When does a teller have "reason to know" or act with a "substantial risk" that an otherwise normal transaction involves tainted funds? What if an ex-convict deposits $5,000 in cash? Must a teller file a report when an individual under indictment for embezzlement obtains a cashier's check for $6,500? What if one teller read the story in the newspaper about the indictment and another teller did not? Are they held to different standards? What if a customer buys a new car and starts dressing in more expensive clothes? Would a teller have to report all transactions close to but under $10,000? How close? $9,800? $9,000? $8,000? Must a teller report the transaction of a customer rumored in the neighborhood to be involved in organized crime? What if it merely involves a $150 deposit? Additionally, what is the teller to do if he or she actually suspects the transaction to involve illegally derived funds? Under most of the bills it would be illegal for the teller to engage in the transaction. Thus, the teller would be forced to confront the alleged money launderer. This would, of course, result not only in warning the alleged criminal that his actions will be reported to law enforcement officials, but also place the teller in a potentially dangerous situation. Moreover, when the overly suspicious teller which is exactly what these bills would force the teller to become an individual who is innocently engaged in a legal and proper transaction, the bank is placed into the role of accuser and thereby risks losing its customers as well as the long term trust of those individuals in financial institutions in general. - confronts These bills turn the emphasis from the criminal activity of the drug dealer to the bank teller to the average law abiding man and woman. That was never the purpose of the Act and never should be. We should not allow the federal law enforcement community's attention and efforts to be diverted from targeting drug dealers to targeting bank tellers and banks. I am not aware that we did not have a sufficient number of drug dealers and others in organized crime as targeted individuals. We do not need prosecution of tellers on weakened or no standards of intent to give the impression that we are succeeding in drug law enforcement. For these reasons, Congress should enact a money laundering statute but limit it to the real targets, those who intentionally and knowingly engage in transactions involving criminally derived funds for a criminal purpose. Such a standard would encompass the bank teller or official who acts with criminal intent without refocusing the emphasis from the criminal activity of the drug dealer, where it should be. While Congressman Hughes' bill, H.R. 1474, comes closest to the necessary standard, it does not include the "intent" standard necessary to protect the teller who, with no intent to launder funds, conducts a transaction with funds he or she suspects were derived illegally but for fear of personal safety, or to avoid embarrassing a long time customer who is in fact not laundering funds, does not confront the individual. Proposed Amendments to Title 31 The Currency and Foreign Transactions Reporting Act As has been amply demonstrated in the Congressional hearings, the recent problems associated with the Act were due to a lack of administration, enforcement and compliance with existing regulations, and not to the lack of an existing legislative or regulatory framework. The creation of new reporting requirements will serve only to hinder the process that is already in existence, which now is being properly applied. During a time of personnel cutbacks in government agencies, the IRS must now process between three and four times the number of transaction reports it handled in 1984. Indeed, both former Assistant Treasury Secretary John M. Walker, Jr. and present Assistant Secretary Francis A. Keating, II reported to Congress that they would not favor lowering the $10,000 limit for filing CTRS, citing the already monumental task facing the IRS in processing the forms they now receive.12/ Instead, the solution is to ensure compliance with existing laws and regulations and to encourage coordination and communication both among the government agencies and between those agencies and financial institutions. The interest of the banking industry in working to stamp out money laundering is not motivated merely by a fear of being fined ΟΙ avoiding negative publicity. Banks in this country, as you well know, cannot survive without the trust of their customers. No bank wishes to tarnish its reputation and jeopardize the trust of its customers by accepting illegally derived funds. Thus, a coordinated joint effort between government and industry, such as through a task force comprised of representatives of law enforcement, the regulatory agencies, Treasury, IRS, and the industry, could result in the type of law enforcement advances which Congress and all parties involved are interested in achieving. Just one example of how coordination between government and industry could prove beneficial was recently suggested to Congress by Treasury Assistant Secretary Francis A. Keating, II.13/ Presently, currency transaction reports must be 10 submitted on official IRS forms. If, instead, the agencies and the financial institutions could work together to permit bank generated computerized forms, which would contribute to speed and efficiency, everyone would benefit. Such coordination might even result in the establishment of a computer network where the information could be fed into IRS data systems directly from the banks. The information could be entered by the banks more quickly and accurately and at less cost, the data could be received and filed with expedition, and law enforcement officials would have easier and earlier access to the data. and Thus, rather than inundating both financial institutions the agencies that regulate them with increased administrative requirements, cooperation on the best methods to apply already existing administrative requirements will provide the best results in the war on money laundering. It is simply unfair and imprudent to impose an adversarial atmosphere through such proposed amendments as a $10,000 fine for the mere negligent failure to file a single CTR. While banks should be liable for a reckless disregard of the reporting requirements, an automatic $10,000 fine for the mere negligent failure to file a few CTRS is totally out of proportion to the conduct being punished. CONCLUSION Congress should take immediate steps to enact a statute making money laundering a crime directed at the real target, namely individuals who knowingly participate in the laundering of illegally derived funds. Otherwise, what is required is not further regulation or new laws, but rather further cooperation between government and industry to make the Act and other available enforcement tools useful instruments in the war on drugs. Before acting to gut the privacy protections Congress has afforded to individuals, or to greatly increase the administrative burdens of both the industry and the agencies, all concerned should continue to open up channels towards cooperation and take time to assess what the improvements over the last year have done to combat the money laundering problem. The proposed amendments to Titles 12 and 31 are not only counterproductive to the goal of abating money laundering but are also imprudent. In this time of fiscal austerity under Gramm-Rudman-Hollings, the proposed bills threaten to appropriate funds and manpower in the least productive manner and further lessen our ability to require that the law enforcement community concentrate the real targets. This on 11 would be particularly wasteful and imprudent at a time when the banking agencies must devote so many of their resources to the supervision of failed and failing financial institutions. Much more prudent use of funds could be made, for instance, by reinstating the low cost yet highly successful Narcotics Trafficker Tax Program (NTTP) which resulted in the indictment, conviction and fining of large numbers of drug dealers and disruption of their operations. The NTTP concentrated on the ill-gotten gains of drug traffickers but did So in an administratively workable manner utilizing bank records retained under the Act. I therefore urge Congress to enact a responsible money laundering statute which would punish those with actual intent to launder illegal funds. Congress should continue its oversight activities which have greatly contributed in the last year to strengthening the emphasis and utilization of the Act. Time should be taken to allow the increased attention paid to the Act and increased enforcement activities to be evaluated. At that time Congress will be in a better position to properly balance the need for additional legislative requirements and the expected benefits against the increased administrative burden such requirements will place on the agencies and the financial industry as well as the increased government intrusion into the privacy rights of our citizens. Beyond that, Congress should give priority to oversight activities on the programs and operations of the various Federal enforcement agencies with the aim of determining the best methods of combatting organized crime with particular emphasis on drug trafficking, since that overall effort has been patently unsuccessful. Thank you, Mr. Chairman. FOOTNOTES General's Report to the Congress, "Bank Id. at iv. 3/ Id. at ii. 4/ Testimony of W. J. Anderson, Director, General Government Testimony of Richard C. Wassenaar, Assistant Commissioner Id. IRS Memorandum of Understanding, IR 85-125. Testimony of Assistant Secretary for Enforcement, U.S. on House Report No. 95-1383, p. 33, U.S.C.A.N. p. 9305, id. at 246, U.S.C.A.N. p. 9375. 124 Cong. Rec. 33311 (October 3, 1978). Testimony of John W. Walker, former Assistant Secretary of the Treasury for Enforcement, before the Subcommittee on Financial Institutions of the Committee on Banking, Finance and Urban Affairs of the House of Representatives, on March 5, 1985; Keating Testimony, supra. Keating testimony, supra at 4. |