-2 suspicions that BSA violations are widespread and extremely serious. In that regard, the Subcommittee will continue to examine efforts undertaken by the Treasury, IRS and banking regulators to improve their enforcement procedures of the BSA in the series of hearings beginning on April 16. Accordingly, please submit to the Subcommittee, no later than April 11, a written report updating your agency's efforts to improve enforcement efforts of the BSA since January 1, 1985. Such report should include, but is not limited to, the following: 1. The number of institutions examined by your agency since January 1, 1985 and the number and type of violations of the BSA found at these institutions, and actions taken by your agency on these violations. 2. 3. 4. 5. 6. Describe the training programs given to your What Describe efforts your agency has undertaken to improve communication with law enforcement agencies. What legal or policy impediments still exist that interfere with an open communication between the agency and law enforcement officials. Are they justified, in your opinion? Describe the progress, if any, that has been made Describe the management controls over Describe the initiatives your agency has taken to broaden the knowledge of and exposure to reporting requirements of the BSA for those institutions you regulate. 7. Describe the role your agency played in the Cite -3 8. Submit copies of all revised regulations, banking circulars, newsletters, internal communications, updates to manual for examiners, and any other written information pertaining to enforcement efforts of the BSA undertaken by your agency since January 1, 1985. It has become apparent that limiting the Subcommittee's review to BSA provisions, as important as that is, does not fully address the grievous problems that currently exist with respect to criminal elements in our society using financial institutions for tax evasion, drug trafficking, money laundering, and other criminal activity. Therefore, the Subcommittee intends to revisit other banking statutes and to review a number of bills that have been referred to the Banking Committee, which bills are generally referred to as "money laundering" legislation. There are four titles of the Financial Institutions Regulatory and Interest Rate Control Act of 1978 (FIRICA), also known as the Safe Banking Act of 1978, which the Subcommittee intends to review and which we feel may lend support to our efforts to fight those criminals who use our financial institutions for their illegal gains. They are Titles I, VI, VII and XI (Supervisory Authority Over Depository Institutions; Change in Bank Control Act; Change in Savings and Loan Control Act; and the Right to Financial Privacy Act, respectively). Your response to the following questions and any other comments you feel are pertinent to the issues raised would be appreciated. Title I (Supervisory Authority Over Depository Institutions) In 1978 Congress gave banking regulators authority to impose civil money penalties for violations of laws, rules and orders. The new authority gave the agencies the flexibility they needed to impose penalties on individuals or institutions for violations which did not rise to a criminal violation. A. Specifically, is there any merit to considering giving the regulators authority to impose civil money penalties upon financial institutions for their failure to report under BSA, or should the Treasury continue to have the authority to impose such penalties? B. C. -4 To what extent could these powers be improved upon to lend support in appropriate cases to criminal law enforcement investigations? To what extent, if any, might the supervisory Titles VI and VII (Change in Bank Control Act and Change in Savings and Loan Control Act, respectively) The Safe Banking Act of 1978 corrected, to a great extent, one of the most glaring gaps in the regulatory structure of our depository institutions, i.e., the lack of control over transfers of ownership of banks and savings and loans between individuals or groups of individuals. However, in light of certain ongoing criminal activities, the Change in Bank Control Act may need to be amended. A. B. C. D. E. What modifications, if any, do you feel are Should more specific standards regarding what Should the agency be given more time in which to What is the standard used for the term "willful" under the Act? Does this definition create problems for the agency? If so, what are they? What problems, if any, is the agency incurring in obtaining sufficient relevant information of foreign nationals seeking to acquire U.S. depository institutions? Title XI (Right to Financial Privacy Act) As you know, the Right to Financial Privacy Act gives individuals notice of, and a chance to challenge, federal government agency requests for their bank records. In 1978 -5 this Committee sought to strike a balance between a customer's right of privacy and the need of law enforcement agencies to obtain financial records pursuant to legitimate investigations. Today, our goals are not any different from what they were in 1978. However, some law enforcement officials have suggested that the 1978 Act is at times an impediment to legitimate law enforcement investigations. Indeed, the Administration's bill, H.R. 2785, would deny the customer's financial privacy protection under the Act under certain circumstances. The Subcommittee would welcome your comments on the experiences you have had with right to financial privacy concerns, and whether in your opinion amendments to the Right to Financial Privacy Act are warranted. "Money Laundering Bills" As noted above, several bills dealing with money laundering, but having impact on various banking and other statutory law have been referred to the Banking Committee. The Subcommittee intends to review these proposals and would appreciate your comments and analyses of them. The bills we intend to review are: H.R. 2785 (Administration's bill), H.R. 1367 (McCollum), H.R. 1945 (Hubbard), H.R. 1474 (Hughes), H.R. 3892 (Wortley), and H.R. 4280 (Torres). Please provide the Subcommittee with 175 copies of your testimony, and 175 additional copies of the BSA report, no later than April 16, 1986. Please have your staff contact Earl F. Rieger, Counsel of the Full Committee staff, if there are any questions. STATEMENT OF HERB FRIEDBERG My name is Herb Friedberg. I am fifty-three years old and a former resident of Miami, Florida. Between 1980 and 1983 I worked as a property manager for an apartment complex in Miami where I came into contact with Jacques Behar, a resident of the apartment complex. Mr. Behar and myself became fairly well acquainted on a social and professional basis. In June, 1983, I lost my employment a result of a back injury. Several months later, I stopped receiving disability compensation and needed additional income. In December, 1983, Mr. Behar contacted me and asked if I could write him a personal check for $5,000.00 in exchange for U.S. Currency. I did this for Mr. Behar as a favor and received no compensation. Shortly thereafter, Mr. Behar asked me to purchase a cashier's check for him in the amount of $7,500.00 using my personal checking account in Miami. I did this for Mr. Behar who claimed that he was too busy to purchase the check himself. I received $50.00 from Mr. Behar for performing this service. During the first few months of 1984, I made additional purchases of cashier's checks for Mr. Behar to supplement my personal income. By March, 1984, I was purchasing cashier's checks on a weekly basis for Mr. Behar using cash he provided me in large amounts well in excess of $10,000. Mr. Behar instructed me to purchase these checks at different banks in Miami and to keep all check amounts under $10,000 at any particular bank. Το do this, I needed to open additional accounts under my own name |