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Mr. ANDERSON. Yes, sir. We are convinced that that is the case.
Mr. ZEFERETTI. Mr. Anderson, do you feel that the reporting requirements would be a burden for the banks, especially the savings and loans institutions?
Mr. ANDERSON. There is a burden out there. We took the precaution of checking with the Office of Information and Regulatory Affairs over at OMB. We have something called a paperwork budget now, and each of the agencies are tasked with coming forward and estimating the number of hours that a particular form represents as a burden. Their estimate, and I have no way to confirm or deny it, it could be off a million hours, is 800,000 hours annually for the currency transaction report alone; 800,000 hours. Normally the Paperwork Commission priced that out about $15 an hour. I cannot affirm or deny that. It is not an unreasonable burden, apparently-800,000 hours distributed among 40,000 financial institutions of all kinds, maybe 15,000 banks.
There is also direct evidence of one institution that had its knuckles rapped as a result of problems with currency transaction reporting. That institution has set up a very effective system for ensuring preparation of the reports.
The single institution estimates that it spends about $1.5 million a year and invests the equivalent of 10 staff years in responding to the requirements.
At this point in time, I am uncertain-we in GAO are uncertain. We have anecdotal evidence here and there that it represents a burden and anecdotal evidence that it is not any real burden, and we have the 800,000-hour estimate. I really don't know.
Mr. ZEFERETTI. Thank you.
Chairman MINISH. Thank you. Where did you get the 800,000 hours figure?
Mr. ANDERSON. That would have been submitted by, I guess in this case, by the Internal Revenue Service to the Office of Information and Regulatory Affairs over at OMB. In order to try to control paperwork across government, there is a process now whereby each of the agencies has, in effect, a paperwork budget. They can impose so many tens, millions of hours of burden on the public. That has to be approved by OMB and some kind of target set for reduction. But in any event, it was not ours. It was an estimate that was apparently developed by IRS and provided to OMB.
Chairman MINISH. The 800,000 hours-is that hours that the banks spend?
Mr. ANDERSON. Yes. All the burden placed on nongovernmental entities.
Chairman MINISH. So roughly that is 20 hours per institution if we have 40,000 institutions, if my arithmetic is correct.
Mr. ANDERSON. Right, sir. You may want to inquire further with those folks, the folks from Treasury, as to how that figure was developed
Chairman MINISH. That doesn't seem too many hours, if that is a fact.
Mr. ANDERSON. I agree, sir.
Chairman MINISH. Considering the problem that we are dealing with. I don't know of any worse problem that we have in the United States. The interest in curtailing that activity in any way possible, I am sure, would get the highest rating by the U.S. citizens. I am not impressed by the 800,000 hours, even assuming that it is right.
My own feeling is that it is on the high side. I do not know how complicated it is to fill out the form to inform the Treasury that Mr. Jones deposited $30,000 to $50,000.
Mr. ANDERSON. We have some forms here. We would be glad to pass them around among the members, sir.
I see you have them there. It looks like about 5 or 10 minutes' work for the currency transaction report. It doesn't appear to be that much.
Chairman MINISH. That's right. They are putting 20 hours in on this? I'll tell you, they have something going that nobody knows about. (Laughter.]
They must have a side jaunt in between.
Everyone seems to agree that from its enactment in 1970 until sometime in 1979 the Bank Secrecy Act was poorly enforced and seldom used. Why did this happen and how can the Congress prevent it from happening with other laws in the future?
Mr. Anderson, do you have any ideas on that?
Mr. ANDERSON. Yes, sir. As I have acquainted myself with what has happened under the Bank Secrecy Act, I think the thing that strikes me most is, gee, what a lost opportunity there was in the early years before the word got out. Now you can read in the Washington Post about the fact that there is a Bank Secrecy Act and what the threshold amounts are. We did not get off and running with this new tool in the first place. We gave them a shotgun, and they used a peashooter over time, really.
I mean, obviously the 33,000 CTR's filed in 1976. I do not think the situation changed that much with respect to the type of transactions. I do not know how many similar instances there will be like this that will arise in the future, but in this particular case, there should have been some followup, perhaps on the part of the Congress, perhaps by tasking GAO. At the time the law was passed, there should have been a requirement that some type of plan came forward from Treasury as the lead agency, drawn up in coordination with the other agencies that would insure we were off and running. Planning-that was the missing ingredient, as we view it.
Chairman MINISH. Do you think the GAO could stand more heat than we gave you after we got in this issue?
Mr. ANDERSON. Not much.
Chairman MINISH. Regardless of what procedural requirements you have on paper, it seems to me that enforcement of a law like the Bank Secrecy Act requires the commitment of the people in the enforcing agencies. Since our subcommittee began its work on the Bank Secrecy Act, has there been a change in attitude of the regulatory agencies and Treasury toward the enforcement and the use of this act?
Mr. ANDERSON. Yes, I would say that is quite apparent to us. There have been a number of significant improvements in the last couple of years.
Chairman MINISH. Let me talk with you a little about your amendment. Do you care to discuss it?
Mr. ANDERSON. Yes, sir. We believe in what the amendment would provide. This is a piece of legislation that should be sunsetted, perhaps sunsetted at least from the standpoint of identifying possible improvements once its impact, burden, and benefits have been thoroughly researched.
I guess I personally feel that this is a piece of legislation that of necessity has to have diminishing utility over time, at least when organized crime is involved. There is probably some place where the cost/benefit lines will cross. I would say in the early years, the potential benefits far exceeded any cost that might have been imposed either on the private sector or on government.
But I think it should be studied over time. I think this would be a piece of legislation where perhaps a couple of years from now we might find out that organized crime, the people we were really aiming this for, are so well-versed and have found other avenues, as they have every other enforcement effort we have made in other areas like drug enforcement, that it serves no useful purpose and does nothing but place a burden on the financial institutions and really is not producing useful information.
Chairman MINISH. I did not ask Mr. Harris or Mr. Maxon. Would you care to say something? Here is a chance to get even. We gave you some heat in the office.
Mr. HARRIS. No, sir, I don't really have anything to say other than that it has been a pleasure working in this area. I believe that the work of the subcommittee and its continuing efforts in the last couple of years have brought out the value in Bank Secrecy Act. I think that over the next 2 to 3 years you will see some serious efforts made to implement the act's reporting requirements. That is why our reauthorization recommendation is so important. It really serves to bring everything to a head and sort of keep the pressure on.
Chairman MINISH. Thank you, Mr. Harris.
Mr. Maxon. I would like to echo those thoughts. That is one of the reasons we believe reauthorization is an important step to go through; that is the act has gone on for so long, and there have been promises made and more promises made; but things were not necessarily accomplished. Reauthorizing the act perhaps forces more energy into and better insures that this serious effort will continue.
Chairman MINISH. Mr. Anderson, speaking for myself and maybe the members who are sitting up here-they may want to say something else—but we are very grateful, and I am sure the country is grateful for the contribution that your organization has made. I want to thank you personally.
Mr. GREEN. I would like to join in those thanks. I would like to ask one more question, following up on the observation you made that organized crime will find new channels once it learns that
these channels are being effectively blocked. We face such problem not only in terms of the operation of the Bank Secrecy Act but in all of our banking legislation, especially in light of the fact that new intermediaries, the financial markets such as the money market funds and cash management accounts, are abounding.
Would it be your feeling that these would be some of the new channels where we have to look at enforcement, looking at cash transactions in these other entities?
Mr. ANDERSON. I appreciate that question, because a couple of days ago, I said, “Hey, fellows, how about money market funds? Let's find out what kind of reporting requirements are imposed on them.” Right now there is a loophole there, at least with respect to broker/dealers who are in the money markets. Investment firms, apparently, generally have banks as transfer agents. The cash passes to them, and a CTR would be prepared. But with those who are broker/dealers, right now there is no requirement. Treasury is researching it. It does not appear that there is a requirement$125 billion in money market funds right now-and lord knows how much cash might have been included in those initial deposits.
At least that is our understanding of it. It is a little uncertain. And right now money market broker/dealers are not preparing CTR's.
Mr. GREEN. You think this is an area where my former colleagues on this subcommittee ought to be taking an active interest?
Mr. ANDERSON. I would say you should pursue the subject, yes, sir.
Mr. GREEN. Thank you very much.
Mr. ZEFERETTI. Mr. Anderson, I, too, thank you. I was just looking at the amendment. I think really the sunset provision that you recognize as an integral part of whatever we do is very, very necessary. But I think the act itself is too useful to terminate by 1984. It has given law enforcement a tremendous lead in the overall problem of organized crime, so I think we may be too premature to cut ourselves off at the pass before we really do the kind of work that I think is useful.
I would oppose it at this point anyway, because I do feel that that act is very, very useful.
Mr. ANDERSON. There was a lot of internal discussion in GAO as to how we should come down on that, sir. A lot of people hold your view.
Mr. ZEFERETTI. Thank you.
Mr. CARMAN. I have nothing to inquire on this morning. Thank you.
Chairman MINISH. Thank you very much, gentlemen.
Will the Treasury people come forward, please? Mr. Powis, you may proceed in whatever fashion you decide on.
Mr. Powis. We are pleased to be here today. I would appreciate it if my prepared statement could be entered in the record, and I have a brief summary.
STATEMENT OF ROBERT E. POWIS, DEPUTY ASSISTANT SECRE
TARY FOR ENFORCEMENT, U.S. DEPARTMENT OF THE TREASURY, ACCOMPANIED BY JORDAN LUKE, ASSISTANT GENERAL COUNSEL, AND ROBERT STANKEY, ADVISER
Mr. Powis. The Treasury Department appreciates this opportunity to testify concerning the actions we have taken to improve the administration of the Bank Secrecy Act and to respond to GAO's report entitled, “Further Actions to Effectively Implement and Test the Usefulness of the 1970 Bank Secrecy Act Reporting Requirements."
As we indicated in our testimony before the subcommittee on October 1, 1980, we have found many of GAO's findings interesting and helpful. To be candid, however, we do have a basic disagreement.
The GAO statement that the use of the Bank Secrecy Act reports has been limited and their overall usefulness is unknown conflicts with our assessment of the value of the reports. We believe that the reporting requirements have been highly useful in identifying subjects engaged in major criminal activities, in helping to document financial transactions of criminals, and in providing a basis for prosecuting criminals who have shielded themselves from prosecution for their other criminal activities. The reports have already made an extremely important contribution to Federal law enforcement efforts, and the growth of that contribution is continuing to accelerate.
Our report lists a number of ways in which it has been useful. This morning I would like to focus on Operation Greenback.
Operation Greenback is the investigation of the surplus currency in the State of Florida that was initiated by my office with the cooperation of the IRS, Customs, and the Department of Justice. Its purpose was to promote and coordinate Treasury Department investigations of Bank Secrecy Act and income tax violations that we believed were inherent in the enormous surplus of currency. Approximately 30 IRS special agents, 7 IRS revenue agents, 10 Customs special agents, and 6 Federal attorneys currently are assigned to grand jury investigations related to the project in Miami alone. FBI, DEA, and ATF agents are also involved.
The project has focused on the $14 billion in surplus currency that Florida banks deposited in the Federal Reserve bank offices in Miami and Jacksonville during 1978, 1979, and 1980. Form 4789's filed by the banks were used to select specific individuals and banks for investigation. More than 25 banks have been identified as handling large amounts of questionable funds.
A number of the related investigations involve hundreds of millions of dollars. Customs has already seized more than $9 million. The project is continuing to identify new targets, and in our opinion, we have only seen the tip of the iceberg.
Last week, one of the criminal investigations resulted in 22 indictments on Bank Secrecy Act and drug charges. A total of 20 arrests have been made in Miami, Minneapolis, and San Francisco resulting from these indictments.
We believe that the importance of the Greenback project has been minimized in the GAO draft report. The results from this one