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money laundering transactions.

Changes should be instituted in

agency procedures to provide for prompt investigation of

suspect transactions.

Our review indicates that while the Bank

Secrecy Act is a potentially powerful weapon in the fight

against money laundering, delays in the reporting and

processing of information often render it ineffective.


permissible 15 day delay in filing CTR's and the administrative mechanism for processing the information within the Treasury

Department leads to stale information in the hands of law

enforcement authorities.

We recommend that consideration be given to requiring CTR'S

within one business day of the transaction. A possible way of providing such prompt reporting is to have bank customers

complete and sign a postcard form at the time of the

transaction, with their identification verified by the teller.

Additionally, it may be possible to have financial institutions inform law enforcement agencies of certain types of suspect

transactions telephonically within one business day.

It should

be noted that the comments of the Section of corporation,

Banking and Business Law on these two proposals indicate that their implementation may cause some difficulty for the banking


We also recommend that special procedures be used to linit

the effectiveness of cashier's checks and treasurer's checks as

money laundering vehicles.

We believe that consideration

should be given to implementing procedures which would reduce the reporting requirement for such instruments to $2.000 when

purchased by non-account holders and requiring that more than

one business day be involved to complete any transaction. This would greatly reduce the attractiveness of such instruments to

money launderers.

Our second recommendation is that the number of personnel

available to the Department of Treasury and Attorney General to

investigate compliance with the Bank Secrecy Act and to investigate potential money laundering transactions be increased. Figures generated by the interim report of the

President's Commission on Organized Crime indicate that the Bank Secrecy Act has been grossly under-utilized. We strongly support increases in investigative and administrative personnel

in order to render the Bank Secrecy Act a more potent weapon.

it is our view that effective investigation of money laundering

activities is a time consuming process.

We believe that

increasing the number of personnel assigned to money laundering

investigations is the single most effective step that can be

taken to combat money laundering.

Our third recommendation is that the administrative

regulations and the Bank Secrecy Act itself should be amended to require additional reporting of foreign transactions, including certain transactions not involving currency or monetary instruments. Most large sophisticated money

laundering transactions use a foreign account or foreign transactions as part of the laundering scheme. The typical

transaction involves the expatriation of funds in the form of

cash and their repatriation in a form that is less detectible. A reporting requirement, similar to that imposed on domestic

currency and monetary instrument transactions relating to

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letters of credit and similar financial instruments would

provide an effective means for tracking such transactions.

The section recommends that wire transfers of funds from

foreign countries and the receipt of letters of credit or

similar guarantees of loan repayment be reported.

An exemption

would, of course, need to be included for routine business


The section on Corporation Banking and Business

Law has commented on this section of our report indicating that

the strain on major financial institutions would be

considerable from such reporting.

Additionally, we encourage

continued efforts to obtain agreements with foreign governments

as the most effective ways of combatting this prong of the

money laundering process.

In addition to these affirmative recommendations, we

appreciate the opportunity to offer to this committee our views

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recommendation is that any new offense include a mens rea

element that prohibits only the intentional and knowing use of financial transactions designed to conceal criminally derived

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offense which is based on a "reason to know" or "reckless

disregard" standard as overly expansive.

The use of the

reckless disregard standard in H.R. 2785. H.R. 2786 and s. 1335 which are each similar to the standard proposed by the

President's Commission on Organized Crine creates too

far-reaching a criminal offense.

We additionally oppose the provisions of H.R. 2785, and H.R. 2786 that define unlawful activity as including any state or federal felony. The extremely broad definition of unlawful activity will greatly expand the authority of federal agencies to investigate and prosecute what have formerly been state law offenses. virtually any crime with an economic motive would be

subject to federal prosecution.

It goes without saying that

any such economic crime would result in some disposition of the proceeds, therefore creating a money laundering offense under the proposed legislation. Additionally the amendments of the

Comprehensive Crime Control Act of 1984 would provide expansive


wire-tap authority for investigation of any such crime. ABA believes that this is neither necessary or desirable.

We believe that there is a need to strengthen, simplify and streamline statutes relating to money laundering. We question, however, whether any compelling need has been demonstrated for

the passage of legislation as sweeping as that proposed.

It is

our belief that the principle problem is detection and not prosecution of money laundering activities. We have detailed in our report a list of available statutory bases for prosecuting money laundering activities. As the recent court

of Appeals decisions in United States v. Anzalone, 766 F.2d 676

(1st cir. 1985) and United States v. Varbel. 780 F.2d 758 (9th cir. 1985) indicate, many of the problems in prosecuting money laundering could be eliminated by cedrafting the Treasury Department cegulations implementing the Bank Secrecy Act. The problem of structured transactions could be dealt with in this way without the need for sweeping legislation that would encompass far more than the evil of structured transactions.

We oppose the creation of any amendment to Title 18 $2 which would create a new offense of knowingly facilitating the

commission of an offense by another.

There has been no

demonstrated need for such a sweeping revision of the basis of federal criminal responsibility. Both the general conspiracy statute, 18 U.S.c. 5371, and the existing aiding and abetting statute, 18 U.S.c. 52, are sufficient means of combatting money laundering. Our specific objection is that the new offense departs from the well-established concepts of both legislation and case law which have recognized that knowledge of the commission of a crime, coupled with association of a criminal, is not a sufficient basis for a criminal conviction.

We oppose the proposed amendment to Rule 17(c) of the

Federal Rules of Criminal Procedure which would permit direction to a subpoenaed party not to disclose the existence of the subpoena to any other party. While our objection to this proposal is broader, we are specifically opposed to a prohibition on a witness contacting an attorney regarding the


We are opposed to Section 8 of the Administration's bill which would create a new offense of receiving the proceeds of a

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