« iepriekšējāTurpināt »
Mr. PICKLE. Yes. Either the smurf or the individual working in the institution, if they are negligent in reporting the currency transaction, would be subject to the provisions of this law. Some of our financial institutions haven't done it, and they are claiming now that they haven't filed these reports innocently and find it was a surprise that they were supposed to make these currency transactions known. But the truth of the matter is, I think, we ought to be very diligent in reporting currency transactions and use this legislation to insist on it.
Mr. BARNARD. Do you think we need to do something in your bill to strengthen the enforcement of the law? In other words, I notice in the testimony of our chairman he indicated that this responsibility had been turned over from the Treasury to the IRS, but the IRS seems to be in on it after the action, not before the action, while we have got the Bank Examination Department of the Comptroller of the Currency supposed to be in there on an active periodic examination.
Do you think there should be some change in direction as far as investigating these reports?
Mr. PickLE. I would assume that the bills that the administration has supported in the other areas under the jurisdiction of other committees, for instance, Judiciary, would probably emphasize enforcement. I try to concentrate on the two or three areas that are mentioned here because, I think, the Internal Revenue Service should be given the information and the right to do something before they have to wait until the full 15 days, for instance, for the report to be filed.
This bill allows the Internal Revenue Service to move in and move in quickly. Now, whether you should have increased penalties, I think, would be a matter that would be more appropriately under the Judiciary Committee.
We want to give the law enforcement authority the right to go in and act immediately.
Mr. BARNARD. Your hearings, have they indicated any more importance been given to this operation by the banks, the regulators and IRS than before?
Mr. Pickle. I don't know how much importance they put on money laundering. I do know that the areas of money laundering and the tax evasion are directly related. Also, probably a great percentage of the violations now are in the area of drug trafficking.
Uniess we can give the governmental entities the authority to move and move quickly, then, I think, we are going to let the money laundering operations go untouched.
I would say that we ought to serve clear notice to the financial institutions that they should know what the law is, what amount of cash must be reported, and to whom it should be reported. If we give the authorities the right to move in and catch these people when they have proof that these people are, in fact, money launderers, the authorities can move in on money laundering operations.
Mr. BARNARD. That is the thing that concerns most of the members of our committee. The law has been in place for a number of years. It seems to be just lackadaisically overlooked. Somehow or another, we have to put more emphasis on the fact that these insti
tutions have got to report these transactions. I guess your bill does in that regard put more teeth into the law, as far as if they don't do it, somebody in that institution, whether it is a bank or money exchange, or whatever it might be, which is another thing we have to do. We have to broaden this bill to include more than just banks and investment houses. There are others in the money exchange business that are being left out of this bill.
I think your bill is a good step forward in getting something done. I compliment you.
Mr. PICKLE. I pointed out to you that the administration recognized this is a problem. They ought to give the Internal Revenue Service forfeiture and seizure authority. They also ought to have the right to say it is illegal to cause a violation of the Bank Secrecy Act. Having recognized that, the administration, through the Treasury and the Office of OMB, has said the Congress ought to pass this legislation.
I think it is a base. I hope this committee will consider it as a part of your bank secrecy legislation as you move forward.
Mr. BARNARD. Thank you.
Mr. WYLIE. Thank you, Mr. Chairman. I, too, would welcome you, Jake, and commend you for your concern and your conscientious hard work in an area which is a serious problem to us.
You say that you have worked with the administration and they support your legislation. Chairman St Germain and I also introduced a bill at the request of the administration.
Do you know up front, and I wouldn't expect you to, how the two bills compare? Are there similarities in the approach taken in your bill and our bill?
Mr. Pickle. I am not sure. I know there is legislation pending in other committees, here and in the Judiciary and Government Operations.
Mr. WYLIE. We will have staff take a look at that.
Mr. PICKLE. This would be a part of the composite bill that I assume you primarily will advance.
Mr. WYLIE. Yes. I think the point and place where I am coming from is that we are all concerned about this money laundering problem. We thank you very much for your testimony this morning. You are a member of the Ways and Means Committee. You say this problem is a growing one. As a result, I am concerned about the impact of money laundering operations on the collection of U.S. Federal income taxes. We just passed a big day in our year as far as income taxes are concerned, yesterday. I am glad to see you do pay attention to such things. Do you have any notion as to how much of an impact in the loss of Federal tax revenues this might have?
Mr. PickLE. Let me ask Vanessa Clark to comment on that. Before I do, with respect to the tax laws, we quite often cannot move in on these money launderers unless we can show a direct connection with a tax case, such as a criminal violation of the Tax Code.
Pending the proof of that, a lot of these people get their money laundered and move on. We don't have time to act. This legislation would give the IRS the authority to seize and forfeit laundered
cash immediately, without having to wait, or to connect it to or requiring a nexus with a violation of the Tax Code.
I think our legislation would help speed up the Government's ability to act. Ms. Clark, do you have any comment to make?
Ms. CLARK. Yes. I have several comments to make. First of all, on the seizure and forfeiture authority, and I'm sure this committee is aware that the-
Chairman ST GERMAIN. Excuse me. Ms. Clark, if you would pull your microphone closer. We have lousy microphones; but we can't do anything about it because of Gramm-Rudman. You have to cuddle up to it. [Laughter.]
Ms. CLARK. There are several points I would like to make. First of all, I would like to talk about why the IRS should have seizure and forfeiture authority. The CTR's, as your committee is aware, are reported to the IRS. They are the agency that has the information on hand from the banks. Therefore, it is logical and appropriate to have the IRS have the authority to take some action, where they are on notice that a money laundering operation is going on and money is not being reported through the CTR process.
As it stands now, seizure and forfeiture authority under the IRS is somewhat restricted and there has to be that nexus to the evasion of taxes or unreported taxes. That is, seizures have to be related to the fact that you haven't reported taxes, you haven't paid taxes or some other Tax Code violations.
This bill would expand that seizure and forfeiture authority given to the IRS. As the authority exists now, the IRS does not have that authority to seize laundered cash. The IRS's ability to seize laundered cash without having a nexus to a Tax Code violation would be a major difference between the current authority of the IRS and the expanded authority under this bill.
Mr. WYLIE. Do you have any notion as to how much money we might be losing? Did IRS give you any estimate on that? You can supply that for the record.
Ms. Clark. We have had some estimates given to us. I can't vouch to the sources at this particular point. We can submit that for the record. There have been estimates of maybe $90 billion altogether due to tax avoidance or evasion and maybe approximately half of that could be attributed to money laundering alone.
Mr. WYLIE. Did you say $90 billion?
Ms. CLARK. $90 billion. We are talking about maybe $50 billion of this amount being attributable to money laundering operations.
Mr. WYLIE. Holy smoke. Thank you very much. Thank you, Mr. Chairman.
Chairman ST GERMAIN. Mr. Annunzio.
I am delighted to associate myself with your remarks and the remarks of the other members of the committee in welcoming a dear and old friend, Jake Pickle, to the hearing this morning.
I want to publicly acknowledge that at the time you became chairman of the Subcommittee on Social Security, everybody was so worried and concerned that the Social Security system would go under as it was operating in the red. Under your chairmanship of that subcommittee, you managed legislation whereby the Social Security fund is now solvent. It is in the black, it is not in the red.
The credit goes to you for being such a watchdog of the system. In fact, it has a surplus today, I understand. Everybody is trying to get their hands on it.
I am one of those who have cosponsored a bill to take Social Security out of the budget process, just leave it alone. It is in the black, we want to keep it there. I wanted to publicly acknowledge your great contribution to the people of America.
Mr. PickLE. You are very kind, Mr. Annunzio. I appreciate it.
Mr. ANNUNZIO. As we all know, Mr. Pickle, money laundering is really big business. We have had hearings in this committee, our chairman has been very diligent on following money laundering operations. We have exposed large institutions throughout the United States; I am talking about bankers.
One of the things that bothered me was the fact that the officers of these large banks or the banks themselves only paid a fine. No one went to jail, that I know of. Maybe the dope peddler went to jail. As far as the banking executives, I don't know of any that went to jail. If any have gone to jail, it has slipped me.
You are absolutely correct. We have to strengthen the law so that people can be punished, whether they be criminals or bankers. If we are going to stop the drug traffic in America we have to stop the money laundering. We have to stop the money at the source so they will not be able to replenish their stock and buy new drugs in order to continue in business. I think if we stop the laundering of money, we have a very good opportunity of stopping drug trafficking in the United States. I am delighted you are taking the leadership role on this money laundering, as well as our committee and our chairman, who is also taking a leadership role.
I think it was back in 1970 when we passed the Bank Secrecy Act. All these years have gone by. We want to strengthen that law. I think your legislation will help strengthen that law. It will curb money laundering and by curbing money laundering, we can curb drug trafficking.
I commend you for the great effort you are making.
Mr. PICKLE. Mr. Annunzio, we saw movies and received testimony from a lot of the operators who are trying to put a stop to this. We were shown that a lot of the financial institutions really didn't make much of an effort to know where the money came from. One of the banks in the Northeast actually received money that was hauled in in gunny sacks. The bank had to just count out the cash. I don't know if there were any loose coins in there. It was just that open and brazen.
You do not have to tell any of us that the bank knew they were not filling out the forms. That money came from somewhere and it wasn't legal money.
Some of the institutions have really become that lax. When that happens, we ought to have a law, not only for enforcement, but to do something to the individuals in that institution. They know better. I think this legislation together with the possible penalties against the institution will save the Government the right to put the smurfs in jail and to seize and forfeit the laundered cash. It will also reduce the violations of the bank secrecy laws considerably.
Chairman ST GERMAIN. Mr. Torres.
Mr. TORRES. Thank you, Mr. Chairman, for allowing me to sit on your subcommittee today. As you know, this is an issue in which I am very interested. Drug money has become an official form of American foreign aid to Latin America. We know that Latin America is beset by horrendous inflation and foreign debt, that many Latin American countries need dollars to desperately finance their programs and laundering has become a paradise in Latin America as well.
It is estimated that $2 billion is laundered through some of the offshore banks in Panama, Colombia, and Peru.
I am appalled this morning to learn that the U.S. Government loses about $50 billion a year through money laundering schemes? Is that correct?
Mr. Pickle. That is approximately correct, Mr. Torres.
Mr. TORRES. I dare say that compounding both these economic crimes and social crimes, that there is another issue that obviously concerns me, and that is that money laundering is being used along with drug sales to perhaps finance gun running in this hemisphere. We have heard that of late, vis-a-vis the situation in Nicaragua and Honduras.
What light can you shed on that, Mr. Pickle? Is there any evidence that money laundering is being used as a vehicle to purchase arms for the Contras in Latin America or Central America?
Mr. PICKLE. I don't think I can comment on that, Mr. Torres. I do not know. I am sure money laundering is so flagrant that it is almost a means of financing any kind of operation. I would not be surprised if that was not the case, but I don't know that.
Mr. TORRES. Thank you very much, and thank you, Mr. Chairman, for
time. Chairman ST GERMAIN. Thank you, Mr. Torres. Mr. McKinney.
Mr. McKINNEY. Thank you, Mr. Chairman. It is a delight to welcome my neighbor here. He is a busy man so I will be brief.
I would love to hear your opinion as to what the definition of a financial institution is. I understand later on we are going to hear about a case where an individual was named a financial institution. It seems to me that this has become so bad in the stock market, the bond market, the futures market, and the commodity market, that we need to get some turf around here and really stretch out a little bit.
I had a real estate broker tell me that the State of Florida has one of the biggest go-go real estate markets in the country. In fact, in the southern tip of Florida it was possible to buy a house with a foreign check and then turn around and put the house on the market. You are bound to make money, even on the house. Then you have a legitimate 500,000 dollars' worth of cash or whatever you sell the place for.
Something has to be done. These guys are floating checks all over the place. Southern Florida is a bottomless pit of laundered money and drug money. The drug business will stop when they can't get anybody to do anything with the money. That is the only reason people are in it. That is the only reason people are getting or buying million dollar boats to carry the stuff into Florida.