laundering aspect of each investigation. The number of indictments charging money laundering have increased from 49 in 1983 to 110 in 1984, to 141 last year.

Likewise, the number of defendants charged with money laundering, this is just out of the OCDETF cases, 19 in 1983 to 78 defendants in 1984, to 130 defendants last year. That is one of the programs we have to examine money laundering activity and prosecute these violations.

Chairman ST GERMAIN. Mr. McKinney.

Mr. MCKINNEY. Thank you, Mr. Chairman. I would like to state that we are being overwhelmed by the gentleman from Georgia, and I congratulate you gentlemen on trying to at least tackle 10 percent of the problem, which seems to be the legit banks.

It was a bad night for me last night to rent Scarface, with Al Pacino, and watch the drug laundering business in Miami, because I knew it was there and even Hollywood couldn't put too much of a lie to it.

What percentage of this money would you guess is going through banks?

Mr. COWARD. I really don't know. There is no way to measure the unknown.

Mr. MCKINNEY. Very small percentage now, wire transfers, real estate purchases, off-State banking, et cetera?

Mr. TROTT. There is no doubt they are trying to keep money away from the Bank Secrecy Act. If you and I were money launderers, the last place we would be taking our cash to right now would be a bank in the United States.

Mr. COWARD. Some of it is going over the Canadian border. The Canadians are very concerned about that problem. The airplanes are still flying to Panama on a regular basis, and disgorging large amounts of cash.

Mr. MCKINNEY. Going to visit the colonel, and not the Kentucky Fried Chicken one. Should we put a cease and desist order on Americans' ability to deposit money in these foreign banks?

Should we bring more diplomatic pressures, pass a law, do something? No one can go to the Bahamas or any of those places and look at one law office with 57 corporations stuck around the brass plaques and not know what is going on in a hurry.

Is there something we can do?

Mr. SAPHOS. One of the things I would suggest you could do is the right of a financial institution to do business is not a right, but it is something which is bestowed upon people by the laws, by the Congress of the United States.

They are given the ability, you bestow upon persons the ability to earn a living by being a financial institution in this country.

I would suggest that it is a privilege, then, of being a financial institution in this country, who also operate in bank secrecy jurisdictions should be conditional upon those institutions agreeing to abide by a process of the U.S. Courts to disclose those books and records, no matter where they exist.

An institution has to make a choice. Does it make good business sense to do business in the United States, and if so, is that good business of such magnitude that they will give up the bank secrecy

they enjoyed in foreign jurisdictions, and the business sense it takes to endorse accepting that dirty money offshore?

Mr. MCKINNEY. These are just hypothetical questions. My tendency is to think here we are, struggling with the banks, and they are becoming less and less of the problem and more and more of the problem is becoming all the wire transfers, fake corporations, and loans.

Part of this issue falls under the jurisdiction of this committee, and as the chairman said, we want to handle at least that part of it. This is a nasty question, but it has to come forth sooner or later. For example, take the young bank executive in Miami who is making $40,000 a year and someone offers him 3, 5, or 10 percent of the laundry process. That is a pretty tempting offer when you are dealing with millions and millions of dollars.

Is that still going on?

Mr. SAPHOS. I would be foolish to say that it is not going on at all, but the incidence of those types of cases have been reduced over the years, because the top management of that institution that is paying that $40,000 has figured out that the amount of money that the institution can make from having those deposits, as opposed to the amount of money the institution will lose, even if it is not guilty as an institution of a criminal violation, don't balance out, so they are giving more scrutiny to the conduct of that young officer than ever before, and perhaps they are cutting down on the incidence of that behavior.

The number of prosecutions that we are initiating against the persons in that position in the legitimate financial institutions appear to be going down.

Mr. MCKINNEY. While the bank is advertising with a full-page ad, one of their executives is caught. Publicity is one of their worse enemies.

Mr. SAPHOS. Yes, sir, we sent out an agent who closed down 11 financial institutions in San Juan, PR, so they could execute search warrants that day. It didn't bode well for the retired folks keeping their money there, and they decide to move it someplace else.

Mr. MCKINNEY. I know a few of my constituents were upset by the names of people they saw on the TV that night, and I congratulate you for that raid. It was planned with all the precision of a military operation.

Mr. ŠAPHOS. We had an awful lot of professionals helping us, yes, sir.

Mr. MCKINNEY. What about foreign banks? Is there something we should be looking at with these?

Mr. SAPHOS. Perhaps the same thing. When you give that foreign bank the privilege under the Edge Act, the privilege of doing business in the United States, perhaps you could make it a reciprocal agreement.

It must agree to make its records available to examination.

Mr. TROTT. The domestic law of the countries where they work would do just the opposite, so it would create an ally in the banks. The banks then might turn to the foreign jurisdictions and suggest that these secrecy laws ought to be changed so they can participate in the worldwide economy, rather than in just one particular country.

If you do business in the United States, you have to cough up records in other places. Canada and Great Britain came into the picture and negotiated an executive agreement. If the Attorney General needs bank records and gets a certification and transfers that certification to the appropriate counterpart, the authorities in the Cayman Islands, now we have records in over 100 major narcotics trafficking cases which have been helpful.

Mr. WORTLEY. Don't you think your treaties would be more effective if you limited them strictly to narcotics situations? We found in Panama, Switzerland, that they are not too interested in cooperating when they think you are also seeking tax evaders.

Mr. TROTT. We understand.

Mr. WORTLEY. We may see the hard evidence that you are on the trail of a narcotics trafficker who was laundering money, that is one thing; but when they think you are going to look for tax evaders, then their dander gets up.

Mr. TROTT. You are right. As much as we would like to include in our treaty the ability to get information to go after tax evaders, tax avoiders, we don't because of the country's refusal to give us that information.

We began to tailor these agreements. Organized crime, theft, both countries recognize as a crime, then we have more success.

Mr. WORTLEY. How many countries do we have a mutual assistance treaty with?

Mr. TROTT. Right now, we have entered into treaties with Switzerland, The Netherlands, Turkey, and Italy.

We have signed and secured Senate advice and consent to treaties with two more countries, Morocco and Colombia, which have not yet ratified the agreements. We have signed but not yet ratified an MLAT with Canada, and just last month, Attorney General Meese signed an MLAT with Thailand.

We are currently negotiating treaties with several other countries, including the Bahamas, Jamaica, the Cayman Islands represented by the United Kingdom, Germany, Israel, and Sweden.

We are exploring negotiations with Panama, Australia, and Austria, and hope to initiate talks with the United Kingdom itself later this year.

I just came from Mexico, where Attorney General Ed Meese began negotiations with the Attorney General from Mexico on an MLAT with Mexico.

In the area of international narcotics work, these MLAT's are our highest priorities.

Mr. WORTLEY. Making any attempt to get ahead of the game? We were told in Austria and Zurich that they anticipate the next marjor money laundering center is going to be in Budapest, Hungary, because of the free flow of traffic from Austria to Hungary, plus the fact that Budapest was becoming a financial center of the Eastern bloc nations.

Have you worked on that one yet?

Mr. TROTT. In the U.N. conventions, which is an update of something that has not been touched in years, we are adding money laundering as something that will be regarded by all signatories, all members of the United Nations; that is new.

Have we addressed Hungary specifically? No. I am glad you bring that up. You are right, in one sense, as soon as we jam them in one jurisdiction, they are off to someplace else, and that is a function of satellite communications, international banking networks. As soon as we are there, they are gone, but our objective is to anticipate where they might go, and to follow them everywhere with this activity, which is extraordinarily difficult to negotiate.

But now, more and more countries are recognizing that they are in this together. No single country standing alone has the capacity to combat this. We have to all stand together. Governments are recognizing this in terrorism, drug trafficking, all the rest.

That is the encouraging news and now it is up to us to get together with those governments and hammer out these treaties. Mr. WORTLEY. Keep working hard at it.

Chairman ST GERMAIN. Mr. Trott, we hear all this wonderful stuff about the Bank of Nova Scotia. We find out that there was a case with the Bank of Nova Scotia against the United States, a subpoena upheld and enforced on a bank-

Mr. TROTT. Right.

Chairman ST GERMAIN [continuing]. Notice how they get religion, once the courts said you better well do it.

Mr. TROTT. I understand exactly what you are saying.

Chairman ST GERMAIN. All of a sudden, once a couple of large banks had fines imposed upon them, they were born again dogooders; right?

Mr. TROTT. I am not here as an advocate for or against any bank, but they were in a situation where the law in the Cayman Islands would have subjected them to serious problems. They kept saying we are between a rock and a hard place.

Chairman ST GERMAIN. Didn't they bring the case?

Mr. TROTT. No, that was a case that we brought to enforce subpoenas.

Chairman ST GERMAIN. I am going to have to have my staff get their glasses out. It says the Bank of Nova Scotia against the United States. From this, it seems to me, that it is the bank that brought the action; correct?

Mr. TROTT. We filed-we subpoenaed the records from the bank. When the banks refused to comply, then we took the case into court for subpoena enforcement, and so it was really at our initiative.

The banks did file certain motions and actions to reduce the amount of the fine, but we were the initiators on that, and I have sat down with bankers everywhere-well, if you want to know the whole story, it got so hot at one point the Canadian Government intervened and had the Prime Minister write a letter to the President of the United States suggesting that we were interfering with Canadian sovereignty.

The Minister of Justice came down and had a long and protracted meeting with the Attorney General of the United States William French Smith and we hashed this out and got down to brass tacks. Who are the bad guys and who are not? Then we generated the activity which resulted in the agreement now proceeding toward a Mutual Legal Assistance Treaty.

Mr. MCKINNEY. My time has expired. The mood of Congress was to protect the little guy, and let them go after the big guy.

The big guy has enough lawyers in-house to protect himself from any problems. I think the Bank Secrecy Act is being misused by many people. I appreciate what you are doing with limited staff, bad laws, and little cooperation, because there is no question about it, the drug business exists because of the money it produces, and we are at war with the dealers as much as we are with Colonel Qadhafi.

At least you can sit and talk to him. I doubt if you can talk to these animals.

Chairman ST GERMAIN. Mr. Wortley.

Mr. WORTLEY. Mr. Coward, in your testimony, the second page here, you talk about the Drug Enforcement Administration acts as a liaison with Interpol, the United Nations, and you talk about your cooperation with the Federal Bureau of Investigation, Customs Service.

If we are really concerned about money laundering, why don't we work more closely with the central banks, foreign central banks? That is where the money is flowing through.

Do you cooperate with them?

Mr. COWARD. We cooperate with the law enforcement agencies in places where the central banks are permitted to cooperate with them such as Switzerland and as Mr. Trott mentioned, the agreement with the Cayman Islands.

There are countries where our relations with the law enforcement agencies are not that good, or we have no access to the bank information because of their local laws.

Mr. WORTLEY. You say the Drug Enforcement Administration has encourage bilateral, mutual legal assistance treaties. Just how helpful have they been in ferreting out money laundering?

Mr. COWARD. We don't normally ferret out money launderers, but we use the records available to trace assets from people we have identified as being in drug trafficking.

We are not looking for money launderers per se, but trying to make a criminal case against the drug trafficker or looking for methods to attack the assets.

Mr. WORTLEY. How effective have these treaties been?

Mr. COWARD. The instances where we have used them, the results have been good.

Mr. TROTT. In the Cayman Islands, the treaty has been almost 100-percent effective in this sense: We were getting nothing out of them 4 years ago; and if you would have asked me as a law enforcement professional with 17 years under his belt, would we ever get anything out of them, I would have told you I don't think so. Drug traffickers and other criminals were running all their money through the Cayman Islands. You can't just follow the dope, because you don't get to the people running the organization.

You got to follow the money, so we decided to drag the Bank of Nova Scotia into court in Florida and sue them for the records we wanted. They resisted saying, hey, you are asking us to do something that will make us violate the law in the Cayman Islands; but the courts agreed with us.