Act which would require gambling casinos to compy with the recordkeeping and reporting requirements of this Act. The casino industry has different views both about the need for cash flow identification and how to accomplish it if in fact there is a need. We intend to work with the casino industry over the next few weeks in order to resolve our differences and to insure that there is a balance between the law enforcement needs and the legitimate concerns of the casino industry.

You are to be congratulated Mr. Chairman, for conducting this hearing as it creates a forum for this issue to be discussed and considered and it creates a forum for all concerned parties to express their views and concerns.

I will now attempt to answer questions that you may have on this subject.

Mr. HUGHES. Thank you very much, Mr. Powis, for a very fine statement.

Mr. Balanon, do you have anything you'd like to add?

Mr. BALANON. No, sir.

Mr. HUGHES. Mr. Stanke?

Mr. STANKE. No.

Mr. HUGHES. Mr. Jennings?

Mr. JENNINGS. No, sir.

Mr. HUGHES. Let me say, first of all, I think the idea of developing with the State the reporting requirements has a great deal of appeal.

I'm a little bit concerned about one aspect of that, though. If we were to exempt a State because a State had, you know, adequate reporting requirements and they are sharing that information with the Federal Government, what would that do with regard to any Federal prosecution if we were to become involved?

Would that deprive us of Federal jurisdiction?

Mr. Powis. No, sir. Mr. Chairman, under this proposal, if the State were willing to set up a system to issue a similar form that contains all the information on the 4789-type form which we have, if the State were willing to do that, and to monitor compliance, then the individual casinos would be exempted from the filing of a Federal form provided they filed their form with the State of the currency transactions.

The State would maintain a copy of that form as would the casino, and would provide another copy to the Treasury Department.

Now, if an individual did not file, we would look in both places, if we had information that something was going on and the individual did not file. We would look to our Federal records, presumably we wouldn't find them.

We would then go to the State and say, has there been a mistake here? Have you forgotten or failed to send us a copy? They would check and find out, no, they haven't.

Mr. HUGHES. My concern is this-I think you missed my point. I am attracted to the suggestion that if the State has an adequate mechanism to deal with large cash transactions and that information is shared with the Federal Government, I'm concerned if we put an exemption, that if, in fact, there is a violation, a failure to file, that it would not trigger Federal jurisdiction as well as State jurisdiction.

Why not talk in terms of designating the State as the agent, as we often do, instead of exempting? Wouldn't that really ensure that, in fact, if we have an interstate transaction, for instance, which might be beyond the ability of the State to deal with it, that

the Federal authorities would have jurisdiction to prosecute for violations?

Mr. Powis. Well, sir, we feel that this type of provision would give us the ability to prosecute. The exemption only goes to the casino to file a Federal form.

The casino has to file a State form. If they file neither, we believe that we have a Federal jurisdiction to come in and be able to prosecute that case.

Mr. HUGHES. Well, I would question that. I really would. I'm not so sure that that would be the case, and I would like to see the procedure in a little more detail. But, I would be concerned that if you create an exemption for filing for Federal purposes, and not make it clear that the State is acting as an agent for itself and for the Federal Government, that we might be depriving ourselves of jurisdiction.

Mr. Powis. Well, Mr. Chairman, we'll certainly take a harder look at that. We have dealt with our attorneys on this matter, and they do feel that we are in good shape in terms of the Federal prosecution.

Mr. HUGHES. You know, we still have Mr. Dumont in the room. Mr. Dumont, I wonder, for the record, if you can give us your own personal view on that-can you come forward and take a microphone?

Mr. DUMONT. Yes; I'll be glad to.

Mr. HUGHES. It's something I'd like to hear your view on.

Mr. DUMONT. Yes. I think my view does differ from what Mr. Powis said, although I may misunderstand him. The question.

If we do not have a provision in title 31 covering casinos, we would not be able to prosecute a title 31 violation. Now, if we did have such a requirement whereby the State form would be made available to us, we would have the information which would lead to maybe detection of another offense, but we wouldn't be able to prosecute the title 31 violation, and I think that's what your question was.

Mr. HUGHES. Yes. Well, maybe we just don't understand the procedure.

Mr. Powis. Let me try one more time. The regulation would clearly require the casino to file a form with the Federal Government.

However, it would say that you are exempted from this filing if, in fact, you filed the State form.

Now, if the individual files neither, the casino files neither form, I submit that we feel that we have a Federal violation.

Mr. DUMONT. As long as we have a regulation probably along those lines, and we have penalties for failure to file

Mr. HUGHES. Right. Trigger Federal as well as State jurisdiction. Mr. DUMONT. I think that's where we misunderstood each other. But, we would have to have the regulation. We would have to have the regulation which requires the filing of a form, and we'd have to have Federal regulation in order to have jurisdiction to prosecute for failure to file it.

Mr. HUGHES. That's right. Otherwise, I would think that the only prosecution that we could bring would be whatever our investiga

tion discloses by way of other violations, but not triggered because of a failure to file or a misfiling.

Mr. DUMONT. That's right.

Mr. Powis. An important part of this regulation would be that casinos would be clearly delineated and defined as financial institutions under the Bank Secrecy Act.

Mr. HUGHES. Thank you, thank you. I appreciate that.

You have detailed a number of instances where laundering, money laundering has taken place through casinos. I'm just wondering, are there additional instances representing ongoing investigations that you're aware of that you cannot share specifically with us, that would also suggest that money laundering is taking place at casinos?

Mr. Powis. Yes. I'm aware of several such situations.

Mr. HUGHES. OK. And, I would assume that you agree that with the pressure that's been brought to bear on financial institutions under the Bank Secrecy Act, that that pressure has been translated into looking for new avenues to launder, and that's pushed a lot of money laundering into the area of casinos, which is attractive. Mr. Powis. I think that's an important part of it. People in this business are looking somewhat away from the banks today into other areas.

Mr. HUGHES. Mr. Powis, you have been in the forefront of trying to develop new forfeiture legislation. In fact, we fought the battles in the 97th Congress trying to get a major forfeiture bill through, one that would contain new administrative forfeiture procedures.

Do you see that plugging this type of a loophole is going to strengthen any efforts at forfeiture?

Mr. Powis. I think any time we can plug a loophole, in a money laundering situation, we help every other facet of what we're doing and certainly it will help in the forfeiture area.

Mr. HUGHES. What percentage, in your judgment, of money laundering transactions incorporate wire transfers?

Mr. Powis. I really would be-

Mr. HUGHES. Can you give me a ball park figure?

Mr. Powis. Even with a ball park figure, the tremendous volume that's involved there-

Mr. HUGHES. All right. Is it a significant concern, though?

Mr. Powis. It is a significant concern.

Mr. HUGHES. What is the rationale for exempting wire transfers from the Bank Secrecy Act?

Mr. Powis. Well, the rationale has been that there is a record of the wire transfer. That has been the rationale in the past.

Mr. HUGHES. But, there are so many wire transfers, unless you have some specific information that you're looking for then it's like searching for a needle in a haystack.

Mr. Powis. Well, this is true, and it's also part of the problem that exists in attempting to set out reporting requirements.

In other words, the volume of wire transfers is staggering in the international area. So, what we're looking at doing is perhaps doing something that wouldn't just say report all wire transfers because I think we would be involved in a monumental paper work burden that probably wouldn't benefit anybody.

We are considering a regulation at the present time that would make an effort to cure this situation. A proposition that would not involve the production of huge volumes of paper and reports, that would go nowhere, but that would target in certain specific areas. We're considering a regulation now whereby we could go to certain domestic banks who concentrate on international transactions, and require them for a short period of time to supply us with all their transactions in a given area.

Our hope would be then that we would have personnel available to do something with that information, to see what kind of transactions we have, what transactions look unusual, and, hopefully, do something about the wire transfer situation.

Mr. HUGHES. There is no question but that Public Law 97-258 of 1982 is broad enough, however, to enable you to promulgate regulations to deal with the problem if, in fact, you can get a handle on it.

Mr. Powis. That is correct.

Mr. HUGHES. Do you see electronic transfers in certain industries, and I take it from your last answer you do, to begin to look at perhaps some targeting, and would that include perhaps targeting in the casino area where apparently wire transfers-

Mr. Powis. I believe under the regulation we're looking at, that we would be able to target in that area.

Mr. HUGHES. Mr. Powis, you've been looking at this problem for the better part of a year now. And, I know it's rather complex, and I know that the industry feels very strongly about additional regulations.

I must say, I have yet to see an industry that welcomes new regulations. So, they are not to be faulted. I suspect that we would make the same arguments as they make if we were that industry.

But, it seems to me that the testimony throughout today has been very clear by all panels, all the witnesses, that money laundering, particularly by those involved in drug trafficking, organized crime, and unorganized crime, I might say, is prevalent.

It would seem to be on the upswing according to all the testimony. And, I gather that from your own testimony, that it seems to be increasing in volume.

I suspect that with the increase in drug trafficking, particularly, which is a major business in this country, that a lot of laundering is done by those engaged in trafficking.

The New Jersey witnesses have all suggested that they are moving expeditiously to do something with their procedures to try to close loopholes. But, that they need Federal support. Much of it, as you well know, is not just within the confines of the state, but is domestic, national, and international in nature.

I wonder if you could give us some idea of some timetable that you might have in trying to deal with what has become a major problem.

You apparently agree it's a major problem. It's something that the Treasury Department has said that we've got to deal with, anything that we do to plug the loophole, even if it's just requiring the reporting of transactions of $10,000 or more, cash transactions, we will have made a major step forward.

Can you give us some idea of the timetable?

Mr. Powis. Well, I do agree that it's a major problem, and I must comment that I think there were some very informative testimony given here this morning. Particularly, it is impressive to hear some of the information coming from the state people who are here.

I think it makes a strong case. It's difficult for me to give you a timetable, Mr. Chairman, other than to say that we will work on it expeditiously, and we will get with the industry just as soon as possible to see what we can come up with. We understand just within the last few days that there are some new proposals to come forward, and we will examine what they are.

Mr. HUGHES. I'm examining your words very carefully, and I don't want to put words in your mouth, but I see on page 24, you say, "We intend to work with the casino industry over the next few weeks in order to resolve our differences."

Now, the industry doesn't want any regulations. I mean, they hope that the problem will go away. It's not going to go away. It's a major problem that we have to deal with.

And, what I'd like to do is I'd like to schedule another hearing because I've had requests for other testimony. I want to hear from the industry. I want to hear how it's going to affect them. I want to make sure that we do the balanced thing that you're talking about.

I think it would be unfair not to try to take into account their peculiar problems, and to try to do a balancing. I don't think it would be good legislating or good administration if we were to promulgate legislation that would overkill, that we didn't get, for what we do, tremendous advantage, significant advantage in trying to identify and prosecute those that are laundering funds.

They are not going to be willing, you know, to accept anything. I mean, they want at this point to enjoy the status quo and that's unacceptable. And, I'm trying to schedule another hearing and what I'd like to know from you is, what timeframe would be realistic so that we can schedule another hearing? Two months adequate time?

Mr. Powis. It seems to me, Mr, Chairman, that a period of 2 to 3 months would be in order. I think it would be helpful to hear what the industry has to say on this issue.

Mr. HUGHES. Well, I think you heard me at the outset. I regretted that they didn't come in today because I really am sensitized to their difficulties, like any industry, and they, obviously, do have unique problems, and they are trying, in many instances, I might say, to cooperate. We want to be sensitized to their concerns. But, I think you'll agree that we have to do what we have to do in the public interest.

Mr. Powis. I agree with that.

Mr. HUGHES. And, that's the point. So, if we looked at a hearing some time in, say, April, by that time we should be in a position to have some idea of the type of regulation that would be appropriate to deal with the problem as we see it

Mr. Powis. I would hope so.

Mr. HUGHES. OK. Well, I appreciate your testimony, and as always, you're most cooperative. We look forward to working with you because I envision this problem as important as anything that we're working on in the area of forfeiture.