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[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 2165 Introduced in Senate (IS)]

105th CONGRESS
  2d Session
                                S. 2165

  To amend title 31 of the United States Code to improve methods for 
          preventing financial crimes, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             June 11, 1998

 Mr. Grassley introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL

 
  To amend title 31 of the United States Code to improve methods for 
          preventing financial crimes, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Money Laundering Deterrence Act of 
1998''.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress finds that--
            (1) the dollar amount involved in international money 
        laundering likely exceeds $500,000,000,000 annually;
            (2) organized crime groups are continually devising new 
        methods to launder the proceeds of illegal activities in an 
        effort to subvert the transaction reporting requirements of 
        subchapter II of chapter 53 of title 31, United States Code, 
        and chapter 2 of Public Law 91-508;
            (3) a number of methods to launder the proceeds of criminal 
        activity were identified and described in congressional 
        hearings, including the use of financial service providers 
        which are not depository institutions, such as money 
        transmitters and check cashing services, the purchase and 
        resale of durable goods, and the exchange of foreign currency 
        in the so-called ``black market'';
            (4) recent successes in combating domestic money laundering 
        have involved the application of the heretofore seldom-used 
        authority granted to the Secretary of the Treasury and the 
        cooperative efforts of Federal, State, and local law 
        enforcement agencies; and
            (5) such successes have been exemplified by the 
        implementation of the geographic targeting order in New York 
        City and through the work of the El Dorado task force, a group 
        comprised of agents of Department of the Treasury law 
        enforcement agencies, New York State troopers, and New York 
        City police officers.
    (b) Purposes.--The purposes of this Act are--
            (1) to amend subchapter II of chapter 53 of title 31, 
        United States Code, to provide the law enforcement community 
        with the necessary legal authority to combat money laundering;
            (2) to broaden the law enforcement community's access to 
        transactional information already being collected which relate 
        to coins and currency received in a nonfinancial trade or 
        business; and
            (3) to express the sense of the Congress that the Secretary 
        of the Treasury should expedite the development and 
        implementation of controls designed to deter money laundering 
        activities at certain types of financial institutions.

SEC. 3. 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.--Notwithstanding any other 
                provision of law, an exempted entity, as defined in 
                subparagraph (B), 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 thereof, or under any contract or 
                other legally enforceable agreement (including any 
                arbitration agreement), for a disclosure described in 
                subparagraph (B)(i), or for any failure to notify the 
                person who is the subject of the disclosure or any 
                other person identified in the disclosure.
                    ``(B) Exempted entities.--For purposes of this 
                paragraph, the term `exempted entity' means--
                            ``(i) any financial institution that--
                                    ``(I) makes a disclosure of any 
                                possible violation of law or regulation 
                                to an appropriate government agency; or
                                    ``(II) makes a disclosure pursuant 
                                to this subsection or any other 
                                authority;
                            ``(ii) any director, officer, employee, or 
                        agent of an institution referred to in clause 
                        (i) who makes, or requires another to make a 
                        disclosure referred to in clause (i); and
                            ``(iii) any independent public accountant 
                        who audits any such financial institution and 
                        makes a disclosure described in clause (i).''.
    (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, any 
                director, officer, employee, or agent of any financial 
                institution, or any independent public accountant who 
                audits any such financial institution, voluntarily or 
                pursuant to this section or any other authority, 
                reports a suspicious transaction to an appropriate 
                government agency--
                            ``(i) the financial institution, director, 
                        officer, employee, agent, or accountant may not 
                        notify any person involved in the transaction 
                        that the transaction has been reported and may 
                        not disclose any information included in the 
                        report to any such person; and
                            ``(ii) no other person, including any 
                        officer or employee of any government, who has 
                        any knowledge that such report was made, may 
                        disclose to any other person or government 
                        agency the fact that such report was made.
                    ``(B) Exception for use by government officers in 
                official capacity.--Paragraph (1) does not apply to the 
                use or disclosure by an officer or employee of an 
                appropriate government agency of any report under this 
                subsection, or information included in the report, to 
                the extent that the use is made solely in conjunction 
                with the performance of the official duties of the 
                officer or employee to conduct or assist in the conduct 
                of a law enforcement or regulatory inquiry, 
                investigation, or proceeding.
                    ``(C) Coordination with paragraph (5).--
                Subparagraph (A) shall not be construed to prohibit any 
                financial institution, or any director, officer, 
                employee, or agent of a financial institution, from 
                including, in a written employment reference that is 
                provided in accordance with paragraph (5) in response 
                to a request from another financial institution, 
                information that was included in a report to which 
                subparagraph (A) applies, but such written employment 
                reference may not disclose that the information was 
                also included in any such report or that a report was 
                made.''.
    (c) Authorization To Include Suspicions of Illegal Activity in 
Employment References.--Section 5318(g) of title 31, United States 
Code, is amended by adding at the end the following new paragraph:
            ``(5) Employment references may include suspicions of 
        involvement in illegal activity.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law, and subject to subparagraph (B) of 
                this paragraph and paragraph (2)(C), any financial 
                institution, and any director, officer, employee, or 
                agent of a financial institution, may disclose, in any 
                written employment reference relating to a current or 
                former institution-affiliated party of the institution 
                that is provided to another financial institution in 
                response to a request from the other institution, 
                information concerning the possible involvement of the 
                institution-affiliated party in any suspicious 
                transaction relevant to a possible violation of law or 
                regulation.
                    ``(B) Limit on liability for disclosures.--A 
                financial institution, and any director, officer, 
                employee, or agent of the institution, 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 thereof, or under 
                any contract or other legally enforceable agreement 
                (including any arbitration agreement), for any 
                disclosure under subparagraph (A), to the extent that--
                            ``(i) the disclosure does not contain 
                        information that the institution, director, 
                        officer, employee, agent, or accountant knows 
                        to be false; and
                            ``(ii) the institution, director, officer, 
                        employee, agent, or accountant has not acted 
                        with malice or with reckless disregard for the 
                        truth in making the disclosure.
                    ``(C) Institution-affiliated party defined.--For 
                purposes of this paragraph, the term `institution-
                affiliated party' has the same meaning as in section 
                3(u) of the Federal Deposit Insurance Act, except that 
                section 3(u) shall be applied by substituting the term 
                `financial institution' for the term `insured 
                depository institution'.''.
    (d) Amendments Relating to Availability of Suspicious Activity 
Reports for Other Agencies.--Section 5319 of title 31, United States 
Code, is amended--
            (1) in the first sentence, by striking ``5314, or 5316'' 
        and inserting ``5313A, 5314, 5316, or 5318(g)'';
            (2) in the last sentence, by inserting ``under section 
        5313, 5313A, 5314, 5316, or 5318(g)'' after ``records of 
        reports''; and
            (3) by adding at the end the following: ``The Secretary of 
        the Treasury may permit the dissemination of information in any 
        such report to any self-regulatory organization (as defined in 
        section 3(a)(26) of the Securities Exchange Act of 1934), if 
        the Securities and Exchange Commission determines that the 
        dissemination is necessary or appropriate to permit the self-
        regulatory organization to perform its functions under the 
        Securities Exchange Act of 1934 and regulations prescribed 
        under that Act.''.

SEC. 4. EXPANSION OF SCOPE OF SUMMONS POWER.

    Section 5318(b)(1) of title 31, United States Code, is amended by 
inserting ``examinations to determine compliance with the requirements 
of this subchapter, section 21 of the Federal Deposit Insurance Act, 
and chapter 2 of Public Law 91-508 and regulations prescribed pursuant 
to those provisions, investigations relating to reports filed by 
financial institutions or other persons pursuant to any such provision 
or regulation, and'' after ``in connection with''.

SEC. 5. PENALTIES FOR VIOLATIONS OF GEOGRAPHIC TARGETING ORDERS AND 
              CERTAIN RECORDKEEPING REQUIREMENTS.

    (a) Civil Penalty for Violation of Targeting Order.--Section 
5321(a)(1) of title 31, United States Code, is amended by inserting 
``or order issued'' after ``regulation prescribed''.
    (b) Criminal Penalties for Violation of Targeting Order.--
Subsections (a) and (b) of section 5322 of title 31, United States 
Code, are amended by inserting ``or order issued'' after ``regulation 
prescribed'' each place that term appears.
    (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 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--
        ''; and
            (3) in paragraphs (1) and (2), by inserting           ``, 
        to file a report required by any 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'' each place 
        that term appears.
    (d) Increase in Civil Penalties for Violation of Certain 
Recordkeeping Requirements.--
            (1) Federal deposit insurance act.--Section 21(j)(1) of the 
        Federal Deposit Insurance Act (12 U.S.C. 1829b(j)(1)) is 
        amended by striking ``$10,000'' and inserting ``the greater 
        of--
                    ``(A) the amount (not to exceed $100,000) involved 
                in the transaction (if any) with respect to which the 
                violation occurred; or
                    ``(B) $25,000''.
            (2) Public law 91-508.--Section 125(a) of Public Law 91-508 
        (12 U.S.C. 1955(a)) is amended by striking ``$10,000'' and 
        inserting ``the greater of--
            ``(1) the amount (not to exceed $100,000) involved in the 
        transaction (if any) with respect to which the violation 
        occurred; or
            ``(2) $25,000''.
    (e) Criminal Penalties for Violation of Certain Recordkeeping 
Requirements.--
            (1) Section 126.--Section 126 of Public Law 91-508 (12 
        U.S.C. 1956) is amended to read as follows:

``SEC. 126. CRIMINAL PENALTY.

    ``A person that willfully violates this chapter, section 21 of the 
Federal Deposit Insurance Act, or a regulation prescribed under this 
chapter or that section 21, shall be fined not more than $250,000, or 
imprisoned for not more than 5 years, or both.''.
            (2) Section 127.--Section 127 of Public Law 91-508 (12 
        U.S.C. 1957) is amended to read as follows:

``SEC. 127. ADDITIONAL CRIMINAL PENALTY IN CERTAIN CASES.

    ``A person that willfully violates this chapter, section 21 of the 
Federal Deposit Insurance Act, or a regulation prescribed under this 
chapter or that section 21, while violating another law of the United 
States or as part of a pattern of any illegal activity involving more 
than $100,000 in a 12-month period, shall be fined not more than 
$500,000, imprisoned for not more than 10 years, or both.''.

SEC. 6. REPEAL OF CERTAIN REPORTING REQUIREMENTS.

    Section 407(d) of the Money Laundering Suppression Act of 1994 (31 
U.S.C. 5311 note) is amended by striking ``subsection (c)'' and 
inserting ``subsection (c)(2)''.

SEC. 7. LIMITED EXEMPTION FROM PAPERWORK REDUCTION ACT.

    Section 3518(c)(1) of title 44, United States Code, is amended--
            (1) by redesignating subparagraphs (C) and (D) as 
        subparagraphs (D) and (E), respectively; and
            (2) by inserting after subparagraph (B) the following new 
        subparagraph:
            ``(C) pursuant to regulations prescribed or orders issued 
        by the Secretary of the Treasury under section 5318(h) or 5326 
        of title 31;''.

SEC. 8. TRANSFER OF REPORTING REQUIREMENTS FROM SECTION 6050I OF THE 
              INTERNAL REVENUE CODE OF 1986 TO TITLE 31, UNITED STATES 
              CODE.

    (a) Reenactment of Section 6050I.--Subchapter 2 of chapter 53 of 
title 31, United States Code, is amended by inserting after section 
5313 the following new section:

``SEC. 5313A. REPORTS RELATING TO COINS AND CURRENCY RECEIVED IN 
              NONFINANCIAL TRADE OR BUSINESS.

    ``(a) Coin and Currency Receipts of More Than $10,000.--Any 
person--
            ``(1) who is engaged in a trade or business; and
            ``(2) who, in the course of that trade or business, 
        receives more than $10,000 in coins or currency in 1 
        transaction (or 2 or more related transactions),
shall file a report described in subsection (b) with respect to the 
transaction (or related transactions) at such time as the Secretary may 
by regulation prescribe.
    ``(b) Form and Manner of Reports.--A report is described in this 
subsection if the report--
            ``(1) is in such form as the Secretary may prescribe;
            ``(2) contains--
                    ``(A) the name, address, and taxpayer 
                identification number of the person from whom the coins 
                or currency was received;
                    ``(B) the amount of coins or currency received;
                    ``(C) the date and nature of the transaction; and
                    ``(D) such other information as the Secretary may 
                prescribe.
    ``(c) Exceptions.--
            ``(1) Amounts received by financial institutions.--
        Subsection (a) does not apply to amounts received in a 
        transaction reported under section 5313 and regulations 
        prescribed under that section.
            ``(2) Transactions occurring outside the united states.--
        Except to the extent provided in regulations prescribed by the 
        Secretary, subsection (a) does not apply to any transaction if 
        the entire transaction occurs outside of the United States.
    ``(d) Currency Includes Foreign Currency and Certain Monetary 
Instruments.--
            ``(1) In general.--For purposes of this section, the term 
        `currency' includes--
                    ``(A) foreign currency; and
                    ``(B) to the extent provided in regulations 
                prescribed by the Secretary, any monetary instrument 
                (whether or not in bearer form) with a face amount of 
                not more than $10,000.
            ``(2) Scope of application.--Paragraph (1)(B) does not 
        apply to any check drawn on the account of the writer in a 
        financial institution referred to in subparagraph (A), (B), 
        (C), (D), (E), (F), (G), (J), (K), (R), or (S) of section 
        5312(a)(2).
    ``(e) Coins or Currency Received by Criminal Court Clerks.--
            ``(1) In general.--Each clerk of a Federal or State 
        criminal court who receives more than $10,000 in coins or 
        currency as bail for any individual charged with a specified 
        criminal offense shall file a report described in paragraph (2) 
        (at such time as the Secretary may by regulation prescribe) 
        with respect to the receipt of such bail.
            ``(2) Report.--A report is described in this paragraph if 
        the report--
                    ``(A) is in such form as the Secretary may 
                prescribe; and
                    ``(B) contains--
                            ``(i) the name, address, and taxpayer 
                        identification number of--
                                    ``(I) the individual charged with 
                                the specified criminal offense; and
                                    ``(II) each person posting the bail 
                                (other than a person licensed as a bail 
                                bondsman);
                            ``(ii) the amount of coins or currency 
                        received;
                            ``(iii) the date on which the coins or 
                        currency were received; and
                            ``(iv) such other information as the 
                        Secretary may prescribe.
            ``(3) Specified criminal offense.--For purposes of this 
        subsection, the term `specified criminal offense' means--
                    ``(A) any Federal criminal offense involving a 
                controlled substance;
                    ``(B) racketeering (as defined in section 1951, 
                1952, or 1955 of title 18, United States Code);
                    ``(C) money laundering (as defined in section 1956 
                or 1957 of title 18, United States Code); and
                    ``(D) any State criminal offense that is 
                substantially similar to an offense described in 
                subparagraph (A), (B), or (C) of this paragraph.
            ``(4) Information to federal prosecutors.--Each clerk 
        required to include in a report under paragraph (1) the 
        information described in paragraph (2)(B) with respect to an 
        individual described in paragraph (2)(B)(i)(I) shall furnish 
        (at such time as the Secretary may by regulation prescribe) a 
        written statement showing such information to the United States 
        Attorney for the jurisdiction in which the individual resides 
        and the jurisdiction in which the specified criminal offense 
        occurred.
            ``(5) Information to payors of bail.--Each clerk required 
        to file a report under paragraph (1) shall furnish (at such 
        time as the Secretary may by regulation prescribe) to each 
        person whose name is required to be set forth in the report by 
        reason of paragraph (2)(B)(i)(II) a written statement showing--
                    ``(A) the name and address of the clerk's office 
                required to file the report; and
                    ``(B) the aggregate amount of coins and currency 
                described in paragraph (1) received by the clerk.''.
    (b) Prohibition on Structuring Transactions.--
            (1) In general.--Section 5324 of title 31, United States 
        Code, is amended--
                    (A) by redesignating subsections (b) and (c) as 
                subsections (c) and (d), respectively; and
                    (B) by inserting after subsection (a) the following 
                new subsection:
    ``(b) Domestic Coin and Currency Transactions Involving 
Nonfinancial Trades or Businesses.--No person shall, for the purpose of 
evading the reporting requirements of section 5313A or any regulation 
prescribed under that section--
            ``(1) cause or attempt to cause a nonfinancial trade or 
        business to fail to file a report required under section 5313A 
        or any regulation prescribed under that section;
            ``(2) cause or attempt to cause a nonfinancial trade or 
        business to file a report required under section 5313A or any 
        regulation prescribed under that section that contains a 
        material omission or misstatement of fact; or
            ``(3) structure or assist in structuring, or attempt to 
        structure or assist in structuring, any transaction with 1 or 
more nonfinancial trades or businesses.''.
            (2) Technical and conforming amendments.--Title 31, United 
        States Code, is amended--
                    (A) in the subsection heading for section 5324(a), 
                by inserting ``Involving Financial Institutions'' after 
                ``Transactions''; and
                    (B) in section 5317(c), by striking ``5324(b)'' and 
                inserting ``5324(c)''.
    (c) Definition of Nonfinancial Trade or Business.--
            (1) In general.--Section 5312(a) of title 31, United States 
        Code, is amended--
                    (A) by redesignating paragraphs (4) and (5) as 
                paragraphs (5) and (6), respectively; and
                    (B) by inserting after paragraph (3) the following 
                new paragraph:
            ``(4) The term `nonfinancial trade or business' means any 
        trade or business, other than a financial institution, that is 
        subject to the reporting requirements of section 5313 and 
        regulations prescribed under that section.''.
            (2) Technical and conforming amendments.--
                    (A) Title 31.--Title 31, United States Code, is 
                amended--
                            (i) in section 5312(a)(3)(C), by striking 
                        ``section 5316,'' and inserting ``sections 
                        5313A and 5316,''; and
                            (ii) in subsections (a) through (f) of 
                        section 5318, and in sections 5326 and 5328, by 
                        inserting ``or nonfinancial trade or business'' 
                        after ``financial institution'' each place that 
                        term appears.
                    (B) Title 18.--Title 18, United States Code, is 
                amended--
                            (i) in section 981(a)(1)(A), by striking 
                        ``5313(a) or 5324(a) of title 31,'' and 
                        inserting ``5313(a) or 5313A of title 31, of 
                        subsection (a) or (b) of section 5324 of title 
                        31,''; and
                            (ii) in section 982(a)(1), by inserting 
                        ``5313A,'' after ``5313(a),''.
    (d) Repeal of Duplicate Provision.--Section 6050I of the Internal 
Revenue Code of 1986 is repealed.
    (e) Clerical Amendments.--
            (1) Title 31.--The table of sections for chapter 53 of 
        title 31, United States Code, is amended by inserting after the 
        item relating to section 5313 the following new item:

``5313A. Reports relating to coins and currency received in 
                            nonfinancial trade or business.''.
            (2) Internal revenue code of 1986.--The Internal Revenue 
        Code of 1986 is amended--
                    (A) in the table of sections for subpart B of part 
                III of subchapter A of chapter 61, by striking the item 
                relating to section 6050I;
                    (B) in section 6103--
                            (i) in subsection (l), by striking 
                        paragraph (15);
                            (ii) in subsection (p)(3)(A), by striking 
                        ``(15),'';
                            (iii) in subsection (p)(4), in the material 
                        preceding subparagraph (A), by striking 
                        ``(12)'' and all that follows through ``(16)'' 
                        and inserting ``(12), or (16)''; and
                            (iv) in subsection (p)(4)(F)(ii), by 
                        striking ``(14), or (15)'' and inserting ``or 
                        (14)'';
                    (C) in section 6721(e)(2)--
                            (i) in subparagraph (A), by striking 
                        ``6050I,'' and by adding ``or'' at the end;
                            (ii) in subparagraph (B), by striking 
                        ``or'' at the end and inserting ``and''; and
                            (iii) by striking subparagraph (C);
                    (D) in section 6724(d)(1)(B), by striking clause 
                (iv), and by redesignating clauses (v) through the 
                first clause designated as clause (xv) as clauses (iv) 
                through (xiv), respectively;
                    (E) in section 6724(d)(2), by striking subparagraph 
                (K), and by redesignating subparagraphs (L) through (Z) 
                as subparagraphs (K) through (Y), respectively; and
                    (F) in section 7203, by striking the last sentence.
    (f) Regulations; Effective Date.--
            (1) Regulations.--Regulations that the Secretary of the 
        Treasury determines are necessary to implement this section 
        shall be published in final form before the end of the 6-month 
        period beginning on the date of enactment of this Act.
            (2) Effective date.--The amendments made by this section 
        shall take effect at the end of the 6-month period beginning on 
        the date on which the regulations referred to in paragraph (1) 
        are published in final form.

SEC. 9. SENSE OF THE CONGRESS.

    It is the sense of the Congress that the Secretary of the Treasury 
should, in conjunction with the Board of Governors of the Federal 
Reserve System, expedite the promulgation of ``know your customer'' 
regulations for financial institutions.
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