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their illegal activities. We must be ever mindful, however, that an equitable balance be maintained between attaining the goal and preserving the financial privacy and other precious rights of individuals.
Fifteen years ago, the Bank Records and Foreign Transactions Act was enacted into law. Titles I and II of the law constitute what is commonly known as the Bank Secrecy Act. The primary purpose of the reporting requirements of that act is to identify the sources, the amount, and movements of U.S. currency which is transported into or out of the country, or deposited in financial institutions in order to give law enforcement officials the basic tools to detect and investigate criminal tax and regulatory violations.
The Bank Secrecy Act, together with other titles of the Bank Records and Foreign Transactions Act, is a product of the House Banking Committee. As passed by our committee, the legislation was designed to stop the use of secret bank accounts for illegal practices such as the evasion of taxes, the taking over of legitimate businesses by organized crime, the financing of narcotics traffic, and other illegal purposes. It should be emphasized that while a great deal of our efforts will be spent on issues involving money laundering as they relate to drug trafficking, we should be mindful that the Bank Secrecy Act was also intended to cover, as well, other forms of illegal activity, including tax evasion.
Also, while recently the focus of attention has been and continues to be on compliance with the reporting provisions by financial institutions, we should be aware that the original purpose of the Bank Secrecy Act was also to catch those individuals who se financial institutions as a means to keep from the Federal Government sources of taxable income.
There is no question that money laundering is now more pervasive than it ever was, and that it is becoming more difficult for law enforcement officials to connect the money laundering scheme per se with the crime from which such funds are obtained. Criminal elements in our society are becoming more sophisticated in their illegal operations. This sophistication has led to the creation of a new position, the professional money launderer.
The subcommittee intends to pursue these actions to learn more about the sophistication of money laundering and the schemes developed by so-called professional money launderers.
As a matter of fact, we have with us today an individual who was a money launderer. His identity was purposely not disclosed in the notice of hearings recently announced, in order to protect him from undue publicity which might have posed some difficulties for him.
In analyzing the various legislative proposals, the subcommittee will revisit not only the Bank Secrecy Act, but will also review the Right to Financial Privacy Act, the Change in Bank Control Act, and other provisions of FIRIĆA, otherwise known as the Safe Banking Act of 1978.
Tomorrow, we will hear from the Department of the Treasury, the civil side of the IRS and the banking regulators, who will review these various issues with us.
Today, it is my pleasure to introduce to you our lead-off witness in these hearings, the Honorable J.J. Pickle. Mr. Pickle, a senior Member of the House Ways and Means Committee, has today introduced a bill that has been referred to this committee, the purpose of which is to deal with the subject of money laundering and seizure and forfeiture provisions of title 31 of the Bank Secrecy Act.
Following Mr. Pickle's testimony, we will hear from Mr. Herbert Friedberg, who will tell us about his experiences as a money launderer. He will be followed by Mr. Richard Wassenaar, Assistant Commissioner-Criminal Investigation of the Internal Revenue Service, who will brief us on the various offshore tax shelter schemes, the various money laundering schemes which have been discovered and successfully prosecuted by the IRS and the Department of Justice, and the problems law enforcement agencies still encounter in tracking down this type of criminal activity.
I would like to also mention the fact that, as I stated, Mr. Wylie and I have cosponsored the administration bill. Legislation has also been introduced, that I have cosponsored with Mr. Torres. Other legislation has been introduced by Mr. McCollum, who also has worked on this in the Judiciary Committee. Mr. Wortley of New York has also been very active in this area and has introduced leg. islation, and Congressman LaFalce on the committee has also had previous interest in it. And of course, we will be hearing from Mr. Pickle.
[The texts of H.R. 1367; H.R. 1474; H.R. 1945; H.R. 2785; H.R. 3892; H.R. 4280; and H.R. 4573, all related to these hearings, follow:
To amend chapter 35 of title 12, chapters 95 and 119 of title 18, chapter 53 of
title 31 of the United States Code relating to money laundering.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 28, 1985 Mr. McCOLLUM introduced the following bill; which was referred jointly to the
Committees on the Judiciary and Banking, Finance and Urban Affairs
JANUARY 10, 1986
YOUNG of Florida, Mr. FAUNTBOY, Mr. MARTINEZ, Mr. GOODLING, Mr.
A BILL To amend chapter 35 of title 12, chapters 95 and 119 of title
18, chapter 53 of title 31 of the United States Code relating to money laundering.
Be it enacted by the Senate and House of Representa
2 tives of the United States of America in Congress assembled,
3 That this Act may be cited as the “Money Laundering Act of
TITLE I-MONEY LAUNDERING OFFENSE
6 SEC. 101. (a) Chapter 95 of title 18, United States 7 Code, is amended by adding the following new section:
1 "8 1956. Laundering of monetary instruments
“(a) Whoever conducts or causes to be conducted a
3 transaction or series of transactions involving one or more
4 monetary instruments in, through, or by a financial institu
5 tion which is engaged in, or the activities of what affect,
6 interstate commerce, or attempts so to do— 7
"(1) with intent to promote, manage, establish, 8 carry on, or facilitate the promotion, management, es9 tablishment, or carrying on, of any unlawful activity;
"(2) with knowledge or reason to know that such
monetary instruments represent income derived, direct
ly or indirectly, from any unlawful activity, or the pro
15 shall be fined not more than $250,000 or twice the value of
16 the monetary instruments, whichever is greater, or impris17 oned not more than five years, or both, for the first such 18 offense, and shall be fined not more than $1,000,000 or five
19 times the value of the monetary instruments, whichever is 20 greater, or imprisoned not more than ten years, or both, for
"(1) the term 'conducts includes, but is not limit
ed to, initiating, concluding, or participating in conducting, initiating, or concluding a transaction;
“(2) the term 'transaction includes, but is not
limited to, a deposit, withdrawal, transfer between ac
counts, exchange of currency, loan, extension of credit,
purchase or sale of any stock, bond, certificate of de
posit, or other monetary instrument, or any other payment, transfer, or delivery by, through, or to a finan
cial institution, by whatever means effected;
“(3) the term 'monetary instruments' means mon
etary instruments as defined in section 203(1) of the
Currency and Foreign Transactions Reporting Act, as
revised (31 U.S.C. 5312(a)(3));
“(4) the term 'financial institution' means financial
institution as defined in section 203(e) of the Currency and Foreign Transactions Reporting Act, as revised
“(5) the term 'unlawful activity' means any act or
“(A) a pattern of racketeering activity or col
lection of unlawful debt, as those terms are de
fined in section 901(a) of the Organized Crime