II

106TH CONGRESS

1ST SESSION S. 1920

To combat money laundering and protect the United States financial system

by addressing the vulnerabilities of private banking to money laundering,

and for other purposes.

IN THE SENATE OF THE UNITED STATES

NOVEMBER 10, 1999

Mr. LEVIN (for himself and Mr. SPECTER) introduced the following bill; which

was read twice and referred to the Committee on Banking, Housing, and

Urban Affairs

A BILL

To combat money laundering and protect the United States

financial system by addressing the vulnerabilities of private banking to money laundering, 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 ‘‘Money Laundering

5 Abatement Act of 1999’’.

6 SEC. 2. FINDINGS AND PURPOSE.

7 (a) FINDINGS.—Congress makes the following find8 ings:
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1 (1) Money laundering is a serious problem that

2 enables criminals to reap the rewards of their crimes

3 by hiding the criminal source of their profits.

4 (2) When carried out by using banks, money

5 laundering erodes the integrity of our financial insti6 tutions.

7 (3) United States financial institutions are a

8 critical link in our efforts to combat money laun9 dering.

10 (4) In addition to organized crime enterprises,

11 corrupt government officials around the world in12 creasingly employ sophisticated money laundering

13 schemes to conceal wealth they have plundered or

14 extorted from their nations or received as bribes,

15 and these practices weaken the legitimacy of foreign

16 states, threaten the integrity of international finan17 cial markets, and harm foreign populations.

18 (5) Private banking is a growing activity among

19 financial institutions based in and operating in the

20 United States.

21 (6) The high profitability, competition, high

22 level of secrecy, and close relationships of trust de23 veloped between private bankers and their clients

24 make private banking vulnerable to money laun25 dering.
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1 (7) The use by United States bankers of finan2 cial centers located outside of the United States that

3 have weak financial regulatory and reporting re4 gimes and no transparency facilitates global money

5 laundering.

6 (b) PURPOSE.—The purpose of this Act is to elimi7 nate the weaknesses in Federal law that allow money laun8 dering to flourish, particularly in private banking activi9 ties.

10 SEC. 3. IDENTIFICATION OF ACTUAL OR BENEFICIAL OWN11 ERS OF ACCOUNTS.

12 (a) TRANSACTIONS AND ACCOUNTS WITH OR ON BE13 HALF OF FOREIGN ENTITIES.—Subchapter II of chapter

14 53 of title 31, United States Code, is amended by adding

15 at the end the following:

16 ‘‘§ 5331. Requirements relating to transactions and

17 accounts with or on behalf of foreign en18 tities

19 ‘‘(a) DEFINITIONS.—Notwithstanding any other pro20 vision of this subchapter, in this section the following defi21 nitions shall apply:

22 ‘‘(1) ACCOUNT.—The term ‘account’—

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

24 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 same meaning as in sec17 tion 19(b)(1)(A) of the Federal Reserve Act.

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

19 term ‘foreign banking institution’ means a foreign

20 entity that engages in the business of banking, and

21 includes foreign commercial banks, foreign merchant

22 banks, and other foreign institutions that engage in

23 banking activities usual in connection with the busi24 ness of banking in the countries where they are or25 ganized or operating.
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1 ‘‘(6) FOREIGN ENTITY.—The term ‘foreign en2 tity’ means an entity that is not organized under the

3 laws of the Federal Government of the United

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

5 of Columbia, or the Commonwealth of Puerto Rico.

6 ‘‘(b) PROHIBITION ON OPENING OR MAINTAINING

7 ACCOUNTS BELONGING TO OR FOR THE BENEFIT OF UN8 IDENTIFIED OWNERS.—A depository institution or a

9 branch of a foreign bank (as defined in section 1 of the

10 International Banking Act of 1978) may not open or

11 maintain any account in the United States for a foreign

12 entity or a representative of a foreign entity, unless—

13 ‘‘(1) for each such account, the institution com14 pletes and maintains in the United States a form or

15 record identifying, by a verifiable name and account

16 number, each person having a direct or beneficial

17 ownership interest in the account; or

18 ‘‘(2) some or all of the shares of the foreign en19 tity are publicly traded.

20 ‘‘(c) PROHIBITION ON OPENING OR MAINTAINING

21 CORRESPONDENT ACCOUNTS OR CORRESPONDENT BANK

22 RELATIONSHIP WITH CERTAIN FOREIGN BANKS.—A de23 pository institution, or branch of a foreign bank, as de24 fined in section 1 of the International Banking Act of

25 1978, may not open or maintain a correspondent account
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1 in the United States for or on behalf of a foreign banking

2 institution, or establish or maintain a correspondent bank

3 relationship with a foreign banking institution (other than

4 in the case of an affiliate of a branch of a foreign bank),

5 that—

6 ‘‘(1) is organized under the laws of a jurisdic7 tion outside of the United States; and

8 ‘‘(2) is not subject to comprehensive supervision

9 or regulation on a consolidated basis by the appro10 priate authorities in such jurisdiction.

11 ‘‘(d) 48-HOUR RULE.—Not later than 48 hours after

12 receiving a request by the appropriate Federal banking

13 agency (as defined in section 3 of the Federal Deposit In14 surance Act) for information related to anti-money laun15 dering compliance by a financial institution or a customer

16 of that institution, a financial institution shall provide to

17 the requesting agency, or make available at a location

18 specified by the representative of the agency, information

19 and account documentation for any account opened, main20 tained, or managed in the United States by the financial

21 institution.’’.

22 (b) TECHNICAL AND CONFORMING AMENDMENT.—

23 The table of sections for subchapter II of chapter 53 of

24 title 31, United States Code, is amended by inserting after

25 the item relating to section 5330 the following:
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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 this section shall apply—

3 (1) with respect to any account opened on or

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

5 date; and

6 (2) with respect to any account opened before

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

8 the 6-month period beginning on such date.

9 SEC. 4. PROPER MAINTENANCE OF CONCENTRATION AC10 COUNTS AT FINANCIAL INSTITUTIONS.

11 Section 5318(h) of title 31, United States Code, is

12 amended by adding at the end the following:

13 ‘‘(3) AVAILABILITY OF CERTAIN ACCOUNT IN14 FORMATION.—The Secretary shall prescribe regula15 tions under this subsection that govern maintenance

16 of concentration accounts by financial institutions,

17 in order to ensure that such accounts are not used

18 to prevent association of the identity of an individual

19 customer with the movement of funds of which the

20 customer is the direct or beneficial owner, which reg21 ulations shall, at a minimum—

22 ‘‘(A) prohibit financial institutions from al23 lowing clients to direct transactions that move
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1 their funds into, out of, or through the con2 centration accounts of the financial institution;

3 ‘‘(B) prohibit financial institutions and

4 their employees from informing customers of

5 the existence of, or means of identifying, the

6 concentration accounts of the institution; and

7 ‘‘(C) require each financial institution to

8 establish written procedures governing the doc9 umentation of all transactions involving a con10 centration account, which procedures shall en11 sure that, any time a transaction involving a

12 concentration account commingles funds belong13 ing to 1 or more customers, the identity of, and

14 specific amount belonging to, each customer is

15 documented.’’.

16 SEC. 5. DUE DILIGENCE REQUIRED FOR PRIVATE BANKING.

17 The Federal Deposit Insurance Act (12 U.S.C. 1811

18 et seq.) is amended by inserting after section 10 the fol19 lowing:

20 ‘‘SEC. 5A. DUE DILIGENCE.

21 ‘‘(a) PRIVATE BANKING.—In fulfillment of its anti22 money laundering obligations under section 5318(h) of

23 title 31, United States Code, each depository institution

24 that engages in private banking shall establish due dili-
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1 gence procedures for opening and reviewing, on an ongo2 ing basis, accounts of private banking customers.

3 ‘‘(b) MINIMUM STANDARDS.—The due diligence pro4 cedures required by paragraph (1) shall, at a minimum,

5 ensure that the depository institution knows and verifies,

6 through probative documentation, the identity and finan7 cial background of each private banking customer of the

8 institution and obtains sufficient information about the

9 source of funds of the customer to meet the anti-money

10 laundering obligations of the institution.

11 ‘‘(c) COMPLIANCE REVIEW.—The appropriate Fed12 eral banking agencies shall review compliance with the re13 quirements of this section as part of each examination of

14 a depository institution under this Act.

15 ‘‘(d) REGULATIONS.—The Board of Governors of the

16 Federal Reserve System shall, after consultation with the

17 other appropriate Federal banking agencies, define the

18 term ‘private banking’ by regulation for purposes of this

19 section.’’.

20 SEC. 6. SUPPLEMENTATION OF CRIMES CONSTITUTING

21 MONEY LAUNDERING.

22 Section 1956(c)(7)(B) of title 18, United States

23 Code, is amended—

24 (1) by striking clause (ii) and inserting the fol25 lowing:
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1 ‘‘(ii) any conduct constituting a crime

2 of violence;’’; and

3 (2) by adding at the end the following:

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

5 committed against a foreign government or

6 foreign governmental entity under the laws

7 of that government or entity;

8 ‘‘(v) bribery of a foreign public offi9 cial, or the misappropriation, theft, or em10 bezzlement of public funds by or for the

11 benefit of a foreign public official under

12 the laws of the country in which the sub13 ject conduct occurred or in which the pub14 lic official holds office;

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 articles of agreement

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

16 SEC. 7. PROHIBITION ON FALSE STATEMENTS TO FINAN17 CIAL INSTITUTIONS CONCERNING THE IDEN18 TITY OF A CUSTOMER.

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

20 States Code (relating to fraud and false statements), is

21 amended by inserting after section 1007 the following:

22 ‘‘§ 1008. False statements concerning the identity of

23 customers of financial institutions

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

25 manner—
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1 ‘‘(1) falsifies, conceals, or covers up, or at2 tempts to falsify, conceal, or cover up, the identity

3 of any person in connection with any transaction

4 with a financial institution;

5 ‘‘(2) makes, or attempts to make, any materi6 ally false, fraudulent, or fictitious statement or rep7 resentation of the identity of any person in connec8 tion with a transaction with a financial institution;

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

10 use, any false writing or document knowing the

11 same to contain any materially false, fictitious, or

12 fraudulent statement or entry concerning the iden13 tity of any person in connection with a transaction

14 with a financial institution; or

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

16 present, in connection with a transaction with a fi17 nancial institution, an identification document or

18 means of identification the possession of which is a

19 violation of section 1028;

20 shall be fined under this title, imprisoned not more than

21 5 years, or both.

22 ‘‘(b) DEFINITIONS.—In this section:

23 ‘‘(1) FINANCIAL INSTITUTION.—In addition to

24 the meaning given to the term ‘financial institution’

25 by section 20, the term ‘financial institution’ also
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1 has the meaning given to such term in section

2 5312(a)(2) of title 31.

3 ‘‘(2) 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 (b) TECHNICAL AND CONFORMING AMENDMENTS.—

8 (1) TITLE 18, UNITED STATES CODE.—Section

9 1956(c)(7)(D) of title 18, United States Code, is

10 amended by striking ‘‘1014 (relating to fraudulent

11 loan’’ and inserting ‘‘section 1008 (relating to false

12 statements concerning the identity of customers of

13 financial institutions), section 1014 (relating to

14 fraudulent loan’’.

15 (2) TABLE OF SECTIONS.—The table of sections

16 for chapter 47 of title 18, United States Code, is

17 amended by inserting after the item relating to sec18 tion 1007 the following:

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

19 SEC. 8. APPROPRIATION FOR FINCEN TO IMPLEMENT SAR/

20 CTR ALERT DATABASE.

21 There is authorized to be appropriated $1,000,000,

22 to remain available until expended, for the Financial

23 Crimes Enforcement Network of the Department of the

24 Treasury to implement an automated database that will
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1 alert law enforcement officials if Currency Transaction

2 Reports or Suspicious Activity Reports disclose patterns

3 that may indicate illegal activity, including any instance

4 in which multiple Currency Transaction Reports or Sus5 picious Activity Reports name the same individual within

6 a prescribed period of time.

7 SEC. 9. LONG-ARM JURISDICTION OVER FOREIGN MONEY

8 LAUNDERERS.

9 Section 1956(b) of title 18, United States Code, is

10 amended—

11 (1) by redesignating paragraphs (1) and (2) as

12 subparagraphs (A) and (B), respectively;

13 (2) by inserting ‘‘(1)’’ after ‘‘(b)’’;

14 (3) by inserting ‘‘, or section 1957’’ after ‘‘or

15 (a)(3)’’; and

16 (4) by adding at the end the following:

17 ‘‘(2) For purposes of adjudicating an action filed or

18 enforcing a penalty ordered under this section, the district

19 courts shall have jurisdiction over any foreign person, in20 cluding any financial institution authorized under the laws

21 of a foreign country, that commits an offense under sub22 section (a) involving a financial transaction that occurs in

23 whole or in part in the United States, if service of process

24 upon such foreign person is made under the Federal Rules
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1 of Civil Procedure or the laws of the country in which the

2 foreign person is found.

3 ‘‘(3) The court may issue a pretrial restraining order

4 or take any other action necessary to ensure that any bank

5 account or other property held by the defendant in the

6 United States is available to satisfy a judgment under this

7 section.’’.

8 SEC. 10. LAUNDERING MONEY THROUGH A FOREIGN BANK.

9 Section 1956(c)(6) of title 18, United States Code,

10 is amended to read as follows:

11 ‘‘(6) the term ‘financial institution’ includes—

12 ‘‘(A) any financial institution described in

13 section 5312(a)(2) of title 31, or the regula14 tions promulgated thereunder; and

15 ‘‘(B) any foreign bank, as defined in sec16 tion 1(b)(7) of the International Banking Act of

17 1978 (12 U.S.C. 3101(7)).’’.

18 SEC. 11. EFFECTIVE DATE.

19 Except as otherwise specifically provided in this Act,

20 this Act and the amendments made by this Act shall take

21 effect 90 days after the date of enactment of this Act.

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