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encompassing proposals in the Administration's bill and by enacting the practical approach embodied in H.R. 4573. We believe that H.R. 4573 along with certain provisions in H.R. 1945 represent these universally acceptable solutions.
The penalties in H.R. 1945 attach to a domestic financial institution
and a partner, director, officer, or employee of a domestic financial institution. H.R. 4573 extends the reach of penalties to persons outside
the financial institution. Under H.R. 4573, any person who causes or
attempts to cause a domestic financial institution to fail to file a report
required by the Bank Secrecy Act or to file a report containing a material
omission or misstatement of fact would be subject to civil penalties in the form of the forfeiture provisions. United States coin, currency, monetary
instruments, or any other interest property traceable to such instruments,
coin or currency could be seized and for feited to the U.S. Government.
We believe the forfeiture proposal presents an issue which
needsclarification: that is, the extent of the reach of forfeiture should
be more precisely defined.
The forfeiture subsection covers funds and assets that are 'traceable"
to the coin or currency involved in a violation or attempted violation of
the Bank Secrecy Act.
The limits of the "reach" of forfeiture need to be
Even though it is the intent of the proposal that no property
or interest in property shall be forfeited if it can be established that
the owner is a bona fide purchaser for value who took without notice of the
violation; or if the violation was not willful, the language offers no
protection or immunity to innocent sellers or innocent parties to a
transaction who accept collateral that may indeed be "tr aceable" to tainted
funds. While the Association supports the concept of forfeiture as a
method of arresting the process of legitimization of illicit drug profits, we offer this support with a concern for the need to protect all innocent
participants to legitimate business transactions.
Both H.R. 1945 and H.R. 4573, focus on subjecting violators of the Bank Secrecy Act to civil penalties, whether inside or outside of the financial institutions. H. R. 1945 would subject a bank and/or its personnel to civil penalties in the amount of the transaction for Bank Secrecy Act violations. Under H.R. 4573, a person who causes a particular
violation of the Bank Secrecy Act can be penalized civilly in the amount of
the transaction involved. Because both H.R. 1945 and H.R. 4573 amend Title
31 of the United States Code, the criminal penalties found in Section 5322
of Title 31 will not only apply to the bank and its personnel, but also to
the person outside the bank.
The amended Title 31, along with use of the
new forfeiture provisions as set out in H.R. 4573, gives the law
enforcement community and financial institutions an effective weapon against two elements of the drug traffic the per son and the proceeds.
In addition to the legislative changes, you requested comment on proposed changes to the Financial Institutions Regulatory and Interest Rate
Control Act, particularly title I, title VI, and title XI.
As we have already stated, we do not believe there is any need to
amend title XI, the Right To Financial Privacy Act. Title VI, the Change
in Bank Control provisions, has already been discussed in the context of H.R. 3892. We do not believe there is a need to make changes in Title I
(Supervisory Powers) or in title VI (Change of Bank Control) at this time.
However, if the Congress and the Supervisory agencies believe changes are necessary to combat drug trafficking, we would be happy to work with
Congress and the regulators on any possible changes.
I see United States V. Anzalone, 766 F.2d 676 (1st Cir. 1985), United States v. Denemark, 779 F.2d 1559 (ilth Cir. 1986) and United States v. Varbel, 780 F.2d 758 (9th Cir. 1986) which have all held that structuring currency transactions to avoid the reporting requirements was not a crime. In fact, the court in the Varbel case pointed out that:
(I]f Congress or the Secretary wish to impose a reporting duty on financial institution customers, they must do so in clear, unambiguous language. We cannot impose the duty by implication.
2See United States v. Tobon-Builes, 709 F.2d 1092 (11th Cir. 1983) and United States v. Thompson, 603 F.2d 1200 (5th Cir. 1979).
3781 F.2d 1432 (9th Cir. 1986). Here, an individual employed persons as "runners" who each day carried large sums of currency to various banks and converted the cash into cashier's checks or other negotiable instruments. The currency was apparently derived from cocaine trafficking. The court on the authority of the Varbel decision reversed the convictions on the charges of conspiracy to violate Section 5313.
The court concluded that "the currency reporting requirements of 31 U.S.C. 5313 do not apply to multiple transactions, each involving less than $10,000 but aggregating to make more than $10,000." 781 F.2d at 1438.
on behalf of the
ASSOCIATION OF THE BAR
MONEY LAUNDERING LEGISLATION
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
UNITED STATES HOUSE OF REPRESENTATIVES
May 14, 1986
Mr. Chairman and Members of the Subcommittee. I am Chair of the Committee on Federal Legislation of
the Association of the Bar of the City of New York.
With me is Lawrence B. Pedowitz, a inember of the
Committee who is the principal author of the Report which the Association has issued concerning money laundering legislation. The Association consists of approximately 15,000 attorneys, most of whom practice in the New York City area.
We appreciate this opportunity to present the Association's views concerning the important but
difficult subject of money laundering.
entitled Money Laundering:
An Analysis of Legislative
Proposals, represents the culmination of an extensive and exhaustive examination of the issues posed by money laundering legislation. Since we are unable
to include all of our analysis and recommendation in
our statement, we respectfully request that the
full Report be included in the Subcommittee's record.
Of course the views contained in our Report
are those of the individual members of the Committee
on Federal Legislation and not those of their professional affiliations or clients. Nevertheless,
it is relevant to note that the Committee's members