financial records to a Federal agency which the financial institution believes may be relevant to crimes by or against the institution or a financial institution supervisory agency, violations of the Bank Secrecy Act in title XXXI, violations of the proposed new money-laundering statute, and certain serious drug felonies.

The effect of this amendment would be simply to allow a bank to fulfill its civic duty and provide information which it has reason to believe may be relevant to one of these very serious offenses without risking civil liability under the RFPA or having to notify the customer of its cooperation.

Section 3 also provides for preemption of this field, thus avoiding the possibility that a bank employee might incur civil or criminal liability under a more strict State bank secrecy law for cooperating with Federal law enforcement authorities.

Section 5 of H.R. 2785 amends the Bank Secrecy Act to give the Secretary of the Treasury summons authority for financial institution witnesses and documents in connection with Bank Secrecy Act violations.

Such authority was another recommendation of the President's Commission on Organized Crime. It would allow the Secretary to summon a financial institution employee who may have knowledge of a violation of one of the recordkeeping or reporting requirements of the BSA and require the production of relevant documents.

We think authority is essential to investigate civil violations of the BSA and to assess an appropriate civil penalty once a violation is discovered.

Briefly, let me now discuss some of the other bills before the committee, starting with H.R. 1367 and H.R. 1945. These bills set out the new money laundering offense recommended by the President's Commission on Organized Crime.

We examined that approach and, although the money-laundering offense in H.R. 2785 is derived from it, we think there are problems with H.R. 1367 and 1945.

First, they would only reach money laundering through financial institutions. That is simply too restrictive and invites money launderers to go every place else in the country, and escape exactly what this Congress intends to set forth.

It is too restrictive and would not reach money laundering by such means as buying out legitimate businesses or purchasing jewelry for resale.

Second, H.R. 1367 and 1945 would punish one who was merely negligent in engaging in a transaction involving the proceeds of a crime. This is much broader than a reckless disregard standard and, in this context, is inappropriate for criminal liability.

Third, these bills only cover money laundering derived from some Federal felonies. They would not, for example, cover money laundering derived from espionage.

Fourth, these other bills would not reach money laundering through wire transfers. H.R. 2785, by contrast, covers wire transfers. That is important in light of such a means of moving money to and from offshore banks.

H.R. 1367 and 1945 both contain provisions giving the Secretary of the Treasury summons authority over certain bank records and

personnel. They are similar to the summons authority in section 5 of H.R. 2785, but not identical.

For example, H.R. 1367 and 1945 would allow Treasury to summons records for both criminal and civil investigations. We think this authority should be limited to civil matters. Moreover, H.R. 1367 provides that Treasury may not delegate its summons authority.

As Mr. Keating noted in his testimony last week, Treasury has delegated Bank Secrecy Act enforcement authority to a number of agencies like the Comptroller of the Currency and delegating summons authority is a practical necessity in everyday matters of conducting law enforcement activities.

H.R. 2785 contains what we think are fully adequate restraints on the use of summons authority by providing that a supervisory level official of an organization that enforces the Bank Secrecy Act must approve a summons. An agent or bank examiner in the field could not issue one.

Turning now to H.R. 1474, that bill sets out a new money laundering offense that has many of the same problems as are in the offense in H.R. 1367 and H.R. 1945. It would be limited to laundering money derived from many, but not all, Federal felonies.

The laundering would have to be done through a financial transaction at a financial institution and would thus not reach money laundering through other methods.

In addition, the definition of "financial transaction" is too narrow. It would exclude such things as purchasing bank stock and placing funds in escrow as collateral for a loan.

I would also note that sections 3 through 5 of H.R. 1474 contain amendments to the Bank Secrecy Act which are of primary concern to Treasury.

Let me say, however, that Treasury feels section 3, which would require the Secretary to approve every Bank Secrecy Act reporting exemption, would be unduly burdensome.

As you know, current regulations allow the banks to exempt certain cash deposits from retail businesses from the reporting requirements. If section 3 would be burdensome for Treasury, section 4 of H.R. 1474 would be terribly burdensome for banks.

It would require the reporting of every outgoing international wire transfer. That would require financial institutions to bury Treasury in a mountain of reports, most of which would be useless. Moreover, Treasury already has the authority to require the reporting of wire transfers and can order the reporting of classes of transfers it deems useful.

Before leaving H.R. 1474, let me mention section 6. That section deals with the problem of persons about to board international flights with large amounts of cash that they had not declared, as required under the Currency and Foreign Transactions Reporting Act.

Before 1984, 31 United States Code 5316(a) punished one who transports such cash or other types of monetary instruments. There was no attempt provision and some courts had held that no violation had occurred until the person was on the verge of boarding the plane, at which time apprehension was difficult.

The Comprehensive Crime Control Act of 1984 added an attempt provision to 31 United States Code 5316(a), thus resolving this problem, so section 6 of H.R. 1474 is now unnecessary.

Turning now to H.R. 4573, introduced by Congressman Pickle, it is aimed at overcoming problems of smurfing, or structuring monetary transactions by breaking up what is essentially one transaction into a series of smaller transactions, to avoid reporting requirements under the Bank Secrecy Act.

In my prepared statement, I set out a number of recent cases that have severely hampered our ability to attack smurfing. Clever defendants seem to be able to stay one step ahead of the Treasury and Justice and the Bank Secrecy Act.

Justice and Treasury are working closely to close some of these regulatory loopholes, but there is just a little bit that can be done by regulation.

Legislation is clearly necessary. H.R. 4573 also deals with smurfing problems by prohibiting the structuring of financial transactions for the purpose of evading reporting requirements.

We endorse this bill as it relates to the structuring problem, but let me emphasize that we do not see it is a substitute for H.R. 2785. Filing reports on monetary transactions are important and at the moment changes in these reporting requirements are needed.

But punishing people who fail to file reports to live up to these requirements, we are approaching the problem in a very indirect

way.

Turning to H.R. 4280, I note that, among other things, it would amend the Bank Secrecy Act to eliminate the discretion presently granted to Treasury to determine when currency transaction reports must be filed by financial institutions and persons who participate in transactions with financial institutions.

Presently, 31 United States Code 5313 provides that they must be filed on an amount, denomination, or amount and denomination, or under circumstances the Secretary prescribes by regulation. The present regulation sets the amount at $10,000 or more.

However, the Secretary could lower that amount, and several ideas are presently being considered under which such a reduction could to be used to deal with the structuring problem I talked about earlier.

H.R. 4280 would eliminate this possibility by setting the amount above which a CTR must be filed at $10,000 or more. Consequently, we oppose this bill.

Mr. Chairman, rather than continue to take up your valuable time with detailed references to differences in these bills, we would be willing to answer any questions you might have on our statement or anything else we might be able to help you with.

[The prepared statement of Mr. Trott on behalf of the Department of Justice can be found in the appendix.]

Chairman ST GERMAIN. Now we will hear from Mr. Coward.

STATEMENT OF ALWIN C. COWARD, ACTING DEPUTY ASSISTANT ADMINISTRATOR FOR INTELLIGENCE, DRUG ENFORCEMENT ADMINISTRATION, DEPARTMENT OF JUSTICE

Mr. COWARD. Thank you, Mr. Chairman, members of the subcommittee, for the opportunity to appear here today.

I would like to take a few moments since DEA has not had the opportunity to appear here before, to briefly acquaint you with our agency, what we do, and a little bit about how we do it, and then get into the money laundering operation.

DEA is a fairly small agency with a large mandate. We have three principal functions. No. 1, among those is enforcement of the Controlled Substances Act, and we do that with the FBI, and with other agencies. DEA is also responsible for maintaining an intelligence network, programs which service the Federal enforcement community, State and local communities, and to a large degree supports our counterparts overseas. Third, we have a diversion investigative arm which is responsible for the investigation and registration of licit producers of drugs, and the diversion from those licit producers to illicit markets.

Our agent strength is 2,500 agents. We are spread fairly thin, 120 offices in the United States, and offices in some 42 countries over

seas.

We stay busy.

Chairman ST GERMAIN. Mr. Coward, you state that your work force is now at some 2,500?

Mr. COWARD. Another roughly 2,000 support personnel.

Chairman ST GERMAIN. 4,600. What was it 10 years ago, and 5 years ago?

Mr. COWARD. I don't have the exact figure, but it was substantially less.

Chairman ST GERMAIN. Well, let me rephrase the question.

Has your work force increased, remained stable, or decreased in the last 5 years?

Mr. COWARD. Gradually increased, not a remarkable increase in the last 5 years, but in the hundreds of agents, at least.

Chairman ST GERMAIN. Now, did this increase occur along with or concommitant with increased duties, or have the mandates-has your mandate remained constant?

Mr. COWARD. Our mandate has been fairly constant. It is just that the drug trafficking has continued to increase because of the-

Chairman ST GERMAIN. This last line then, drug trafficking would have increased in the past couple-during a 5-year period? Mr. COWARD. Certainly.

Chairman ST GERMAIN. If you had a graph, by what percentage would drug trafficking have increased in the past 5 years, for instance?

Mr. COWARD. That would be difficult to graph, sir, because there is no way we can make an accurate statement as to the level of the drug trafficking.

We know our efforts, and we know what they have produced.

Chairman ST GERMAIN. Last time: Has your increase-or has the increase in your work force paralleled what you feel the increase in drug trafficking has been?

Mr. COWARD. In that they have both escalated, yes, sir. Whether or not it has been pro rata, I am not sure, because we don't have an accurate handle on it.

Chairman ST GERMAIN. You don't have a personal opinion?

Mr. COWARD. The drug trafficking is endless. We need all the people we can get in order to attack the problem.

Chairman ST GERMAIN. Your work force has increased in the past 2 or 3 years by how many hundred?

Mr. COWARD. Several.

Chairman ST GERMAIN. 1,000?
Mr. COWARD. No, sir.

Chairman ST GERMAIN. 500?

Mr. COWARD. Probably, or slightly less.
Chairman ST GERMAIN. Slightly less?
Mr. COWARD. Yes, sir.

Chairman ST GERMAIN. Thank you.

Mr. COWARD. In any event, our 2,500 agents do stay busy. Last year, we made 15,000 arrests, and we seized 300 or so clandestine laboratories in this country. We seized 38,000 pounds of cocaine, 1.6 million pounds of marijuana, 980 pounds of heroin, and we seized more than $250 million in trafficker assets, so we do stay busy.

In addition to these principal programs, DEA assists and supports other Federal, State, and local agencies and foreign governments with training, crop eradication programs, and other nonenforcement programs.

We are encouraging increased forfeiture legislation among all the jurisdictions we work with, because it is a good technique to attact the drug trafficking problem.

Overseas, we work under the direction of the Secretary of State and U.S. Ambassadors. Also overseas, in our role we try to deal with groups of nations as much as possible.

We work very closely with Interpol, the United Nations, regional geographic organizations, and principally with our counterparts, the law enforcement officials of those countries. We seem to share a common bond, and we work very well on a working level basis. Today's drug traffickers are truly international entrepreneurs and, because of this, international cooperating in investigating cases, obtaining evidence, and coordination prosecutions is crucial to DEA and Justice Department enforcement efforts.

DEA has encouraged bilateral mutual legal assistance treaties, other bilateral agreements, and a number of other cooperative arrangements to provide us with better intelligence and with evidence which might otherwise be unavailable because of bank secrecy laws.

Most of our overseas work is man-to-man, police officer-to-police officer. We are in the trenches with them.

As you requested, I would like now to expand a bit on the subject of money laundering of drug profits and the Federal Government's seizure and forfeiture of drug trafficker assets.

Financial investigations leading to the seizure and forfeiture of assets are a crucial part of narcotics enforcement. The Comprehen