c) d) e) to require that any objections to requests for to authorize U.S. District Judges to attend to provide that a deposition taken in a foreign country and recorded in a manner other than a verbatim record is not inadmissible simply because it is not verbatim. 7. Modify costs statutes to authorize the trial court to impos on defendants costs of investigation as well as prosecution. 8. Consider amendment of the Speedy Trial Act to designate as excludable time the period between the issuance of a request for international judicial assistance and its execution by the foreign judicial authority or until such time as the issuing court determines that there is no reasonable expectation of receiving such assistance. The tremendous growth in the importance of internationl crimina activity in the United States is a relatively recent phenomena. The Department of Justice is fully aware of the magnitude of this problem, and intends to play a leadership role in developing measures and program to effectively deal with it. Such measures and programs, of course, wil be significantly dependent on Congressional support. In this respect, we are very pleased with this Subcommittee's interest in the problem and the fine work it and its fine staff are doing. Violent Crimea innlude: homicide, rape, kidnapping, explosivos and weapons offennos, terrorists. NOTE: A fugitive whose extradition was sought for more than one crime category la Bepartment of Justice STATEMENT OF GLENN L. ARCHER, JR. ASSISTANT ATTORNEY GENERAL TAX DIVISION U.S. DEPARTMENT OF JUSTICE CONCERNING LAW ENFORCEMENT PROBLEMS ARISING FROM FOREIGN BANK SECRECY LAWS AND PROPOSED REMEDIES BEFORE THE SENATE PERMANENT SUBCOMMITTEE ON INVESTIGATIONS COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE MARCH 15, 1983 Mr. Chairman and members of the Subcommittee: Thank you for the opportunity to appear before you and present the views of the Tax Division regarding the use of offshore banks and other foreign entities by United States citizens. We welcome these hearings in light of the increasing misuse of offshore jurisdictions in order to circumvent domestic law, including our tax laws. At the outset, I would like to place the role of the Justice Department's Tax Division in perspective. The detection, selection and development of criminal tax cases is primarily the responsibility of the IRS. The Tax Division is responsible for authorization of prosecutions and grand jury investigations of tax offensesd and supervision over prosecutions and investigations conducted by the United States Attorneys. In a number of cases, the Tax Division assumes responsibility for conducting the grand jury investigation or prosecution. These cases often involve offshore transactions. Our staff also works closely with the Criminal Division, particularly the Office of International Affairs, in treaty negotiations and advises the Treasury Department's International Tax Counsel concerning exchange of information provisions of tax treaties. In addition, we assist United States Attorneys with regard to foreign information gathering and evidence problems, including the initiation of formal requests under tax conventions and mutual assistance treaties. The use of offshore banks, corporations, trusts and other entities located or formed in foreign countries for illegal activities creates some of the most difficult and vexing problems facing those of us in tax enforcement and litigation today. These cases include the laundering of profits from both legal and illegal business activities and the use of nominee entities and fictitious transactions to create tax shelter deductions or to promote various tax protestor schemes. The money laundering problem is not, of course, confined to the tax area -it impacts on the enforcement of many other areas of criminal priority, such as narcotics trafficking, securities fraud, and organized crime. Overall, money laundering has become one of the most important and vital aspects of criminal activity generally. In solving crimes involving offshore banks, the investigator and prosecutor are faced with several significant difficulties: first, discovering where and when money laundering, fictitious transactions and sham entities have occurred or been used; second, obtaining sufficient information and leads to follow the complex schemes that are employed; and, third, securing documents, testimony and other evidence than will be admissible in court to prove the criminal violations. Enormous resources, both investigative and prosecutorial, must be committed to ferrett out and convict the perpetrators of these unlawful offshore activities and, in the case of tax crimes, additional resources are necessary to proceed with the audits and investigations necessary to determine civil tax liabilities and thereafter to collect such liabilities. Following hearings before the Ways and Means Subcommittee on Oversight in 1979, the Commissioner of Internal Revenue, the Assistant Attorney General, Tax Division, Department of Justice, and the Assistant Secretary of the Treasury (Tax Policy) asked Richard A. Gordon to accept an appointment as IRS Special Counsel for International Taxation and to conduct an in depth study of the tax haven problem. In January, 1981, Mr. Gordon submitted a report entitled "Tax Havens and Their Use by United States Taxpayers--An Overview" that has come to be known as the "Gordon Report. A finding of the Gordon Report was that despite the Government's efforts to curtail the use of offshore tax havens for tax evasion and avoidance purpose, legal and illegal use of tax havens appears to be on the increase. . by taxpayers ranging from large multinational companies to small individuals to criminals [who] are making extensive use of tax havens. The Gordon Report also found that tax havens thrive largely due to the presence of foreign banks, the prime subject of this Subcommittee's hearings. Despite these findings, too few people, both in and out of Government are adequately informed of the pervasiveness of the use of tax haven countries for money laundering and other illegal activities. As in many areas, and I think this is one of them, it is frequently difficult to combat a crime problem without a strong public awareness and concern. In view of its dimensions, it is ironic that this problem has not received more attention. Reliable overall statistics on money laundering and fictitious transactions for tax evasion are not available, but the best estimates are that we are not dealing with millions of dollars or hundreds of millions or even a few billions. The scope of the problem is probably in the many billions of dollars annually. An indication of the scope of the problem is suggested by statistical information gathered by the Federal Reserve System of net cash surpluses flowing into or out of particular areas. In Miami, the net cash surpluses had grown dramatically as drug trafficking become widespread and prevalent in the area. An enforcement project in Florida directed at money laundering, called Operation Greenback, in which the IRS, the Justice Department and other agencies participated, caused some dramatic shifts. In an adjacent area, for example, the net cash surpluses grew from 304 million to 835 million in a single year. believed that this increase occurred due to the diversion of funds from Miami as the result of the success of Operation Greenback. It is Looking at it another way, the small island of Anguilla not more than three years ago had only three banks, but today reportedly has 96. Of the 96, only one apparently has a vault. Paper banks in the Mariana Islands, a U.S. Trust Territory, are being actively marketed in the United States. Brokers of these banks often intimate, without specifically stating, that these offshore banks can be used for illegal purposes or concealment. As an illustration, one piece of promotional material advertises the advantages of being the first on the block to own your own bank. It describes a means of increasing net worth by recycling of funds and concludes -- and I quote: "Theoretically this process may be recycled over and over again; however, its overall effect after several recyclings would appear fraudulent. Therefore, Therefore, this technique should be used like |