STATEMENT OF on behalf of the ASSOCIATION OF THE BAR concerning MONEY LAUNDERING LEGISLATION before the SUBCOMMITTEE ON FINANCIAL INSTITUTIONS COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS May 14, 1986 Mr. Chairman and Members of the Subcommittee. I am Chair of the Committee on Federal Legislation of the Association of the Bar of the City of New York. With me is Lawrence B. Pedowitz, a member of the Committee who is the principal author of the Report which the Association has issued concerning money laundering legislation. The Association consists of approximately 15,000 attorneys, most of whom practice in the New York City area. We appreciate this opportunity to present the Association's views concerning the important but difficult subject of money laundering. Our Report, entitled Money Laundering: An Analysis of Legislative Proposals, represents the culmination of an extensive and exhaustive examination of the issues posed by money laundering legislation. Since we are unable to include all of our analysis and recommendation in our statement, we respectfully request that the full Report be included in the Subcommittee's record. Of course the views contained in our Report are those of the individual members of the Committee on Federal Legislation and not those of their professional affiliations or clients. Nevertheless, it is relevant to note that the Committee's members brought to their consideration of this problem diverse professional backgrounds and experience. We include government attorneys, former prosecutors, staff member of the American Civil Liberties Union, law professors, and banking lawyers. Despite these different perspectives from which we approached this issue, we arrived at a broad consensus concerning where the balance should be struck between legitimate law enforcement concerns and other important societal interests. Summary of Conclusions Money laundering is a growing national problem. Its existence contributes significantly to the vitality and profits of organized crime in the United States, especially to narcotics trafficking. We believe that this Subcommittee is rightly focusing upon money laundering's pervasiveness and its ill effects. also agree with the Administration and others who believe that new legislation is needed to combat money laundering. We We are concerned, however, that any legislation enacted in response to significant law enforcement interests be narrowly tailored so as not to encroach unnecessarily on other societal interests, such as the protection of individual rights of privacy. In our view, most of the pending legislative proposals, and in particular H.R. 2785, are overbroad in a number of important respects and cannot be sufficiently justified by law enforcement concerns. We believe that if, after enactment of narrower legislation, experience dictates the need for more expansive legislation, amendments can be proposed. We principally urge, in summary, that federal legislation in this area should be subject to a number of key restraints. First, we recommend that a federal offense of money laundering be limited to those instances in which the money laundering: (i) is undertaken "knowingly"; (ii) utilizes a bank or other "financial institution"; and (iii) involves the cash proceeds of federal offenses that qualify as "racketeering activity" under the Racketeering Influenced and Corrupt Organizations ("RICO") statute. Second, although we agree that there is some need to liberalize the disclosure provisions of the RFPA, we do not believe there is any justification for permitting voluntary disclosure by financial institutions of customer financial records beyond certain derivative information. We recommend that voluntary disclosure be strictly limited to identifying information concerning the customer and account involved in, and the nature or specifics of, the suspected illegal activity. Third, we recommend against creating a receipt of criminal proceeds offense which would criminalize on a federal level conduct of a much broader scope than we believe desirable. A. Money Laundering Statute The need for a money laundering statute seems plain. As the Commission Report makes evident, nothing short of new legislation will "strike directly at the activities in which money launderers engage."l Money 1 President's Commission on Organized Crime, The Cash Connection: Organized Crime, Financial Institutions, and Money Laundering 61 (Interim Report to the President and the Attorney General, October 1984) [hereinafter "Commisson Report"] |