During my appearance before your Subcommittee at its July 24, 1985, hearing concerning money laundering legislation, questions were raised as to whether the new money laundering offense as set out in the bills which the Department of Justice supports, H.R. 2785 and H.R. 2786, should contain forfeiture provisions for the funds involved in the offense. It was pointed out that such provisions would, in many cases, overlap those provided in the existing RICO statute (18 U.S.c. 1963), and in the narcotics forfeiture statutes (21 U.S.C. 853 and 881). I would like to take this opportunity to provide further information as to why we believe the forfeiture provisions in H.R. 2785 and 2786 are necessary.

Initially, it should be noted that the Department-supported bills contain both civil and criminal forfeiture provisions. Any funds or monetary instruments involved in a violation of the new money laundering offense would be subject to civil forfeiture. In addition, civil forfeiture is provided for any funds or other property involved in a violation of the proposed new offense of receiving property obtained in violation of a federal felony provision, provided the underlying felony relates to narcotics trafficking, and for money or other property obtained in connection with narcotics trafficking in violation of a foreign law and brought into the United States. Criminal forfeiture provisions are established for the money or other property involved in or which is traceable to a violation of the new money laundering offense (which applies to transactions involving the funds derived from or to carry on any federal felony) or to a violation of the proposed new offense of receiving the proceeds of any federal felony, not just those related to controlled substances.

While in many cases involving drug-generated money the new forfeiture provisions would overlap with the existing narcotics forfeiture statutes, it should be kept in mind that under the narcotics forfeiture provisions the government must prove that

the defendant is guilty of the underlying narcotics offense or, pursuant to the relation back doctrine, that the person holding the money or other property to be forfeited knew that it was derived from a drug transaction. Existing law may not be sufficient to reach a professional money launderer for example an attorney who for a $50,000 fee accepts a suitcase containing $500,000 in cash and agrees to deposit it in several different accounts and ultimately to wire transfer it to the "client's" offshore bank account who can be shown to know or to be acting

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in reckless disregard of the fact that he is handling "dirty money" but who cannot be shown to have knowledge that the funds in question came from any particular drug offense. It is also important to note that the present narcotics forfeiture statutes cannot be used to reach the proceeds of foreign drug trafficking that are brought into the United States whereas such funds could be forfeited under the Department-supported bills. Finally, a specific forfeiture provision for the funds involved in money laundering or receiving the proceeds of a crime, even if the underlying crime involves drugs, is a somewhat more direct way of focusing the attention of the court on the specific reprehensible conduct, money laundering, that justifies forfeiting the money and thus separating the criminal from the fruits of his crime than is proceeding under the drug forfeiture statutes.

Moreover, both the civil and criminal forfeiture provisions in H.R. 2785 and H.R. 2786 cover a wide variety of situations not reached in the narcotics forfeiture or the RICO statutes. For example, both the civil and criminal forfeiture provisions in these bills could be applied to money deposited in a bank which had been obtained as payment for an act of espionage in violation of 18 U.S.C. 794, obtained as payment for or to facilitate the assassination of the President or a Member of Congress in violation of 18 U.S.C. 1751 and 351, respectively, or money obtained from a robbery of a federally insured bank in violation of 18 U.S.C. 2113. Obviously, the narcotics forfeiture provisions do not reach any of these offenses. The RICO statute does not even cover espionage since it is not within the definition of "racketeering activity" in 18 U.S.C. 1961, and thus laundered funds involved in this extremely serious offense are not subject to forfeiture. H.R. 2785 and H.R. 2786 would remedy this situation.

While arguably the RICO statute might reach the offenses of Presidential and Congressional assassination, since they would in all likelihood also be murders "chargeable under State law," this is by no means free from doubt in view of the federal preemption provisions in subsections 1751 (h) and 351 (f) which operate to "suspend" the exercise of State jurisdiction if federal jurisdiction is asserted. In any event, use of the RICO forfeiture provisions for one of the assassination offenses would require the government to prove at least one other offense to show a "pattern of racketeering," a requirement that is not appropriate to the need to permit forfeiture for money laundering associated with these crimes. Moreover, as you know, the RICO statute

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contains only a criminal forfeiture provision and is of no avail without a prosecution and conviction. Normally, of course, prosecution would be undertaken for any and all persons involved in a Presidential or Congressional assassination plot. However, situations can easily be envisioned in which this might not be the wisest course. For example, if some evidence was obtained that a low-level member of a terrorist organization believed to be planning a series of political assassinations was depositing large sums of cash intended to finance the assassinations in several different banks, it might be considered advantageous to seek only the civil forfeiture of the money and to forego prosecution of the person in exchange for disrupting the plot and obtaining complete information about other persons involved.

Similar considerations apply with respect to the bank robbery offense. The RICO criminal forfeiture provisions would only be applicable following proof beyond a reasonable doubt of all the elements of the bank robbery and one other RICO predicate offense. They would be of no help in recovering the stolen money even if it was clearly traceable to the robbery if it was in the hands of a defendant who could not be shown to have committed another RICO predicate offense, or if such money was deposited in another bank by a person who could not be proven to have been involved in the actual robbery and so could not be prosecuted for that crime.

In sum, we believe that the proposed forfeiture provisions in H.R. 2785 and 2786 would add to the government's ability to seek forfeiture of funds derived from drug offenses that are not reachable under existing laws and, further, that federal law enforcement officers should have the authority generally to seek a forfeiture of the laundered money derived from or intended to facilitate other serious criminal activity, such as that in the above examples, which does not involve drug trafficking and that cannot be shown to involve a violation of the RICO statute. fact of the laundering is a fairly clear indication that the underlying criminal offense was motivated either by profit or by a desire to obtain money to finance other offenses, and in such situations we believe it is completely justifiable to provide a generally applicable weapon with which to attack these economic aspects of the crime.

The

I hope that the above adequately explains the Department's reasons for supporting the forfeiture provisions in H.R. 2785 and H.R. 2786.

Sincerely

JB Stephen

Jay B. Stephens

Associate Deputy Attorney General

Mr. HUGHES. Does the gentleman from California have any further questions?

Mr. LUNGREN. No, Mr. Chairman.

Mr. HUGHES. Thank you very much. I appreciate your testimony. We have a vote in progress. The subcommittee is going to recess for about 10 minutes so we can catch that vote. I want to thank the panel. They have been most helpful.

John, we really want to wish you well with this tremendous new challenge. It is going to be a much different experience, I am sure, than you have had thus far. We congratulate you on your continued success.

Mr. WALKER. Thank you very much, Mr. Chairman.

I just want to say in conclusion that, although we have not always agreed on our various positions, the give and take between your committee and the administration and the Treasury Department has, I think, been highly beneficial to the development of sound law enforcement policy.

I want to thank the committee and you, Mr. Chairman, for your continued attention to very important matters affecting the criminal justice system throughout the 4 years that I have been at Treasury and the very high degree of effort and attention that you place on these matters.

Mr. HUGHES. I appreciate your cooperation. I really have enjoyed working with you. So, continued success to you and good health. Thank you.

We stand in recess. We do have some very important testimony following this from the Customs Service. We are recessed for 10 minutes.

[Recess.]

Mr. HUGHES. The subcommittee will come to order.

Our final witness today is Bonni G. Tischler, the Director of the Financial Investigations Division of the U.S. Customs Service and the Acting Director of the Office of Investigations.

Ms. Tischler began her career with the Customs Service as a sky marshal in 1971. In 1977 she became a Treasury agent. She was an original agent with Operation Greenback at its inception. After 3 years with Greenback, she came to Washington, where she was the head of Customs Financial Law Enforcement Center until it became the Financial Investigations Division.

Ms. Tischler, on behalf of the Subcommittee on Crime, we welcome you. We have your statement, which will be made a part of the record in full, without objection. You may proceed as you see fit. Welcome.

STATEMENT OF BONNI G. TISCHLER, DIRECTOR, FINANCIAL INVESTIGATIONS DIVISION, U.S. CUSTOMS SERVICE, ACCOMPANIED BY STEVEN BASHA

Ms. TISCHLER. Good afternoon, Mr. Chairman, Mr. McCollum, and counsel.

Would you like me to run through the statement, summarize it, or just answer questions?

Mr. HUGHES. Well, why don't you summarize it for us? Your statement will be made part of the record in full. We have read

your statement. But if you can summarize it, that would be very useful.

MS. TISCHLER. Basically what we really wanted to get across was that money laundering took many forms. Some of them are traditional, and some of them are nontraditional. Some of them involve putting cash through established businesses. A lot of them involve transporting cash outside the United States. That is something that the Customs Service was very eager to offer your subcommittee.

Because of the enormous quantities of cash, we brought some pictures in just to demonstrate really the volume involved. I enjoyed seeing the President's Commission on Organized Crime's pylon over there. We brought in a currency weight chart also to further demonstrate the logistical problem of moving all that cash around. Mike, hold up the one that you have in your hand there. That was $3.5 million, Mr. Chairman. It was taken off of something we call the Sonal case back in 1981. To illustrate the difficulty in bringing these people to justice, this was half a seizure. It was $3.5 million in cash. The rest of it was taken out of the bank account to the tune of $4.2 million. The total seizure was in the realm of $8 million, plus interest, we forfeited approximately $11 million a couple of weeks ago. This is 1985, and the money was seized in 1981.

No criminal prosecution was accomplished against the defendant. At the moment, he is still out on bond and he is in Colombia. I think what I will do is just run through

Mr. HUGHES. What was the denomination of bills?

Ms. TISCHLER. It was all street money, sir. It was between five and twenties, mostly twenties.

We found, according to our chart here, we actually went into a bank and we had them weigh twenties and hundreds and ones and so on and so forth, of course with the object being to reduce the quantity of bills to ease the logistics of the situation. As you can see, a hundred pounds of hundreds comes out to be $4.5 million, while a hundred pounds of twenties is $908,000. I was really bad in mathematics and mechanics in school. My agent over here has been explaining this chart to me for 5 days.

I was there for the Sonal seizure, and I can tell you that $3.5 million in cash weighed 350 pounds, because we had to weigh it in.

At any rate, the seizure that is sitting in front of you there is something called the Millan Rodriguez seizure. That individual basically had a terrific scheme. He flew around the United States, picking up money from various places, brought it back to South Florida, counted it, massaged it, manipulated it, and then carried it out to Panama in his Lear jet. We watched him for a while. One early morning we stopped him. He had with him, interestingly enough, a Customs form 4790, the instrument that reports cash. We refer to it as a throwdown instrument, almost like it would have been a throwdown gun, the bottom line being that it nowhere came near the amount that he had with him. We seized the cash. We got a search warrant for his house. We turned up, I think, 40 kilos of cocaine, something to that effect.

In any event, that is still an outstanding case. That was seized in