Mr. WORTLEY. When you talk about $10,000 transactions involving lawyers, are you talking about attorneys also would be coming in with cash? Mr. PEDOWITZ. No, we had in mind specifically retainers, for example, in criminal cases. Very often these days retainers of criminal defense lawyers exceed $10,000 and certainly a very strong argument could be made under the administration bill and the Organized Crime Commission bill that that would be covered by the legislation that is being proposed. It would also cover, for example, real estate brokers who might be selling a house to someone who is a suspected member of the Cosa Nostra. Our view was that that was not an appropriate transaction to cover. Mr. WORTLEY. How many people you find going around with $10,000-substantial amounts of cash and putting it down as a downpayment on a house or even a retainer to their attorney? Mr. PEDOWITZ. It is my belief that an extraordinary number of people deal in cash and an extraordinary number of these transactions occur. Mr. WORTLEY. These are all nice, legitimate people? Mr. PEDOWITZ. Mr. Hadlow just described 60,000 transactions involved CTR's in his banks. When we looked at the Chemical Bank in 1977 there were thousands and thousands of transactions involving cash which were not money laundering transactions. We found roughly 10 examples of washing for narcotics dealers, and we found hundreds and hundreds of transactions which were perfectly legitimate. People go into banks, withdraw cash and pay for things with cash. Mr. WORTLEY. Amazing. Simply amazing. I guess I don't have any friends like that. Mr. PEDOWITZ. No, I deal in checks myself, but an extraordinary number of people deal in cash. Mr. WORTLEY. At least you don't have to worry about keeping your checkbook balanced. My time is expired. Thank you, Mr. Chairman. Chairman ST GERMAIN. Thank you, Mr. Wortley. Gentlemen, the administration bill would eliminate customer notification requirements when interagency transfers of personal records of an individual are requested. Obviously Mr. Harmon would agree with this since he helped draft the legislation. But I would ask the remaining three witnesses what their reaction is to that. Mr. Buffone. Mr. BUFFONE. I don't think I am prepared to comment, Mr. Chairman, because I am not familiar with that portion of the administration bill. Chairman ST GERMAIN. Mr. Hadlow. Mr. HADLOW. Would you repeat your question, please? Chairman ST GERMAIN. It is the one that states that when there are interagency transfers of records amongst the agencies, that the customer need not be notified. Mr. HADLOW. I do not know. So I will not comment. Chairman ST GERMAIN. If you find the ABA does have one, would you submit one? Mr. HADLOW. Yes, we will submit it in writing. [The information referred to can be found in the appendix.] Chairman ST GERMAIN. Mr. Pedowitz. Mr. PEDOWITZ. Our committee was opposed to that change, believing that if agencies are free to move the records around, the likelihood is that the sensitivity of those records and privacy concerns that we are founded on would be reduced. We feel that to the extent the Government wants to transfer them from agency to agency, notice should go to the customer, unless the agencies are going into a court and getting a court to agree that there is no need for immediate notice and that the various reasons for delayed notice are applicable. Chairman ST GERMAIN. Mr. Buffone. Mr. BUFFONE. I think I now understand the question a little better. We have spoken this morning at some length about the interface between the grand jury investigative process and the administrative investigative process. The Supreme Court in the Baggett and Sells Engineering cases decided last year, determined that it was improper for information derived in the grand jury proceeding to be shuffled around the Government without a judicial determination that there was particular need for it. We would support that position and take the realistic approach that much of the information we are talking about is going to be grand jury information. Chairman ST GERMAIN. Mr. Harmon, I should allow you to com ment. Mr. HARMON. Yes. Chairman ST GERMAIN. As to why the provision is in the legislation that was submitted. Mr. HARMON. Well, Mr. Chairman, it is a further recognition of what the Right to Financial Privacy Act already says which is that there are risks of flight, risk of destruction of records inherent in the notification process and merely by transferring records to trigger what would not already exist in the way of notice requirement would undercut what the Right to Financial Privacy Act already says in the way of an exemption. Chairman ST GERMAIN. However, if it is determined that a transfer should be made, doesn't this signify that there is reason to believe that there might be criminal actions involved? Mr. HARMON. Yes, I would agree with that. Chairman ST GERMAIN. If that is the case, isn't it burdensome to ask that the agencies then go to the court, to a judge and go through the proper channels to obtain an exemption from the notice requirement? Mr. HARMON. Well, I would say that depends on the circumstances, Mr. Chairman. Just so the record is clear, we, that is the Commission, did not participate in the drafting of that specific piece of legislation. Chairman ST GERMAIN. All right. Mr. HARMON. The Commission really took no position on it and I take no strong position on it myself. Chairman ST GERMAIN. Mr. Manton, do you have any questions? Chairman ST GERMAIN. Mr. Wortley. Chairman ST GERMAIN. We want to express our appreciation to the panel. I have a number of questions that we will submit to you in writing. We would ask for your additional assistance with those and also thank you for your appearance this morning. It has been beneficial. [The information referred to can be found in the appendix.] Chairman ST GERMAIN. Hopefully this will assist us in coming up with some legislation within the jurisdiction of this subcommittee and full committee that will be meaningful without overreacting, as Mr. Hadlow said we shouldn't do. Mr. HADLOW. Thank you, sir. [The letter from Mr. Berman to Chairman St Germain dated May 13, 1986 and the prepared statement of Mr. Berman on behalf of the American Civil Liberties Union can be found in the appendix.] Chairman ST GERMAIN. The subcommittee stands in recess to the call of the Chair. [Whereupon, at 12:15 p.m., the subcommittee was adjourned, subject to the call of the Chair.] [Additional supplemental material supplied for the record can be found in the appendix.] On May 14, 1986, the Subcommittee on Financial Institutions Supervision, Regulation and Insurance will continue its hearings on proposals to protect against financial institutions becoming havens for tax evaders, drug traffickers and launderers of funds derived from criminal activity. . As part of these hearings, the Subcommittee will conduct hearings on the several bills dealing with money laundering, including the Administration's bill, HR 2785. The other bills the Subcommittee intends to review are: HR 1367 (Mr. McCollum), HR 1945 (Mr. Hubbard), HR 1474 (Mr. Hughes), HR 3892 (Mr. Wortley), HR 4280 (Mr. Torres), and HR 4573 (Mr. Pickle). The views of the American Bankers Association on these proposals would be of value to the Subcommittee in its deliberations. It is requested, therefore, that you, or your designee, appear and testify before the Subcommittee concerning these matters on May 14, 1986, at 10:00 a.m. in Room 2128, Rayburn House Office Building. In addition to the bills mentioned above, 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). -2 The Subcommittee would appreciate any comments or opinions which you might have with respect to the aforementioned Titles and that you believe would provide guidance to us in these matters. Please provide the Subcommittee with 175 copies of your testimony no later than 24 hours in advance of your appearance. Please contact Earl F. Rieger, Counsel of the Full Committee staff, if there are any questions. Sincerely, Удивит Fernand J. St Germain |