man McCollum's proposal, which would give Treasury an administrative summons authority.

Mr. HUGHES. Mr. McCollum.

Mr. MCCOLLUM. You just walked right into what I wanted to ask you about. That is an explanation of that summons authority and I wanted you to give us some examples of how you would or could go about using that and be more productive in terms of what you are trying to accomplish. Are you saying that if you had the power that you don't have now then you wouldn't have to rely on the Comptroller's Office?

Mr. WALKER. That is correct; it would enable us to do so. We could pursue civil investigations independently of the criminal investigation. Customs has this authority in the commercial fraud area and IRS has it in the tax area.

We have counted some 30 agencies of the Government that have independent administrative summons authority. We would be happy to supply that list for the record.

Mr. MCCOLLUM. Do those include any of the agencies that are independent of you that are involved in this, such as the Federal Reserve System?

Mr. WALKER. Yes, they have this authority as well. In addition to that, the FTC, the SEC and other agencies of that sort have it.

Mr. MCCOLLUM. It is my understanding that this whole Bank of Boston matter that was discovered in your shop was discovered outside of all those agencies. It was discovered, in fact, by a gentleman sitting in this room today and we are mighty proud of him. But, that was done by your shop and in reality much of the work that is done in this area is done independent of those agencies by your office, isn't that correct?

Mr. WALKER. That is correct and it is true that in the Bank of Boston case that it was a study done by our office of the CTR level around the country that allowed us to focus on Massachusetts as showing a very low level of reporting. That combined with a study that our office then conducted in Boston to look at the cash that was being turned into the Federal Reserve there, revealed an apparent discrepency between the amount of reports that we were getting out of the Boston area and the huge amount of cash that was being turned into the Federal Reserve. We then requested exempt lists from the major banks up there, including the Bank of Boston, to see whether or not there were abuses, potential abuses, of the exempt list procedures. We in our office found that that was probably the case and also that there were potential problems with the international reporting requirements.

Mr. MCCOLLUM. But, if the Bank of Boston had not cooperated with you, then you would have had to have asked somebody else to look into this matter and get those papers. You didn't have the power to do that without their cooperation, is that correct?

Mr. WALKER. That is correct.

Mr. McCOLLUM. Wouldn't there be an appropriate subdepartment of yours, such as the IRS where, perhaps, depositing these powers would be better than giving you the general powers or do they need to go specifically to you?

Mr. WALKER. Well, the Comptroller has them under his supervisory authority. In fact, he really can get the records that he wants

at will. If they were given to the IRS, in my judgment that would muddy the waters a bit, because the IRS right now does not have the authority to go in there and it could create some confusion as between the Comptroller and the IRS. Of course, the IRS does have the power to conduct criminal investigations and normally does that.

Mr. MCCOLLUM. But again, it is your shop that is doing this work and you are the ones that need the summoning authority to be able to go in look at the factors as you did in the Bank of Boston case? Mr. WALKER. That is correct. In fact, the summons authority could be given to the Secretary, and I believe your bill would do that. Then that would provide for the Secretary to delegate within the Treasury Department to the appropriate office.

Mr. MCCOLLUM. Right now, if I may change the subject and then go back for the second round of questioning.

The exempt lists that were involved in the Bank of Boston case became a focus of attention after you had gotten involved and found those exempt lists. Apparently, right now, the purpose of exempt lists is primarily, and correct me if I am wrong, to protect a bank from having to do a lot of extra work where customers would normally be handling a lot of cash transactions in the routine course of business. The procedure is, as I understand it, for the customer of the bank to actually file any kind of a written request to be put on the exempt list is really done by the bank institution themselves.

Would it be helpful in the process of the course of things-it seems to me that it would be, at least from the criminal law enforcement standpoint-to have the customer have to file something to start his whole ball rolling in order to have his signature on there as to what the purpose is for this business?

In the Bank of Boston case, as I recall it, there was considerable question raised after the fact as to what the activities were, but none raised before the fact, regarding the activity generated cash. Mr. WALKER. Yes, I think that this suggestion has been made in other form and I think that this is a worthwhile suggestion to follow and we are studying that one.

Mr. MCCOLLUM. Well, I have spent most of my time and I yield back Mr. Chairman.

Mr. HUGHES. Mr. Staggers.

Mr. STAGGERS. Thank you, Mr. Chairman. Following up, I am not sure about what my colleague was referring to with respect to filing CTR's.

Mr. WALKER. The CTR's?

Mr. STAGGERS. The individuals, is that what you were talking about?

Mr. WALKER. No, this would be-Mr. McCollum, I believe, was talking about actually getting exempt status. The filing, in effect, a paper which would warrant the granting of an exemption. I would say that we would definitely want to make the banks responsible for granting the exemption. Even if the paper were filed, we wouldn't want to have that be a process that would be conducted solely between the Secretary and the customer seeking exemption, because the bank ultimately has the responsibility to comply with the act.

The bank is in a better position than the Secretary of the Treasury would be to understand the nature of the business in which the exemption is being sought. Also, once the exemption is granted, suppose the individual then changes his business. Suppose it is a parking lot which gets exempt status because of the large cash volume, but then, all of a sudden, the bank becomes aware that a gambling operation is being conducted inconsistent with that parking lot, or maybe it is being used to launder gambling proceeds; then, under those circumstances, the bank should be held accountable. They should still be held accountable and not be eliminated from the process.

Mr. STAGGERS. Is there any problem with having the individuals file CTR's also?

Mr. WALKER. I don't think that it would be a problem, whether you would have a separate CTR or you could have an individual sign off on a CTR that is filed by the bank. That is another suggestion that we are looking at. That could be done and then you would have an individual CTR, one CTR which would contain both parties. The only problem that I can foresee there is that that would modify the current rule which permits the bank to file the CTR within 15 days of the transaction. In that case the CTR would presumably be prepared while the customer was engaged in the transaction and it would be filed. I think that we would rather have the single CTR with two signatures on it than two CTR's, from an administrative standpoint.

Mr. STAGGERS. Are you aware of this laundering mechanism called smurfing?

Mr. WALKER. Yes.

Mr. STAGGERS. Are you doing anything about that? That is why I pursued the individual filing CTR's.

Mr. WALKER. Yes, if by smurfing, you mean-there are two contexts in which the term "smurfing" has been used. One is when a series of transactions under $10,000 are engaged in, whereby amounts of less than $10,000 are used to purchase cashier's checks and then the cashier's checks are transported offshore or to another bank. If they are in pay form then they could be deposited without triggering other reports and thereby avoid the reporting altogether.

Also, I have understood that smurfing is transactions somewhat over $10,000 but so small as not to create any suspicion. Again, this is spread out over the country in which case there would be reports but the reports would be lost in the shuffle, if you will. Are you referring to the former?

Mr. STAGGERS. Yes. How widespread is that and what are you doing about it?

Mr. WALKER. Well, it is widespread in the sense that we are seeing it in different parts of the country. There have been instances of major cases brought where smurfing has occurred. Our financial investigators are alert to this problem and we are seeing it as a technique so that when we come across cashier's checks, they may provide an indicia of a smurfing operation. We are not contemplating lowering the reporting requirement below $10,000 at this time.

Mr. STAGGERS. Why not?

Mr. WALKER. Well, we feel that whatever level you operate at you will drive the, so called, smurfers into using smaller denominations.

Mr. STAGGERS. Does that make it more difficult?

Mr. WALKER. Well, it would make it more difficult but by the same token, you would be increasing the burden on the banking community. So, what we have done is we have tried to strike a balance at $10,000. We could require reports of every transaction regardless of the size of the transaction.

Mr. STAGGERS. What about some sort of limitation on the cashier's check sale, how about that type of approach? Have you considered that?

Mr. WALKER. Yes, that is another possibilty that we have been discussing and that is a possibility. It would seem to me that it might not be inappropriate to require the banks to do this, and we have urged some banks who have expressed an interest in controlling the money laundering to do this, to require this as a voluntary matter.

Again, the problem is the extent to which we would be intruding on legitimate financial activities. And I think that the reason that we have been successful, and I am talking now from a practical viewpoint in terms of regulating in this area without creating the backlash from the financial community, is that we have approached each of these steps with some measure of concern for the legitimate financial activities of the community. I think we now have the support of the banking community in our efforts. We have been hopeful not to create a hostile constituency out there.

It may be that this could be required as a matter of law. We would prefer to see, of course, a voluntary effort by financial institutions in this area. If the smurfing problem persists, then I think that we would have to consider dealing with it by regulation.

Mr. STAGGERS. With the particular problem of smurfing, would the proposed legislation address the smurfing problem?

Mr. WALKER. Yes, the only proposed legislation that would address the smurfing problem would be in the area of voluntary disclosure of information that some banks, in the past, have withheld citing the Right to Financial Privacy Act. If the Right to Financial Privacy Act were modified to permit the full disclosure of suspicious transactions, and that would be primarily by supplying a good faith defense to bank employees that supply this information and are later sued, having misjudged and made a mistake but having acted in good faith. That would help us in the smurfing area, because it would enable banks to supply information regarding suspicious transactions, although, non-reportable transactions. Mr. STAGGERS. Mr. Chairman, I am going to yield back. Mr. HUGHES. The gentleman from California.

Mr. LUNGREN. I will pass.

Mr. HUGHES. The gentleman from Kentucky.

Mr. MAZZOLI. Thank you, Mr. Chairman and thank you for scheduling these hearings. I appreciate being a member of this panel and I look forward to working with you.

Mr. Walker, let me, perhaps, be the first to congratulate you on a job very well done. I was pleased by what I read in the paper here several weeks ago of your efforts and I was moved enough to

write a letter to you. It is, to me, a valorous and very appropriate service that you have given and I think that it is a very important topic. While we want to give you the best tools, there are some efforts in which I think the chairman feels like you didn't act quickly enough.

Let me ask you a couple of questions. What I was most encouraged to write to you about before was about this question of amnesty. As you will well recall, there is some evidence that the American Bankers Association had made some contacts with the Department of Treasury about the possibility of amnesty.

Now, tell me about the question of amnesty: Have you been contacted and what is the position of the Treasury Department on amnesty?

Mr. WALKER. The first report that came out in the Wall Street Journal in this area indicated that some 45 banks had contacted the American Bankers Association with a view of having that association seek_amnesty for banks that had not reported. Upon contacting the Banker's Association, after reading this article, we determined that there wasn't 45 but it was 4 to 5 banks. Quite a substantial difference.

At that point, however, there were numerous inquiries of Treasury as to whether we had a policy of amnesty or were contemplating one. At every opportunity we have stated our policy which is unequivocally no. We intend no amnesty for banks that have failed to report; in fact, every bank that has come in voluntarily, and they have been reported in the press, has been told expressly that the full panoply of sanctions is available to the Government and can be used.

By the same token, I would like to point out that the fact that an institution comes forward voluntarily is a plus mark. That is something in their favor. So that would be taken into account as we reach a determination.

Mr. Mazzoli. Well, we well understand that, but as far as your department, there is no policy to grant amnesty, is that correct? Mr. WALKER. That is absolutely correct.

Mr. MAZZOLI. So it could be that some bank would come in voluntarily to say that they had failed to report and this could, even after admitting this, lead to their being fined.

Mr. WALKER. That is correct.

Mr. MAZZOLI. To what extent are you supporting this?

Mr. WALKER. The Secretary is fully aware of this policy and is supportive of it.

Mr. MAZZOLI. Has he enunciated on this subject directly?

Mr. WALKER. I don't believe that he has enunciated on it.

Mr. MAZZOLI. Is there some opportunity that you would have of bringing this to his attention and suggest that at least I, and perhaps the committee, but at least I would like to hear from him with respect to this question of amnesty and to the specific Treasury policy.

Mr. WALKER. I would be happy to do so.

Mr. MAZZOLI. Thank you. Mr. Walker, I have been continually unimpressed by the banks' suggestion that they really didn't know what they had to do. I am quite confident that if I had failed to pay my loan on time that they would very quickly know what my name