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transactions occurring at different financial institutions.

One

of the most common methods of smurfing is the practice of traveling to different banks on the same day with increments of less than $10,000 in order to prevent a CTR from being filed.

In Denemark (supra), the lack of any regulatory requirement that a financial institution aggregate transactions occurring at other institutions on the same day caused the 11th Circuit Court of Appeals to reverse the conviction of a bank customer. Denemark split up $137,000 of currency into increments of less than $10,000 and purchased 14 cashiers checks at 14 different banks on the same day. The appellate court reasoned that "there was no transaction in a financial institution which would require any such institution to file a CTR."

Denemark was charged with violations of 18 U.S.C. Section 2 (aiding and abetting or causing another to commit an offense) and Section 1001 (concealing from the government a material fact by a trick, scheme, or device). The court stated that Denemark should not have been prosecuted for causing the financial institution to fail to perform an act (filing a CTR) which the financial institution had no legal obligation to perform.

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Treasury, with input from the Internal Revenue Service and

the Justice Department, is currently in the process of preparing regulations to address these and other aspects of the Title 31 regulations. The Title 31 regulations must at least be clarified to impose a clear duty upon financial institutions to aggregate multiple transactions occurring on the same day that the institution is aware of. In addition, some sort of reporting duty should be imposed upon customers in order to obtain CTRS for transactions in which the financial institution would not normally be aware that more than $10,000 of currency had been transferred within a 24-hour period. For example, situations such as Denemark, in which a person travels to 14 different banks on the same day. No one bank will likely know about the transfers at the other banks unless the customer tells the institution.

A clear reporting duty on the customer will also overcome the concern expressed in Yarbel (supra), that "the reporting act and its regulations did not impose a duty on [customers] to inform the banks involved of the nature of their currency transactions."

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Offshore Money Laundering and Foreign Evidence Problems: The Role of Banks

In recent years both the legal and illegal use of tax havens by United States companies and individuals has increased. Tax haven jurisdictions are uniquely suited to facilitate illegal conduct, such as tax evasion and the hiding of income from criminal activity. Tax haven jurisdictions encourage offshore transactions through the promotion of the following:

(1)

The low tax rate, if any, which eliminates concern about the funds being subject to tax by the haven;

(2)

the presence of banks and other financial institutions which proliferate in tax haven countries and provide the facilities to move or hold funds;

(3)

the presence of a professional community including bankers, lawyers, and accountants to provide financial advice and financial services such as setting up dummy corporations, documenting questionable transactions, and providing general financial advice;

(4) the bank secrecy and blocking laws protecting against

detection of illegal schemes by law enforcement agencies including the Internal Reenue Service.

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(5)

nonrecognition of tax evasion as a crime, resulting in

the refusal of assistance in investigations of suspected tax evaders;

Willingly or unwillingly, banks, both in the United States and the haven country, are vital components in the entire offshore money laundering scheme. Banks have the physical facilities to accept large amounts of cash, issue checks, make loans, and receive or send funds by wire. The funds are secure and may even earn interest.

A compelling illustration of the critical role of banks in offshore money laundering schemes was provided by a Los Angeles attorney/money launderer who explained the ease of the process to a government undercover agent:

"...You're going to take it out of your right hand
pocket and pay it back into your left hand pocket..Which
I think is a beautiful way to use your money...You
haven't transported money out of the United states which
is a crime, you haven't taken the risk of carrying it,
and it's done on a bank to bank basis. Within 48 to 72
hours, I can move the money from Los Angeles to Bangkok
or Istanbul or Afghanistan or wherever you want it...And
you see, if Uncle then looks at you and says, "Where did

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you get this money from,' well (you say), "I borrowed
the money from such and such corporation which is an
offshore corporation' and they're in the money lending
business...you see, for 20 to 22 thousand bucks, you got
yourself a totally confidential setup."

Absent treaties, or other bilateral agreements, it is extremely difficult for the IRS to obtain the production of records from banks located in financial secrecy jurisdictions. Conventional investigative tools, such as the summons or subpoena, are useless unless a U.S. Court can acquire personal jurisdiction over the bank and enforce compliance. We have achieved success in

those cases where the foreign bank has a branch office in the United States, or where a United States bank's foreign branch is involved.

Our experience with the Bank of Nova Scotia underscores the difficulties that we encounter in obtaining evidence from tax haven banks even when there is a domestic branch. United States y. Bank of Nova Scotia. 691 F.2d 1384 (11th Cir. 1982) and United States v. Bank of Nova Scotia 740 F.2d 817 (11th Cir. 1984). Although we ultimately won both cases, the process of obtaining the information was costly and time consuming.