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laundering, they cannot in and of themselves put an end to
In the Board's view, it is more
appropriate to strengthen enforcement through better utilization of current resources, and to strengthen prosecution by making money laundering a crime, rather than
to increase reporting burdens.
Because of the link between money laundering and cash-based criminal activity, the Board supports legislative efforts to limit the use of financial institutions by money
Four of the bills before the Subcommittee (H.R.
2785, 1367, 1474, and 1945) would make money laundering a
This would approach the problem more
directly; under present law, criminal activities are only indirectly tracked by monitoring currency transactions involving financial institutions.
Two proposed bills (H.R. 4573 and 3892) are aimed at giving enforcement authorities additional tools to prevent one common means of evading the Bank Secrecy Act--namely, structuring transactions involving more than $10,000 into multiple transactions of a lesser amount. The
Board supports efforts to limit such "structuring."
While we generally support the objectives of the
bills before the Subcommittee, it is important that their
provisions be closely evaluated to ensure that they pass a
reasonable cost-benefits test.
It is not possible to review
in detail all of the provisions of these bills at this
However, we do want to stress that in this attempt
to strengthen our laws, care should be taken to avoid
the collection of more information than is necessary.
such an exercise does not significantly contribute to law enforcement efforts, and only adds to the costs of banking,
which are passed on to the consumer.
With regard to specific bills, H.R. 1474 contains a provision that would require federal supervisory agencies to verify compliance with the Bank Secrecy Act in the course
order to make more cost-effective use of our resources, we
would like to retain the flexibility to determine the
parameters and frequency of such visits.
For these reasons,
we suggest that the provision not be adopted by the
H.R. 1474 would also provide that every exemption
to the Bank Secrecy Act's requirements be approved by Treasury. Under current regulations, it is the responsibility of the financial institution to determine whether its customers are eligible for such exemptions. We agree with the testimony by Treasury before this
Subcommittee that it is not desirable to shift this
determination to Treasury and away from the financial
institutions that, after all, are in a better position to know the identity and transactional habits of their customers. Such a shift would be unduly burdensome to Treasury and to the financial institutions that would have
to supply Treasury with the detailed information needed to make its determinations. Perhaps it would be better to retain current law which allows Treasury, by regulation, to
make any such changes it deems necessary.
H.R. 3892 would
require Treasury to review annually all exemptions to currency reporting requirements granted by a financial institution to its customers. We suspect that this
requirement might also prove unduly burdensome to Treasury and financial institutions.
H.R. 1474 would require that all outgoing
international wire and other electronic transfers be
reported on a Currency or Monetary Instrument Report. we generally believe that wire and other electronic
transfers should be included among the types of transactions
regulated by the Bank Secrecy Act, we agree with the testimony given by Treasury before this Subcommittee which stated that this particular reporting requirement should not
be imposed by statute.
We question whether the burden
imposed by the reporting requirement would be offset by the usefulness of the information that the reports would generate. Such information is more effectively acquired through Treasury's existing authority to require specific
financial institutions to provide copies to Treasury of all wire transfers taking place within a particular period of
H.R. 4280 would require a financial institution to keep special records relating to any cash transaction in excess of $3,000. It is already within Treasury's ability to require this type of record-keeping by regulation as needed, provided it would assist law enforcement efforts in ways that would justify the burden imposed on financial
H.R. 4280 would establish that the amounts subject
to currency transaction reporting requirements be at least $10,000. Currently, Treasury has the authority to vary this
amount as necessary to carry out its enforcement
We believe that it is useful for Treasury
to maintain its ability to respond to changing criminal practices rather than to mandate by statute, as this bill would do, a specific size of transaction to be covered.
H.R. 3892 contains a provision that would include
any foreign subsidiary or affiliate of a United States
commercial bank in the definition of financial institution
for purposes of the Bank Secrecy Act. This would appear to subject these entities to reporting requirements, including filing CTRS for cash or currency transactions of $10,000,
regardless of whether they involve U.S. dollars.
Treasury regulations, as we understand them, do not extend
the reach of the present reporting requirements beyond our
H.R. 3892 would, for the first time, give extra
territorial effect to the reporting requirements, with the likely result of placing u.s. banks, in some instances, in conflict with local law and raising important areas of friction with many host countries who have been particularly sensitive to the extraterritorial application of u.s. law.
Title I, Supervisory Control Over Depository Institutions
You asked that we revisit certain titles of FIRICA to determine whether they too could be strengthened to keep
criminal elements from using financial institutions for
The basic thrust of Title I is to provide the bank regulatory agencies with enhanced tools for combating violations of banking laws and unsafe and unsound activities. Title I authorizes, among other things, the use of civil money penalties fo violations of various banking laws (including the Board's Regulations D and o, Section 23A of the Federal Reserve Act, and the Bank Holding Company Act) and provides for enforcement authority against individuals, as opposed to institutions. 1
with regard to the authority of the bank regulatory agencies to take enforcement actions directly against individuals, I note that the U.S. Court of Appeals for the