  (a) * * *

           *       *       *       *       *       *       *

  (d) Maximum Effective Period for Order.--No order issued 
under subsection (a) shall be effective for more than [60] 180 
days unless renewed pursuant to the requirements of subsection 
(a).

           *       *       *       *       *       *       *

                              ----------                              


            SECTION 18 OF THE FEDERAL DEPOSIT INSURANCE ACT

  Sec. 18. (a) * * *

           *       *       *       *       *       *       *

  (v) Written Employment References May Contain Suspicions of 
Involvement in Illegal Activity.--
          (1) In general.--Notwithstanding any other provision 
        of law, any insured depository institution, and any 
        director, officer, employee, or agent of such 
        institution, may disclose in any written employment 
        reference relating to a current or former institution-
        affiliated party of such institution which is provided 
        to another insured depository institution in response 
        to a request from such other institution, information 
        concerning the possible involvement of such 
        institution-affiliated party in potentially unlawful 
        activity.
          (2) Definition.--For purposes of this subsection, the 
        term ``insured depository institution'' includes any 
        uninsured branch or agency of a foreign bank.

           *       *       *       *       *       *       *

                              ----------                              


      SECTION 1564 OF THE ANNUNZIO-WYLIE ANTI-MONEY LAUNDERING ACT

SEC. 1564. ADVISORY GROUP ON REPORTING REQUIREMENTS.

  (a) Establishment.--Not later than 90 days after the date of 
the enactment of this Act, the Secretary of the Treasury shall 
establish a Bank Secrecy Act Advisory Group consisting of 
representatives of the Department of the Treasury, the 
Department of Justice, and the Office of National Drug Control 
Policy, of nongovernmental organizations advocating financial 
privacy, and of other interested persons and financial 
institutions subject to the reporting requirements of 
subchapter II of chapter 53 of title 31, United States Code, or 
section 6050I of the Internal Revenue Code of 1986.

           *       *       *       *       *       *       *

  (c) Inapplicability of Federal Advisory Committee Act.--The 
Federal Advisory Committee Act shall not apply to the Bank 
Secrecy Act Advisory Group established pursuant to subsection 
(a), other than subsections (a) and (d) of such Act which shall 
apply.

           *       *       *       *       *       *       *


                            DISSENTING VIEW

    We are pleased that the committee adopted the Campbell-
Paul-Barr-Metcalf amendment adding a privacy advocate to the 
Bank Secrecy Act Advisory Group, opening up their meetings and 
seeking the advice of regulators concerning BSA penalties. Our 
preference would have been for the committee to strike the 
existing ``Know Your Customer'' requirements in the compliance 
manuals of the Bank Secrecy Act. The provision was voluntarily 
dropped by Mr. Campbell in committee after objections were 
raised. The rationale for offering this proposal in committee 
was the overwhelming public opposition to the KYC proposal.
    The Bank Secrecy Act violates consumer financial privacy by 
requiring financial institutions to collect private, personal 
information. Bankers then use sophisticated computer software 
to make ``profiles'' of customers that some institutions then 
share with affiliates or sell to third parties in order to 
recover the regulatory cost of collecting the information in 
the first place. Explains a Thomson Financial Publishing letter 
last year trying to sell its Bank Secrecy Act compliance 
software, ``You have to sell aggressively while complying with 
numerous regulations. To enhance profitability, you must sell 
more to your current client base.''
    Granting so much ``discretion'' to the executive branch in 
this bill raises other concerns. Congress would shirk its 
responsibility to address the issues and act accordingly by 
passing legislation rather than cede all authority to the 
executive branch. There is no limit on the size of transactions 
that could trigger retribution by the secretary of the 
Treasury. While it is one thing to expand regulation in a 
stealth manner through inflation such as the minimum 
transaction triggers for the Currency Transaction Reports, it 
is another to begin authorization without such limits.
    Actions of the Financial Act Task Force and the 
Organization for Economic Cooperation and Development indicate 
that they are more interested in combating ``harmful tax 
competition'' rather than the drug trade. While Israel has no 
anti-money laundering laws, focus has been on the Caribbean and 
Pacific states--many of which do have anti-money laundering 
laws and cooperate with international investigations--but have 
lower taxes. Perhaps the reminder in Israel how bank secrecy 
saved Jews during the Nazi terror gives them a ``free pass'' 
with the multilateral organizations. Perhaps we should be as 
respectful of all individuals escaping persecution.
    ``Institutions in the developed world that have no 
authority under any treaty, convention, agreement or legal 
instrument known in international law, are simply attempting to 
bend the course of developing countries to their will by the 
use of crude threats and stigmas,'' said Barbados Premier Owen 
Arthur; he calls it ``institutional imperialism.'' Barbados 
offers quality banking supervision and cooperates with 
international investigations, according to the OECD (``Reno To 
Hear Caribbean Complaints On Money Laundering,'' June 12, 2000, 
Dow Jones).
    The most constructive and beneficial change we could have 
made to our money laundering laws would have been to pass the 
Barr-Paul-Campbell-Metcalf amendment to raise the threshold of 
Currency Transaction Reports. According to Treasury's Financial 
Crimes Enforcement Network (FinCEN), financial institutions 
filed nearly 13 million CTRs last year. Each CTR requires an 
average of 19 minutes per report to fill out (in addition to 
another average of five minutes of record keeping time) in 
compliance time (and money). these CTRs constituted about 95% 
of the $110 million regulatory burden imposed by just the BSA 
last year. The $10,000 limit has never been raised or adjusted 
for inflation since it was imposed in 1970 and would be about 
$45,000 today. By reducing the number of forms, it is likely 
that the percentage of forms that are actually useful to law 
enforcement would rise. Currently fewer than \1/1000\ of one 
percent of the CTR forms are ever used in a money laundering 
conviction, according to former Federal Reserve Board Governor 
Larry Lindsey citing Department of Justice figures.
    In short, the bill shifts the institutional balance too far 
from the legislative branch in favor of the executive branch. 
The new requirements in the bill will further erode protections 
for consumer financial privacy. The current reporting 
requirements impose a large regulatory burden on financial 
institutions with little benefit to law enforcement, and the 
current approach of the multilateral organizations threatens 
diplomatic cooperation with our friends and allies which could 
reduce, rather than aid, the efforts to stem the problems 
associated money laundering. For these reasons, we oppose the 
bill.

                                   Ron Paul.
                                   Tom Campbell.
                                   Bob Barr.
                                   Walter B. Jones.

                                
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