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Switzerland, three men were convicted and jailed for laundering
$ 47 million obtained from heroin sales in United States pizza parlors. The scheme involved some 500 people in Switzerland, New York, Italy, and Turkey, who sold some $1.65 billion worth of
heroin through the so-called "pizza connection."
imposed ranged from two to 13 years, and the men were fined a
total of $82,000.
Section nine of our bill sets out a new Chapter 202 in Title
18 dealing with criminal and civil forfeitures.
(It is drafted
in such a way that is is easily modifiable if at some later time the Congress thought another Title 18 offense ought to have a forfeiture remedy). It provides for the civil forfeiture of all funds or monetary instruments involved in the violation of the money laundering offense, and of the receiving proceeds offense if the proceeds were obtained in violation of either a federal or foreign felony provision pertaining to controlled substances. The provisions for accomplishing civil forfeitures are patterned
after the civil forfeiture provisions in Title 21.
chapter also provides for the criminal forfeiture of money or
other property involved in a violation of the money laundering or receiving proceeds offense. Criminal forfeiture would apply to any violation of the new receiving proceeds offense, not just the receiving of money or property derived from a drug crime.
In addition to setting out new offenses and other sanctions, H.R. 2785 also contains several provisions designed to make easier the investigation of money laundering and the tracing of the proceeds of crime. These amendments generally concern the
Currency and Foreign Transactions Reporting Act in Title 31 and
the Right to Financial Privacy Act in Title 12 and were addressed by Mr. Keating, from Treasury, last week. However, I would point
out that H.R. 2785 contains a procedural provision in Section 4 that is a matter of concern to this Committee. Section 4
essentially complements the amendments to the Right to Financial
Privacy Act made in section three.
Section 3 would amend the Right to Financial Privacy Act to define and clarify further the extent to which financial
institutions may cooperate with federal law enforcement
authorities in providing information which is relevant to
by or against financial institutions, violations of the Bank
The effect of this amendment to the RFPA is to allow a
bank or other financial institution to provide information which
it has reason to believe may be relevant to one of these crimes
without risking civil liability under the Act or entailing any obligation to notify the customer of such cooperation which the Act requires. The bill also provides for preemption of this field, thus avoiding the possibility of a bank employee incurring in civil or even criminal liability under a more strict state
71 The Bank Secrecy Act includes the Currency and Foreign Transactions Reporting Act. The CFTRA was enacted as Title II of P.L. 91-508 and is now codified at 31 u.s.c. 5311-5322. Together with Title I of P.L. 91-508, it is commonly called the Bank Secrecy Act.
statute, for cooperating with federal law enforcement
Section 4 contains an analogous provision that would amend Rule 17 (c) of the Federal Rules of Criminal Procedure to clarify the authority of the United States District Courts to issue orders commanding a person to whom a subpoena duces tecum is directed not to notify, for a specified period, any other person of the existence of the subpoena. Like the amendment to the Right to Financial Privacy Act negating the financial institution's obligation in certain situations to notify the customer
that it has provided evidence of crime to law enforcement author
ities, this provision is intended to prevent disclosure by third party record holders, such as banks, of legitimate law enforcement interest in the records subpoenaed by a grand jury. Such premature disclosure obviously has a high potential for impairing the investigation and should not be tolerated.
I would now like to address some features of the money laundering and related provisions in other bills pending before
Let me turn first to H.R. 1367 and to H.R. 1945.
sets out the new money laundering offense recommended by the
President's Commission on Organized Crime as Title I, and H.R. 1945 makes only minor stylistic changes in this approach which it
- 16 sets out as Title II.
While our bill is derived in part from this approach, as I have indicated there are significant
First, the money laundering offense in H.R. 1367 and 1945 would be limited to money laundering through financial institutions. That is too restrictive as it would not reach money
laundering by such methods as directly purchasing businesses,
real estate, jewelry, etc.
Nor would it help in an actual case
which I can describe only generally because certain aspects of it are unresolved. In this case an attorney, whose clients were drug traffickers who generated large amounts of cash, hired a private investigator to receive, hold, and distribute the cash at the
In fact, well over $1,000,000 of this
money was handled by the investigator in a six month period.
Some of it was used to acquire boats, aircraft, and real estate and to make improvements to this property. In our view, the new money laundering offense should be applicable to cases such as
8/ These are the only changes in Title 18 set out in the two bills with the exception of Title III of H.R. 1367 which amends part of the federal wiretap statute (18 0.9.c. 2516). This Title in H.R. 1367 would make the new money laundering offense one which could be investigated by the use of court-ordered interceptions of communications. A similar provision is in section six of the Administration's bill which also makes the new money laundering offense a predicate offense for the ITAP statute (18 U.S.C. 1953) and a RICO predicate (18 U.S.C. 1961). Moreover, Title III of H.R. 1367 would make a now-unnecessary change in 18 U.S.c. 2516 by making a violation of 31 V.S.C. 5322 concerning the failure to file currency transaction reports an offense which may be investigated by court-ordered wiretaps. Such a change was made by Section 1203 (c) of P.L. 98-473 (The Comprehensive Crime Control Act of 1984).
this even though a financial institution was not involved. Accordingly, the money laundering offense in the Administration's bill, would apply whenever the transaction involving the proceeds of a crime can be shown to affect interstate or foreign commerce
or to be conducted through a financial institution which is
engaged in or the activities of which affect interstate commerce.
Second, as I have already discussed, the scienter standard
in H.R. 1367 and H.R. 1945 is too broad.
These bills would
punish one who was merely negligent in engaging in a transaction
involving the proceeds of a crime. Although negligence in this area is certainly reprehensible, we think criminal liability should be reserved for persons who had actual knowledge that the
funds involved were derived from a crime or who acted in reckless
disregard of that fact.
Third, H.R. 1367 and H.R. 1945 would only proscribe the laundering of money derived from certain listed federal felonies.
while the list is long and cover offenses most likely to produce "dirty money" it closely follows the list of crimes that are
predicate offenses for the RICO statute, 18 U.S.C. 1961
see no valid reason to limit the offense to laundering money derived from these crimes while not covering money derived from
such heinous federal offenses as Presidential assassination and
espionage, and such state offenses as gambling and prostitution. In short, we would prefer the new money laundering offense to
cover the proceeds of any federal or state felony.
Pourth, H.R. 1367 and H.R. 1945 describe the offense as
conducting "a transaction or series of transactions." The