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The bill also provides seizure and forfeiture authority for currency related to a domestic (CTR) reporting violation or

interest in property traceable to the currency.

The forfeiture

would not affect bona fide purchasers who took the currency or property without notice of a reporting violation.

Currently,

there is forfeiture authority only for monetary instruments underlying violations of the reporting requirements for internationally transported monetary instruments. The forfeiture would not be applicable to domestic financial institutions examined by a federal bank supervisory agency or a financial institution regulated by the Securities and Exchange Commission.

With respect to the other bills before the Committee, Treasury opposes two provisions in H.R. 1474. Section 3 of H.R. 1474 would provide that every Bank Secrecy Act reporting exemption be approved by the Secretary. Under the current regulations (31 C.F.R. § 103.22(b)), a bank may exempt from reporting certain cash deposits and withdrawals of accounts of retail businesses in amounts commensurate with the lawful, customary conduct of such a business. The bank has a continuing duty to monitor the qualifications for such exemptions, and it would be unwise, in our view, to shift the burden of monitoring the eligibility of bank customers for exemptions away from the bank. The bank is in the best position to know its customers and changes in their status. The provision is accordingly inefficient, overly burdensome and unnecessary.

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Section 4 of H.R. 1474 would require that every person,

including every financial institution, report all outgoing international wire transfers. As discussed above, with respect to Treasury's new international transaction reporting regulations, Treasury already has authority under 31 U.S.C. § 5314 to require reporting of international wire transfers.

However,

wholesale reporting of international wire transfers would not be in keeping with the restriction of $ 5314 that Treasury consider the need to "avoid burdening unreasonably a person making a transaction with a foreign financial agency." This broad

reporting requirement would create a virtual blizzard of reports, burdening financial institutions out of all proportion to the utility of the information generated and would bury the Treasury Department in an avalanche of reporting forms, all but a very few of which would be unrelated to money laundering.

This bill would make

I would now like to turn to H.R. 4280. two major changes to the Bank Secrecy Act. First, it would amend 31 U.S.C. 5313 to provide that the Treasury could only require reporting of domestic currency transactions in excess of $10,000. As you know, $10,000 is the reporting amount currently under Treasury regulations. We disagree strongly with this restriction on Treasury rulemaking flexibility and the ability to respond to changing law enforcement needs. There may be instances where the $10,000 reporting trigger is too high. For example, we have discussed various ways to address the smurfing problem by regulatory changes. One idea that has been circulated within

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Treasury is to require reports at the time of cash purchases of cashier's checks in excess of $3,000.

This reporting requirement

or similar use of the regulations to address such changing law enforcement problems would be precluded by H.R. 4280.

Another provision of H.R. 4280 would require a financial institution to keep special records relating to any cash transaction in excess of $3,000. Similar proposals have been under discussion within Treasury and within the Department of Justice as regulatory solutions to the various schemes being used to avoid the currency reporting requirements. We believe that a regulatory rather than legislative response is appropriate to address these situations, so that we can maintain the flexibility to respond to changing law enforcement needs. Moreover, in considering any proposal that imposes a new requirement on financial institutions, we must assess the cost and administrative burden to financial institutions in relation to the

law enforcement interests served.

Another bill introduced by Congressman Wortly provides that Treasury review all exemptions not less than once a year and "in any case in which there is a change in management or control of a financial institution." As we have discussed above with respect to H.R. 1474, the annual review of all exemptions is a practical impossibility. However, we would have no objection to the review of exemptions when there is a change in control. We generally support increased attention to Bank Secrecy Act compliance at the time of changes in control.

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Finally, Mr. Chairman, I want to express my appreciation

for the continuing interest and support that you and the other members of this committee have demonstrated for Treasury's

administration of the Bank Secrecy Act.

This concludes my prepared remarks. Mr. Stankey and I would be pleased to answer any questions the Committee may have.

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Enclosed are our written responses to the questions you posed to me following my testimony on April 17th.

I very much appreciated the opportunity to appear before the Committee. Your sustained interest in Bank Secrecy Act enforcement, especially in good quality examination by bank supervisory agencies, is essential to Treasury's Bank Secrecy Act enforcement objectives.

If you have any further questions or if Treasury can be of any further assistance with respect to the legislation you are drafting, please do not hesitate to call on me or my staff.

Sincerely,

The Honorable Fernand J. St. Germain
Chairman, Committee on Banking,

Finance and Urban Affairs

United States House of Representatives
Washington, D. C. 20515

Enclosures

Plank A. Keating, II
Assistant Secretary
(Enforcement)

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