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.

Chairman MINISH. Mr. Zeferetti?

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.

Chairman MINISH. Mr. Carman?

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 SECRETARY 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

project alone would appear to justify the current reporting requirements.

In addition, as our prepared statement indicates, there have been other significant cases stemming from the reporting requirements. While many seem to involve drug traffickers, some involve multinational corporations, and the IRS has initiated hundreds of tax cases based on the report information. Customs has obtained 344 convictions on Bank Secrecy Act violations. In short, a great deal of use is being made of the report information.

While we believe that the Bank Secrecy Act reporting requirements have been useful, we agree with the GAO that we have not realized their full potential. In our opinion, much more can be done to take advantage of the reports.

We recognize that in order to achieve a higher level of success, we will need to increase our staff to provide the necessary leadership. We are currently taking action that will accomplish that. In general, we appreciate the time and effort GAO has put into reviewing the implementation of the Bank Secrecy Act, and we certainly intend to take action on their findings. We do not, however, concur in their recommendation that Congress should amend the act to terminate the reporting requirements in 1984.

Such an action would have a deadening psychological effect on further plans to make better utilization of the reports. In effect, the judgment will have been made that the reports have little value. An immediate decision to terminate the reporting requirements of the Bank Secrecy Act would be a major blow to effective drug enforcement. The most immediate beneficiaries would be major drug traffickers responsible for financial transactions of hundreds of millions of dollars per year.

The GAO recommendation comes at a time when the drug problem is assuming monumental proportions in the Nation. It also comes at a time when enforcement officials are beginning to realize the benefit of the Bank Secrecy Act in combating drug trafficking. Contrary to the findings of the report, the reports filed under the Bank Secrecy Act are highly useful. Therefore, the Treasury Department opposes termination of the reporting requirements of the act in 1984.

That terminates my statement, sir.

[Mr. Powis' prepared statement, on behalf of the Treasury Department, follows:]

STATEMENT OF ROBERT E. POWIS

DEPUTY ASSISTANT SECRETARY (ENFORCEMENT)
U.S. DEPARTMENT OF THE TREASURY

BEFORE THE

SUBCOMMITTEE ON GENERAL OVERSIGHT AND RENEGOTIATION
OF THE

COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS
HOUSE OF REPRESENTATIVES

Mr. Chairman and Members of the Subcommittee:

We appreciate 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 Needed 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. For example, the reporting requirements are playing a major role in our current investigation of the financial aspects of drug trafficking in Florida, which involves billions of dollars and promises to be one of the largest financial investigations ever undertaken.

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. Forms 4789 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. The project is continuing to identify new targets; and, in our opinion, we have seen only the tip of the iceberg.

Approximately 30 IRS special agents, 7 IRS revenue agents, 10 Customs special agents, and 6 Federal attorneys currently are assigned to the grand jury investigations related to the project. FBI, DEA, and BATF agents are also involved. The charges being investigated include possible income tax evasion, Bank Secrecy Act violations, and drug charges.

Although the project in Florida is still fairly young, a substantial number of criminal cases have been developed by IRS and the Customs Service.

Last week, one of the criminal investigations resulted in 22 indictments on Bank Secrecy Act and drug trafficking charges. A total of sixteen arrests were made in Tampa, Miami, Atlanta, Minneapolis, and San Francisco.

We believe that the importance of the Greenback project has been minimized in the GAO draft report. The results from this one project alone would appear to justify the currency reporting requirements. In addition, however, its success has stimulated U.S. attorneys in various parts of the nation to establish similar projects. Ten have been established to date.