79–006

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.
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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 any other 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.
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(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:

‘‘§ 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;
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‘‘(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 payablethrough 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 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 payablethrough account involves any such jurisdiction or institution, or if any such

transaction may be conducted through such correspondent account or payablethrough account.
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‘‘(c) CONSULTATIONS AND INFORMATION TO BE CONSIDERED IN FINDING JURISDIC- TIONS, 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
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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 sec-
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tion 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 selfregulatory 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 institutionaffiliated party in potentially unlawful activity.
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‘‘(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-LeachBliley 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.
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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-andsoundness 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
10

$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 and seizing 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
11

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 socalled 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 off-
12

shore 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
13

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 antimoney laundering effort must embrace aggressive multilateral and

bilateral strategies to encourage the adoption of necessary antimoney 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 and National Security

Council official; Paul Saunders, Director of the Nixon Center;
14

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, ProsecutorGeneral 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
15

Secretary to notify Congress within 10 days of special measures

taken under this bill; (10) added a definition of the term ‘‘payablethrough 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.
16

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. Vela ́zquez

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
17

‘‘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
18

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.
19

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 Crime Victims 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
20

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 insti-
21

tutions 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
22

1The 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.

§ 5312(b)(2).

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
23

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.

The second measure would require domestic financial institutions

to take such steps as the Secretary determines to be ‘‘reasonable’’

and ‘‘practicable’’ to ascertain beneficial ownership 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. § 228.403; 26 C.F.R.

§ 1.1441–1(c)(6); 28 C.F.R. § 9.2(e); Letter re: Public Securities Association (Sept. 29, 1995) (SEC staff ‘‘no action’’ letter addressing 17
24

C.F.R. § 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 antimoney 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
25

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. § 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
26

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.

§ 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 officer or 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.

§1828 to permit a bank, upon request by another bank, to share

information in a written employment reference concerning the pos-
27

sible 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. § 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.
28

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

* * * * * * *

§ 5318. Compliance, exemptions, and summons authority

(a) * * *

* * * * * * *

(g) REPORTING OF SUSPICIOUS TRANSACTIONS.—

(1) * * *

ø(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.

ø(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 reg-
29

ulation 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 REF- ERENCES.—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
30

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.

* * * * * * *

§ 5318A. Special measures for jurisdictions, financial institutions, or international transactions of primary

money laundering concern

(a) INTERNATIONAL COUNTER-MONEY LAUNDERING REQUIRE- MENTS.—

(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:
31

(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
32

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 AC- COUNTS.—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 MAINTAIN- ING 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 payablethrough 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
33

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
34

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.

* * * * * * *

§ 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
35

continues and at each office, branch, or place of business at which

a violation occurs or continues.

* * * * * * *

§ 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.

* * * * * * *

§ 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

øsection—¿ 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 123 of Public

Law 91–508, that contains a material omission or

misstatement of fact; or

* * * * * * *
36

§ 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 ø60¿ 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.

* * * * * * *
(37)

DISSENTING VIEW

We are pleased that the committee adopted the Campbell-PaulBarr-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
38

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 BarrPaul-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.

Æ