II

106TH CONGRESS

1ST SESSION S. 1663

To combat money laundering and protect the United States financial system,

and for other purposes.

IN THE SENATE OF THE UNITED STATES

SEPTEMBER 29, 1999

Mr. SCHUMER (for himself and Mr. COVERDELL) introduced the following bill;

which was referred to the Committee on Banking, Housing, and Urban Affairs

A BILL

To combat money laundering and protect the United States

financial system, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Foreign Money Laun5 dering Deterrence and Anticorruption Act’’.

6 SEC. 2. FINDINGS.

7 The Congress finds as follows:

8 (1) Money laundering enables international or9 ganized crime groups to control and legitimize pro10 ceeds from a wide variety of illegal activities includ-
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1 ing theft, racketeering, terrorism, tax evasion, fraud,

2 insider trading, and traffic in narcotics, arms, and

3 other contraband. In many instances, these activities

4 impact United States citizens and territory and frus5 trate United States foreign policy.

6 (2) Money laundering by international criminal

7 enterprises challenges the legitimate authority of na8 tional governments, corrupts officials and profes9 sionals, endangers the financial and economic sta10 bility of nations, diminishes the efficiency of global

11 interest rate markets, and routinely violates legal

12 norms, property rights, and human rights.

13 (3) In some countries, such as Colombia, Mex14 ico, and Russia, the wealth and power of organized

15 criminal enterprises rival the wealth and power of

16 the government of the country.

17 (4) Organized criminal enterprises, such as the

18 Colombian and Mexican cartels, the Russian

19 ‘‘mafiya’’, Sicilian crime families, and Chinese

20 gangs, are highly resistant to conventional law en21 forcement techniques, and the financial management

22 and organizational infrastructure of such enterprises

23 are highly sophisticated and difficult to track be24 cause of the globalization of the financial services in25 dustry.
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1 (5) In addition to organized crime enterprises,

2 corrupt government officials around the world in3 creasingly employ sophisticated money laundering

4 schemes to conceal wealth they have plundered or

5 extorted from their nations or received as bribes,

6 and these practices weaken the legitimacy of foreign

7 states, threaten the integrity of international finan8 cial markets, and harm foreign populations—some9 times to the point of impoverishment.

10 (6) The existence of ‘‘offshore financial cen11 ters’’ (nations, regions, zones, and cities that in

12 many instances have virtually impenetrable financial

13 secrecy laws and weak financial regulatory and re14 porting regimes, which are tailored to violate or cir15 cumvent the laws of other nations) facilitates global

16 money laundering and, as some of the long-estab17 lished offshore financial centers begin to respond to

18 international pressure to implement internationally

19 acceptable standards, money-laundering transactions

20 have started migrating to new centers that have

21 been rapidly proliferating.

22 (7) Recent advances in communications and in23 formation technology, particularly in the fields of on24 line transactions, have meant that offshore financial

25 centers, originally concentrated near the ‘‘onshore’’
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1 nations whose rules they circumvented, are being es2 tablished in increasingly remote locations that are

3 difficult and costly for law enforcement and super4 visory authorities to monitor and visit.

5 SEC. 3. REQUIREMENTS RELATING TO TRANSACTIONS AND

6 ACCOUNTS WITH OR ON BEHALF OF FOREIGN

7 ENTITIES.

8 (a) IN GENERAL.—Subchapter II of chapter 53 of

9 title 31, United States Code, is amended by adding at the

10 end the following new section:

11 ‘‘§ 5331. Requirements relating to transactions and

12 accounts with or on behalf of foreign en13 tities.

14 ‘‘(a) PROHIBITION ON OPENING OR MAINTAINING

15 ACCOUNTS BELONGING TO OR FOR THE BENEFIT OF UN16 IDENTIFIED OWNERS.—A financial institution may not

17 open or maintain any account in the United States for

18 a foreign entity or a representative of a foreign entity,

19 unless—

20 ‘‘(1) the institution identifies, and maintains a

21 record of the identity of, each person having a direct

22 or beneficial ownership interest in the account; or

23 ‘‘(2) some or all of the shares of the foreign en24 tity are publicly traded.
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1 ‘‘(b) PROHIBITION ON OPENING OR MAINTAINING

2 CORRESPONDENT ACCOUNTS OR CORRESPONDENT BANK

3 RELATIONSHIP WITH CERTAIN FOREIGN BANKS.—

4 ‘‘(1) IN GENERAL.—A depository institution

5 may not open or maintain a correspondent account

6 in the United States for or on behalf of a foreign

7 banking institution, or establish or maintain a cor8 respondent bank relationship with a foreign banking

9 institution, that—

10 ‘‘(A) is organized under the laws of a juris11 diction outside the United States but is not li12 censed or permitted to offer, or is not offering,

13 any banking service to any resident of such ju14 risdiction; and

15 ‘‘(B) is not subject to comprehensive su16 pervision or regulation on a consolidated basis

17 by the appropriate authorities in such jurisdic18 tion.

19 ‘‘(2) EXCEPTION.—Paragraph (1) shall not

20 apply to a foreign banking institution, if the institu21 tion is an affiliate of—

22 ‘‘(A) a depository institution; or

23 ‘‘(B) a foreign bank (as defined in section

24 1(b)(7) of the International Banking Act of

25 1978) that is subject to comprehensive super-
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1 vision or regulation on a consolidated basis by

2 the appropriate authorities in the foreign juris3 diction under whose laws it is organized.

4 ‘‘(c) PROHIBITION ON OPENING OR MAINTAINING

5 PAYABLE-THROUGH ACCOUNTS FOR FOREIGN BANKING

6 INSTITUTIONS.—A depository institution may not open or

7 maintain a payable-through account in the United States

8 for a foreign banking institution, unless the depository in9 stitution is able—

10 ‘‘(1) to identify each customer of the foreign

11 banking institution who is permitted to use the ac12 count; and

13 ‘‘(2) with respect to each such customer, to ob14 tain the same information about the customer that

15 it obtains, in the ordinary course, with respect to a

16 customer residing in the United States who opens or

17 maintains an account through which they are au18 thorized to conduct the same transactions as may

19 be conducted through the payable-through account.

20 ‘‘(d) DEFINITIONS.—Notwithstanding any other pro21 vision of this subchapter, for purposes of this section, the

22 following definitions shall apply:

23 ‘‘(1) ACCOUNT.—The term ‘account’—

24 ‘‘(A) means a formal banking or business

25 relationship established to provide regular serv-
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1 ices, dealings, and other financial transactions;

2 and

3 ‘‘(B) includes a demand deposit, savings

4 deposit, or other asset account and a credit ac5 count or other extension of credit.

6 ‘‘(2) CORRESPONDENT ACCOUNT.—The term

7 ‘correspondent account’ means an account estab8 lished to receive deposits from and make payments

9 on behalf of a correspondent bank.

10 ‘‘(3) CORRESPONDENT BANK.—The term ‘cor11 respondent bank’ means a depository institution that

12 accepts deposits from another financial institution

13 and provides services on behalf of such other finan14 cial institution.

15 ‘‘(4) DEPOSITORY INSTITUTION.—The term ‘de16 pository institution’ has the meaning given such

17 term in section 19(b)(1)(A) of the Federal Reserve

18 Act.

19 ‘‘(5) FOREIGN BANKING INSTITUTION.—The

20 term ‘foreign banking institution’ means a foreign

21 entity that engages in the business of banking, and

22 includes foreign commercial banks, foreign merchant

23 banks, and other foreign institutions that engage in

24 banking activities usual in connection with the busi-
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1 ness of banking in the countries where they are or2 ganized or operating.

3 ‘‘(6) FOREIGN ENTITY.—The term ‘foreign en4 tity’ means an entity that is not organized under the

5 laws of the Federal Government of the United

6 States, any State of the United States, the District

7 of Columbia, the Commonwealth of Puerto Rico, the

8 Virgin Islands, Guam, American Samoa, the Com9 monwealth of the Northern Mariana Islands, the Re10 public of the Marshall Islands, the Federated States

11 of Micronesia, or the Republic of Palau.

12 ‘‘(7) PAYABLE-THROUGH ACCOUNT.—The term

13 ‘payable-through account’ means an account, includ14 ing a transaction account (as defined in section

15 19(b)(1)(C) of the Federal Reserve Act), opened at

16 a depository institution by a foreign banking institu17 tion by means of which the foreign banking institu18 tion permits its customers to engage, either directly

19 or through a sub-account, in banking activities usual

20 in connection with the business of banking in the

21 United States.’’.

22 (b) CLERICAL AMENDMENT.—The table of sections

23 for subchapter II of chapter 53 of title 31, United States

24 Code, is amended by inserting after the item relating to

25 section 5330 the following new item:
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‘‘5331. Requirements relating to transactions and accounts with or on behalf of

foreign entities.’’.

1 (c) EFFECTIVE DATE.—The amendments made by

2 subsection (a) shall apply—

3 (1) with respect to accounts opened on or after

4 the date of the enactment of this Act, as of such

5 date; and

6 (2) with respect to accounts opened before the

7 date of the enactment of this Act, as of the end of

8 the 6-month period beginning on such date.

9 (d) RULE OF CONSTRUCTION.—No provision of the

10 amendment made by subsection (a) shall be construed as

11 requiring or authorizing a financial institution to disclose

12 any information described in such amendment to any

13 other entity.

14 SEC. 4. CORRUPTION IN FOREIGN GOVERNMENTS.

15 (a) IN GENERAL.—It is the sense of the Congress

16 that, in deliberations between the United States Govern17 ment and any other country on money laundering and cor18 ruption issues, the United States Government should—

19 (1) emphasize an approach that addresses not

20 only the laundering of the proceeds of traditional

21 criminal activity but also the increasingly endemic

22 problem of governmental corruption and the corrup23 tion of ruling elites; and
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1 (2) encourage the enactment and enforcement

2 of laws in such country to prevent money laundering

3 and systemic corruption.

4 (b) UNITED STATES VOTES IN INTERNATIONAL FI5 NANCIAL INSTITUTIONS.—The Secretary of the Treasury

6 shall instruct the United States Executive Directors of

7 each international financial institution (as defined in sec8 tion 1701(c) of the International Financial Institutions

9 Act) to oppose any loan, disbursement, or other utilization

10 of resources by the international financial institution,

11 other than to address basic human needs, for any country

12 that the Secretary of the Treasury determines—

13 (1) has a high level of corruption;

14 (2) is not effectively implementing good govern15 ance and anticorruption measures; and

16 (3) is not taking meaningful steps to improve

17 good governance and reduce corruption.

18 (c) REPORT REQUIRED.—

19 (1) IN GENERAL.—The Secretary of the Treas20 ury shall submit an annual report to the Congress

21 on the deliberations between the United States and

22 other countries on money laundering and corruption

23 issues.

24 (2) CONTENTS OF REPORT.—Each report sub25 mitted under paragraph (1) shall contain—
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1 (A) an assessment by the Secretary of the

2 extent of corruption in each country covered by

3 the report; and

4 (B) an assessment by the Secretary of the

5 extent to which such country maintains effec6 tive money laundering and corruption preven7 tion measures or is implementing such meas8 ures.

9 SEC. 5. AMENDMENTS RELATING TO REPORTING OF SUS10 PICIOUS ACTIVITIES.

11 (a) AMENDMENT RELATING TO CIVIL LIABILITY IM12 MUNITY FOR DISCLOSURES.—Section 5318(g)(3) of title

13 31, United States Code, is amended to read as follows:

14 ‘‘(3) LIABILITY FOR DISCLOSURES.—

15 ‘‘(A) IN GENERAL.—Notwithstanding any

16 other provision of law—

17 ‘‘(i) any financial institution that—

18 ‘‘(I) makes a disclosure of any

19 possible violation of law or regulation

20 to an appropriate government agency;

21 or

22 ‘‘(II) makes a disclosure pursu23 ant to this subsection or any other au24 thority;
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1 ‘‘(ii) any director, officer, employee, or

2 agent of such institution who makes, or re3 quires another to make any such disclo4 sure; and

5 ‘‘(iii) any independent public account6 ant who audits any such financial institu7 tion and makes a disclosure described in

8 clause (i),

9 shall not be liable to any person under any law

10 or regulation of the United States, any con11 stitution, law, or regulation of any State or po12 litical subdivision thereof, or under any contract

13 or other legally enforceable agreement (includ14 ing any arbitration agreement), for such disclo15 sure or for any failure to notify the person who

16 is the subject of such disclosure or any other

17 person identified in the disclosure.

18 ‘‘(B) EXCEPTION.—Subparagraph (A)

19 shall not apply to a disclosure or communica20 tion required under Federal securities law,

21 other than provisions of law that specifically

22 refer to the Currency and Foreign Transactions

23 Reporting Act of 1970.

24 ‘‘(C) RULE OF CONSTRUCTION.—Subpara25 graph (A) shall not be construed as creating—
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1 ‘‘(i) any inference that the term ‘per2 son’, as used in such subparagraph, may

3 be construed more broadly than its ordi4 nary usage so to include any government

5 or agency of government; or

6 ‘‘(ii) any immunity against, or other7 wise affecting, any civil or criminal action

8 brought by any government or agency of

9 government to enforce any constitution,

10 law, or regulation of such government or

11 agency.’’.

12 (b) PROHIBITION ON NOTIFICATION OF DISCLO13 SURES.—Section 5318(g)(2) of title 31, United States

14 Code, is amended to read as follows:

15 ‘‘(2) NOTIFICATION PROHIBITED.—

16 ‘‘(A) IN GENERAL.—If a financial institu17 tion, any director, officer, employee, or agent of

18 any financial institution, or any independent

19 public accountant who audits any financial in20 stitution, voluntarily or pursuant to this section

21 or any other authority, reports a suspicious

22 transaction to an appropriate government

23 agency—

24 ‘‘(i) the financial institution, director,

25 officer, employee, agent, or accountant
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1 may not notify any person involved in the

2 transaction that the transaction has been

3 reported and may not disclose any infor4 mation included in the report to any such

5 person; and

6 ‘‘(ii) any other person, including any

7 officer or employee of any government,

8 who has any knowledge that such report

9 was made may not disclose to any person

10 involved in the transaction that the trans11 action has been reported or any informa12 tion included in the report.

13 ‘‘(B) COORDINATION WITH PARAGRAPH

14 (5).—Subparagraph (A) shall not be construed

15 as prohibiting any financial institution, or any

16 director, officer, employee, or agent of such in17 stitution, from including, in a written employ18 ment reference that is provided in accordance

19 with paragraph (5) in response to a request

20 from another financial institution, information

21 that was included in a report to which subpara22 graph (A) applies, but such written employment

23 reference may not disclose that such informa24 tion was also included in any such report or

25 that such report was made.’’.
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1 (c) AUTHORIZATION TO INCLUDE SUSPICIONS OF IL2 LEGAL ACTIVITY IN EMPLOYMENT REFERENCES.—Sec3 tion 5318(g) of title 31, United States Code, is amended

4 by adding at the end the following new paragraph:

5 ‘‘(5) EMPLOYMENT REFERENCES MAY INCLUDE

6 SUSPICIONS OF INVOLVEMENT IN ILLEGAL ACTIV7 ITY.—

8 ‘‘(A) IN GENERAL.—Notwithstanding any

9 other provision of law and subject to subpara10 graph (B) of this paragraph and paragraph

11 (2)(C), any financial institution, and any direc12 tor, officer, employee, or agent of such institu13 tion, may disclose, in any written employment

14 reference relating to a current or former insti15 tution-affiliated party of such institution which

16 is provided to another financial institution in

17 response to a request from such other institu18 tion,

19 information concerning the possible involvement

20 of such institution-affiliated party in any sus21 picious transaction relevant to a possible viola22 tion of law or regulation.

23 ‘‘(B) LIMIT ON LIABILITY FOR DISCLO24 SURES.—A financial institution, and any direc25 tor, officer, employee, or agent of such institu-
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1 tion, shall not be liable to any person under any

2 law or regulation of the United States, any con3 stitution, law, or regulation of any State or po4 litical subdivision thereof, or under any contract

5 or other legally enforceable agreement (includ6 ing any arbitration agreement), for any disclo7 sure under subparagraph (A), to the extent—

8 ‘‘(i) the disclosure does not contain in9 formation which the institution, director,

10 officer, employee, agent, or accountant

11 knows to be false; and

12 ‘‘(ii) the institution, director, officer,

13 employee, agent, or accountant has not

14 acted with malice or with reckless dis15 regard for the truth in making the disclo16 sure.

17 ‘‘(C) INSTITUTION-AFFILIATED PARTY DE18 FINED.—For purposes of this paragraph, the

19 term ‘institution-affiliated party’ has the mean20 ing given to such term in section 3(u) of the

21 Federal Deposit Insurance Act, except such sec22 tion 3(u) shall be applied by substituting ‘finan23 cial institution’ for ‘insured depository institu24 tion’.’’.
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1 (d) AMENDMENTS RELATING TO AVAILABILITY OF

2 SUSPICIOUS ACTIVITY REPORTS FOR OTHER AGEN3 CIES.—Section 5319 of title 31, United States Code, is

4 amended—

5 (1) in the 1st sentence, by striking ‘‘5314, or

6 5316’’ and inserting ‘‘5313A, 5314, 5316, or

7 5318(g)’’;

8 (2) in the last sentence, by inserting ‘‘under

9 section 5313, 5313A, 5314, 5316, or 5318(g)’’ after

10 ‘‘records of reports’’; and

11 (3) by adding the following new sentence after

12 the last sentence: ‘‘The Secretary of the Treasury

13 may permit the dissemination of information in any

14 such reports to any self-regulatory organization (as

15 defined in section 3(a)(26) of the Securities Ex16 change Act of 1934), if the Securities and Exchange

17 Commission determines that such dissemination is

18 necessary or appropriate to permit such organization

19 to perform its function under the Securities Ex20 change Act of 1934 and regulations prescribed

21 under such Act.’’.

22 SEC. 6. SPECIFIED UNLAWFUL ACTIVITIES FOR MONEY

23 LAUNDERING.

24 Section 1956(c)(7) of title 18, United States Code,

25 is amended—
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1 (1) in subparagraph (B)—

2 (A) by striking clause (ii) and inserting the

3 following new clause:

4 ‘‘(ii) any conduct constituting a crime

5 of violence;’’; and

6 (B) by adding at the end the following new

7 clauses:

8 ‘‘(iv) fraud, or any scheme to defraud,

9 committed against a foreign government or

10 foreign governmental entity;

11 ‘‘(v) bribery of a public official, or the

12 misappropriation, theft, or embezzlement

13 of public funds, by or for the benefit of a

14 public official;

15 ‘‘(vi) smuggling or export control vio16 lations involving munitions listed in the

17 United States Munitions List or tech18 nologies with military applications, as de19 fined in the Commerce Control List of the

20 Export Administration Regulations;

21 ‘‘(vii) an offense with respect to which

22 the United States would be obligated by a

23 multilateral treaty either to extradite the

24 alleged offender or to submit the case for

25 prosecution, if the offender were found
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1 within the territory of the United States;

2 or

3 ‘‘(viii) the misuse of funds of, or pro4 vided by, the International Monetary Fund

5 in contravention of the Articles of Agree6 ment of the Fund or the misuse of funds

7 of, or provided by, any other international

8 financial institution (as defined in section

9 1701(c)(2) of the International Financial

10 Institutions Act) in contravention of any

11 international treaty or other international

12 agreement to which the United States is a

13 party, including any article of agreement

14 of the members of such international fi15 nancial institution.’’;

16 (2) in subparagraph (D)—

17 (A) by inserting ‘‘section 541 (relating to

18 goods falsely classified),’’ before ‘‘section 542’’;

19 (B) by inserting ‘‘section 924(m) (relating

20 to firearms trafficking),’’ before ‘‘section 956’’;

21 (C) by inserting ‘‘section 1030 (relating to

22 computer fraud and abuse),’’ before ‘‘1032’’;

23 and

24 (D) by inserting ‘‘any felony violation of

25 the Foreign Agents Registration Act of 1938,
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1 as amended,’’ before ‘‘or any felony violation of

2 the Foreign Corrupt Practices Act’’;

3 (3) in subparagraph (E)—

4 (A) by inserting ‘‘section 42 or 43 of this

5 title (commonly called the Lacey Act),’’ after ‘‘a

6 felony violation of’’;

7 (B) by inserting ‘‘the Clean Air Act (42

8 U.S.C. 7401 et seq.),’’ after ‘‘the Safe Drinking

9 Water Act (42 U.S.C. 300f et seq.),’’; and

10 (4) by adding at the end the following new sub11 paragraph:

12 ‘‘(G) Any offense under any Federal law

13 consisting of the failure to report to an appro14 priate Federal agency the ownership or control

15 of a foreign corporation, the ownership or con16 trol of a foreign financial account, or a bene17 ficial interest in a foreign trust.’’.

18 SEC. 7. FALSE STATEMENTS TO FINANCIAL INSTITUTIONS

19 CONCERNING THE IDENTITY OF A CUS20 TOMER.

21 (a) IN GENERAL.—Chapter 47 of title 18, United

22 States Code (relating to fraud and false statements) is

23 amended by inserting after section 1007 the following new

24 section:
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1 ‘‘§ 1008. False statements concerning the identity of

2 customers of financial institutions

3 ‘‘(a) IN GENERAL.—Whoever knowingly in any

4 manner—

5 ‘‘(1) falsifies, conceals, or covers up, or at6 tempts to falsify, conceal, or cover up, the identity

7 of any person in connection with any transaction

8 with a financial institution; or

9 ‘‘(2) makes, or attempts to make, any materi10 ally false, fraudulent, or fictitious statement or rep11 resentation of the identity of any person in connec12 tion with a transaction with a financial institution;

13 or

14 ‘‘(3) makes or uses, or attempts to make or

15 use, any false writing or document knowing the

16 same to contain any materially false, fictitious, or

17 fraudulent statement or entry concerning the iden18 tity of any person in connection with a transaction

19 with a financial institution; or

20 ‘‘(4) uses or presents, or attempts to use or

21 present, in connection with a transaction with a fi22 nancial institution, an identification document or

23 means of identification the possession of which is a

24 violation of section 1028,

25 shall be fined under this title, imprisoned for not more

26 than 5 years, or both.
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1 ‘‘(b) DEFINITIONS.—For purposes of this section, the

2 following definitions shall apply:

3 ‘‘(1) IDENTIFICATION DOCUMENT AND MEANS

4 OF IDENTIFICATION.—The terms ‘identification doc5 ument’ and ‘means of identification’ have the mean6 ings given to such terms in section 1028(d).

7 ‘‘(2) FINANCIAL INSTITUTION.—In addition to

8 the meaning given to the term ‘financial institution’

9 by section 20, the term ‘financial institution’ also

10 has the meaning given to such term in section

11 5312(a)(2) of title 31.’’.

12 (b) TECHNICAL AND CONFORMING AMENDMENT.—

13 Section 1956(c)(7)(D) of title 18, United States Code (as

14 amended by section 6(2) of this Act) is amended by strik15 ing ‘‘1014 (relating to fraudulent loan’’ and inserting

16 ‘‘section 1008 (relating to false statements concerning the

17 identity of customers of financial institutions), section

18 1014 (relating to fraudulent loan’’.

19 (c) CLERICAL AMENDMENT.—The table of sections

20 for chapter 47 of title 18, United States Code, is amended

21 by inserting after the item relating to section 1007 the

22 following new item:

‘‘1008. False statements concerning the identity of customers of financial institutions.’’.

Æ