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brought to their consideration of this problem diverse

professional backgrounds and experience.

We include

government attorneys, former prosecutors, staff member

of the American Civil Liberties Union, law professors,

and banking lawyers. Despite these different perspectives from which we approached this issue, we arrived at a broad consensus concerning where the

balance should be struck between legitimate law enforce

ment concerns and other important societal interests.

Summary of Conclusions

Money laundering is a growing national problem.

Its existence contributes significantly to the vitality

and profits of organized crime in the United States,

especially to narcotics trafficking.

We believe that

this Subcommittee is rightly focusing upon money

We

laundering's pervasiveness and its ill effects. also agree with the Administration and others who believe that new legislation is needed to combat money

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interests be narrowly tailored so as not to encroach unnecessarily on other societal interests, such as the

protection of individual rights of privacy.

In our view, most of the pending legislative

proposals, and in particular H.R. 2785, are overbroad

in a number of important respects and cannot be suffi

ciently justified by law enforcement concerns. We believe that if, after enactment of narrower legislation, experience dictates the need for more expansive legislation, amendments can be proposed.

We principally urge, in summary, that federal legislation in this area should be subject to a number

of key restraints.

First, we recommend that a federal

offense of money laundering be limited to those instances

in which the money laundering:

(i) is undertaken

"knowingly"; (ii) utilizes a bank or other "financial institution"; and (iii) involves the cash proceeds of federal offenses that qualify as "racketeering activity"

under the Racketeering Influenced and corrupt Organiza

tions ("RICO") statute.

Second, although we agree that

there is some need to liberalize the disclosure provi

sions of the RFPA, we do not believe there is any

justification for permitting voluntary disclosure by

financial institutions of customer financial records

beyond certain derivative information.

We recommend

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that voluntary disclosure be strictly limited to identifying information concerning the customer and account involved in, and the nature or specifics of, the suspected illegal activity. Third, we recommend against creating a receipt of criminal proceeds offense which

would criminalize on a federal level conduct of a much

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The need for a money laundering statute seems plain. As the Commission Report makes evident, nothing short of new legislation will "strike directly at the

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ing requirements of the Bank Secrecy Act ("BSA") by

completing CTRs and other required forms "can operate with virtual impunity, unless and until it can be proved that the launderer has violated another Federal

Moreover, bank officials and employees who

statuter2

know that money laundering is occurring, but nonetheless

continue to file the requisite BSA forms, also may

1

President's Commission on Organized Crime, The Cash Connection: Organized Crime, Financial Institutions, and Money Laundering 61 (Interim Report to the President and the Attorney General, October 1984) (hereinafter "Commisson Report" ) 2.

Id.

escape liability. The BSA poses simply too indirect and ineffective attack on the problem. Some direct

prohibition which would apply to financial institutions, and their officers and employees is necessary.

Accordingly, a statute

narrowly designed to

address these issues by criminalizing the knowing participation in or facilitation of money laundering schemes would appear to be an effective and necessary complement to the existing statutes (i.e., the BSA) available to combat money laundering. By increasing both the amount and likelihood of incurring penalties for money laundering activities, such legislation should act as a more definite deterrent. It would also squarely

attack the money laundering problem and serve the dual

purposes of striking at organized crime and protecting

the integrity of financial institutions.

1.

Mens Rea.

A very troublesome aspect of the money laundering statutes contained in the legislative proposals is the level of culpability giving rise to criminal liability. The scienter requirement must create a statute that is

broad enough to reach those persons actively involved

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in money laundering, but narrow enough to avoid covering

innocent parties.

The "reason to know" standard

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of H.R. 1367

and to a lesser degree the "reckless disregard" standard

of H.R. 2785 are objectionable because they may in

practical application, particularly when presented to a jury, give rise to convictions for what is merely

negligent conduct.

The difficulty is that each standard,

either definitionally or through connotations associated

with common usage, creates a purely objective basis upon

which to convict a defendant, i.e., these standards ask what should the defendant have known or done. These standards will thus also create uncertainty among financial institutions and the public at large over what

constitutes the offense of money laundering.

These objective standards go well beyond the

money laundering problem as defined by the Commission

Report and testimony before Congress. Typical money launderers are persons who actually know they are dealing with "dirty money" or have a strong suspicion with

regard thereto but deliberately close their eyes in

3

Such a standard has few precedents in existing federal criminal statutes. But see, Foreign Corrupt Practices Act, 15 U.S.C. S 78dd-2(a)(3).

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