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Special Agent Chase further advised that the "float" period enjoyed by banks on monetary instruments used to launder currency varies with the type of instrument purchased and the destination of the instrument itself. Typically, cashier's checks purchased by money launderers and sent to banks for collection outside the United States result in a "float" of two to four weeks depending on the location of the foreign bank and the efficiency of that bank in processing and collecting on these instruments. In some cases, however, this period is much longer due to a variety of

so that a float can extend for periods of up to six months. Money orders result in a much shorter float of only two to three days due to the bank's payment to American Express through domestic banking channels for the money orders sold by the bank for American Express. It should be noted that the float experienced by American Express on money orders is approximately the same as that experienced by the bank's for cashier's checks.

I hope these responses are satisfactory and useful to the Subcommittee. I would be pleased to provided further information if necessary.

Sincerely,

LEON B. KELLNER
UNITED STATES ATTORNEY

BY:

TED E. BANDSTRA
ASSISTANT UNITED STATES ATTORNEY

STATEMENT OF

RICHARD C. WASSENAAR

INTERNAL REVENUE SERVICE ASSISTANT COMMISSIONER (CRIMINAL INVESTIGATION)

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
SUPERVISION, REGULATION AND INSURANCE

OP THE

COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS

U.S. HOUSE OF REPRESENTATIVES

ON THE
HEARING TO PROTECT AGAINST
FINANCIAL INSTITUTIONS BECOMING
HAVENS FOR TAX EVADERS, DRUG TRAFFICKERS
AND LAUNDERERS OF FUNDS DERIVED FROM

CRIMINAL ACTIVITY

APRIL 16, 1986

Introduction

Thank you for the opportunity to testify concerning the Internal Revenue Service efforts to use the laws within its

jurisdiction to attack money launder ing.

1

As the Assistant Commissioner (Criminal Investigation) for

the Internal Revenue Service. (IRS), I am the principal advisor to the Commissioner in the areas of planning, coordinating and evaluating IRS criminal investigative activity. Criminal Investigation has responsibility for the investigation of alleged violations of the Internal Revenue Laws and related offenses, certain aspects of 31 USC (Bank Secrecy Act) and the protection of Service personnel and property in appropriate situations.

We at the Internal Revenue Service believe that devoting

substantial resources to the investigation of money launder ing is appropriate not only because of the significant amount of revenue that can be collected but also because the Services's tax administration expertise can be focused on the motive for drug trafficking the huge illegal profits invcl ved. In order to stem the flow of drugs we must attack the movement of funds generated by this illegal activity.

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Money laundering is big business.

It is also a business with

varied clientele:

drug dealers saddled with millions of dollars

in cash per week; ostensibly legitimate businessmen trying to evade taxes; giant corporations setting up slush funds for bribes and kickbacks; and ordinary people trying to hide their assets.

We make every effort to investigate and prosecute those

guilty of tax crimes. But when that is coupled with other, perhaps more sinister crimes aga inst society, there is a clear-cut obligation on our part to combine our resources with those of

other agencies to identify and prosecute the perpetrators.

Bank Secrecy Act

I would like to begin with a brief review of the Bank Secrecy

Act in order to place our activities in perspective.

As a result of concerns expressed by law enforcement over the

laundering of illegally generated proceeds through domestic banks

and foreign tax havens, Congress passed the Bank Secrecy Act in

1970 (P.L. 91-508).

The Act provided four basic tools to identify

those who attempt to conceal their participation in crimes where substantial amounts of currency are generated, and to provide a basis to prosecute those who fail to comply with its requirements. The Act focuses on individuals involved in the flow

of currency, as opposed to those involved in the substantive

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violations that generated the currency. Legislative history of the Act shows that Congress explicitly recognized the value of the Act to have a high degree of usefulness in criminal, tax, or

regulatory investigations or proceedings.

The four basic tools provided:

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A paper trail of records that must be ma inta ined by financial institutions for up to 5 years. These records include copies of checks, drafts, money orders, and

customer identification information,

o A Currency Transaction Report (CTR) that must be filed

by banks and other financial instituticns whenever a
currency transaction over $10,000 occurs.

A Currency or Monetary Instruments Peport (CMIR)

whenever currency or monetary instruments over $10,000

are taken into or out of the U.S.

Offenses relating to

the transportation of currency across v.s. borders are investigated by U.S. Customs,

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A Foreign Bank Account Report (FBAR) is required

whenever a person has a financial interest in or
signature authority over a foreign financial account
in excess of $10,000 in value.

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