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produce information especially useful in identifying individuals

and companies involved in money laundering and tax evasion.


Internal Revenue Service's Office of Criminal Investigations

is developing a plan for the initial use of this regulatory


We are also discussing a number of other regulatory amendments, including regulatory solutions to problems of *smurfing" and structuring transactions to avoid the reporting

requirements of the Bank Secrecy Act.

These revisions are being

discussed within Treasury and with the Department of Justice and

should be published in the Federal Register within the next few

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Treasury will consider carefully the financial and operational impact of regulatory changes on financial institutions as it


to meet

the needs of law enforcement.


I would now like to address the various proposals under

discussion to bolster our

attack against money laundering and

to improve Treasury's enforcement of the Bank Secrecy Act.

First is H.R. 2785 and 2786 (identical bills), the "Money

Laundering and Related Crimes Act," which was developed jointly by the Departments of Justice and Treasury. I would like to

remark on the critical revisions to

the Bank Secrecy Act con

tained in the bill.

I understand that my colleague from the



Department of Justice, who will testify before you next week,

will address the provisions of the bill establishing the criminal

offense of money laundering and related revisions to Title 18.

Most important, under H.R. 2785 and 2786 the Secretary would

be given for the first time summons authority both for financial

institution witnesses and documents in connection with Bank

Secrecy Act violations.

This author ity was among the legislative

recommendations in the October, 1984 report of the President's

Commission on Organized Crime on money laundering and is also

contained in H.R. 1945 and H.R. 1367.

The Secretary may summon

a financial institution officer,


an employee, former officer, former employee or custodian of

records, who may have knowledge relating to a violation of a

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Secrecy Act with respect to miscellaneous non-bank financial

institutions such as casinos and foreign currency brokers, which number in excess of 3,000. The responsibility for compliance review of these institutions has been delegated to the Internal Revenue Service. However, currently, the IRS summons authority

is restricted to Title 26 purposes.

Therefore, in examining

these institutions IRS must rely on voluntary cooperation.



Under this bill, a

summons would be issued only by the

Secretary or with his approval by a supervisory level official of

an organization to which the Secretary has delegated Bank Secrecy

Act enforcement authority, e.g., the Internal Revenue Service,

the Comptroller of the Currency or

the Customs Service,

An agent

or bank examiner in the field could not issue a summons

on his or

her own authority.

H. 1367 by contrast provides that Treasury

may not delegate summons authority.

For Treasury, the ability

to delegate summons authority is a practical necessity.

The bill also provides for a civil penalty for negligent

violations of the Bank Secrecy Act.

Currently, Treasury has

authority to assess civil penalties for "willful" violations

under 31 U.S.C. S 5321.

"Willful" in a civil penalty context

means with specific intent or with reckless disregard of the

law. Nevertheless, mere negligent non-filing of currency reports deprives the government of potentially useful law enforcement

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financial institutions to give more attention to good compliance.

H.R. 2785 and 2786 also provide important revisions to the

Right to Financial Privacy Act (RFPA).

The revisions to the RFPA

contained in the Administration's money laundering bill can be considered as an adjunct to that bill, with application separate

from the subject of criminal money laundering legislation or

enforcement of the Bank Secrecy Act.



The most important and least controversial of the revisions

is the amendment to subsection 1103(c) of the RFPA, 12 U.S.C.

S 3403(c). Currently, S 3403(C) provides that nothing in the Act shall preclude a financial institution from notifying a government authority that the institution has information "which may be relevant to a possible violation of any statute or regulation." The statute gives no guidance on what information can be given

without running the risk of exposure to civil liability under

the RFPA.

The proposed amendment sets out explicitly that enough

information can be given to enable Federal law enforcement


authorities to proceed with legal process, e..., summons,

subpoena, or search warrant, in accordance with the RFPA.


information at a minimum must include the nature of the Sus

picious activity, the name of the customer, and other identifying

information necessary to identify the customer


the account


We believe you should find very little opposition in the financial community to this particular revision of the RFPA.

The revision imposes no

new legal duty on financial institutions,

clarifies the right of financial institutions to act as good citizens without risk of civil liability, far outweighs any jeopardy to legitimate privacy interests, and would be of major

assistance to Federal law enforcement.



For consistent application throughout the United States,

this amendment must be accompanied by the proposed preemption

provision so that a financial institution that complies with the

RPPA will not run afoul of any more restrictive state privacy laws. The proposed clarification of the "good faith defense" to

civil liability is also needed to protect financial institutions

who cooperate with Federal law enforcement in good faith within

the confines of the RFPA.

In addition to the Administration's money laundering bill,

there is another legislative initiative on which I urge early and

favorable action.

That is the bill discussed in this committee

yesterday by Congressman Pickle.

This bill would prohibit structuring of currency transactions to avoid the $10,000 currency transaction reporting requirement.

Structuring includes the well-known practice of


Recent decisions in three Federal Circuits have made it clear

that the current law is inadequate to sustain consistent prose

cutions for structuring. The proposal would make a person who structures transactions to avoid the currency reporting require

ments, or who causes

a financial institution not to file a

required report, subject to the criminal and civil sanctions

of the Bank Secrecy Act.

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