Congressional Documents
105th Congress Rept. 105-611
HOUSE OF REPRESENTATIVES
2d Session Part 1
_______________________________________________________________________
MONEY LAUNDERING DETERRENCE ACT OF 1998
_______
July 8, 1998.--Ordered to be printed
_______
Mr. Leach, from the Committee on Banking and Financial Services,
submitted the following
R E P O R T
[To accompany H.R. 4005]
[Including cost estimate of the Congressional Budget Office]
The Committee on Banking and Financial Services, to whom
was referred the bill (H.R. 4005) to amend title 31 of the
United States Code to improve methods for preventing financial
crimes, and for other purposes, having considered the same,
report favorably thereon with an amendment and recommend that
the bill as amended do pass.
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Money Laundering Deterrence Act of
1998''.
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings.--The Congress finds as follows:
(1) The dollar amount involved in international money
laundering likely exceeds $500,000,000,000 annually.
(2) Organized crime groups are continually devising new
methods to launder the proceeds of illegal activities in an
effort to subvert the transaction reporting requirements of
subchapter II of chapter 53 of title 31, United States Code,
and chapter 2 of Public Law 91-508.
(3) A number of methods to launder the proceeds of criminal
activity were identified and described in congressional
hearings, including the use of financial service providers
which are not depository institutions, such as money
transmitters and check cashing services, the purchase and
resale of durable goods, and the exchange of foreign currency
in the so-called ``black market''.
(4) Recent successes in combating domestic money laundering
have involved the application of the heretofore seldom-used
authority granted to the Secretary of the Treasury and the
cooperative efforts of Federal, State, and local law
enforcement agencies.
(5) Such successes have been exemplified by the
implementation of the geographic targeting order in New York
City and through the work of the El Dorado task force, a group
comprised of agents of Department of the Treasury law
enforcement agencies, New York State troopers, and New York
City police officers.
(6) Money laundering by international criminal enterprises
challenges the legitimate authority of national governments,
corrupts government institutions, endangers the financial and
economic stability of nations, and routinely violates legal
norms, property rights, and human rights. In some countries,
such as Columbia, Mexico, and Russia, the wealth and power of
organized criminal enterprises rivals their own government's.
(7) The structure of international criminal enterprises
engaged in money laundering is complex, diverse, and
fragmented. Organized criminal enterprises such as the
Colombian and Mexican cartels, the Russian ``mafiya'', Sicilian
crime families, and Chinese gangs are highly resistant to
conventional law enforcement techniques. Their financial
management and organizational infrastructure are highly
sophisticated and difficult to track because of the
globalization of the financial service industry.
(b) Purposes.--The purposes of this Act are as follows:
(1) To amend subchapter II of chapter 53 of title 31, United
States Code, to provide the law enforcement community with the
necessary legal authority to combat money laundering.
(2) To broaden the law enforcement community's access to
transactional information already being collected which relate
to coins and currency received in a nonfinancial trade or
business.
(3) To expedite the issuance by the Secretary of the Treasury
of regulations designed to deter money laundering activities at
certain types of financial institutions.
SEC. 3. AMENDMENTS RELATING TO REPORTING OF SUSPICIOUS ACTIVITIES.
(a) Amendment Relating to Civil Liability Immunity for Disclosures.--
Section 5318(g)(3) of title 31, United States Code, is amended to read
as follows:
``(3) Liability for disclosures.--
``(A) In general.--Notwithstanding any other
provision of law--
``(i) any financial institution that--
``(I) makes a disclosure of any
possible violation of law or regulation
to an appropriate government agency; or
``(II) makes a disclosure pursuant to
this subsection or any other authority;
``(ii) any director, officer, employee, or
agent of such institution who makes, or
requires another to make any such disclosure;
and
``(iii) any independent public accountant who
audits any such financial institution and makes
a disclosure described in clause (i),
shall not be liable to any person under any law or
regulation of the United States, any constitution, law,
or regulation of any State or political subdivision
thereof, or under any contract or other legally
enforceable agreement (including any arbitration
agreement), for such disclosure or for any failure to
notify the person who is the subject of such disclosure
or any other person identified in the disclosure.
``(B) Exception.--Subparagraph (A) shall not apply to
a disclosure or communication required under Federal
securities law, other than provisions of law that
specifically refer to the Currency and Foreign
Transactions Reporting Act of 1970.''.
(b) Prohibition on Notification of Disclosures.--Section 5318(g)(2)
of title 31, United States Code, is amended to read as follows:
``(2) Notification prohibited.--
``(A) In general.--If a financial institution, any
director, officer, employee, or agent of any financial
institution, or any independent public accountant who
audits any financial institution, voluntarily or
pursuant to this section or any other authority,
reports a suspicious transaction to an appropriate
government agency--
``(i) the financial institution, director,
officer, employee, agent, or accountant may not
notify any person involved in the transaction
that the transaction has been reported and may
not disclose any information included in the
report to any such person; and
``(ii) any other person, including any
officer or employee of any government, who has
any knowledge that such report was made may not
disclose to any person involved in the
transaction that the transaction has been
reported or any information included in the
report.
``(B) Coordination with paragraph (5).--Subparagraph
(A) shall not be construed as prohibiting any financial
institution, or any director, officer, employee, or
agent of such institution, from including, in a written
employment reference that is provided in accordance
with paragraph (5) in response to a request from
another financial institution, information that was
included in a report to which subparagraph (A) applies,
but such written employment reference may not disclose
that such information was also included in any such
report or that such report was made.''.
(c) Authorization To Include Suspicions of Illegal Activity in
Employment References.--Section 5318(g) of title 31, United States
Code, is amended by adding at the end the following new paragraph:
``(5) Employment references may include suspicions of
involvement in illegal activity.--
``(A) In general.--Notwithstanding any other
provision of law and subject to subparagraph (B) of
this paragraph and paragraph (2)(C), any financial
institution, and any director, officer, employee, or
agent of such institution, may disclose, in any written
employment reference relating to a current or former
institution-affiliated party of such institution which
is provided to another financial institution in
response to a request from such other institution,
information concerning the possible involvement of such
institution-affiliated party in any suspicious
transaction relevant to a possible violation of law or
regulation.
``(B) Limit on liability for disclosures.--A
financial institution, and any director, officer,
employee, or agent of such institution, shall not be
liable to any person under any law or regulation of the
United States, any constitution, law, or regulation of
any State or political subdivision thereof, or under
any contract or other legally enforceable agreement
(including any arbitration agreement), for any
disclosure under subparagraph (A), to the extent--
``(i) the disclosure does not contain
information which the institution, director,
officer, employee, agent, or accountant knows
to be false; and
``(ii) the institution, director, officer,
employee, agent, or accountant has not acted
with malice or with reckless disregard for the
truth in making the disclosure.
``(C) Institution-affiliated party defined.--For
purposes of this paragraph, the term `institution-
affiliated party' has the meaning given to such term in
section 3(u) of the Federal Deposit Insurance Act,
except such section 3(u) shall be applied by
substituting `financial institution' for `insured
depository institution'.''.
(d) Amendments Relating to Availability of Suspicious Activity
Reports for Other Agencies.--Section 5319 of title 31, United States
Code, is amended--
(1) in the 1st sentence, by striking ``5314, or 5316'' and
inserting ``5313A, 5314, 5316, or 5318(g)'';
(2) in the last sentence, by inserting ``under section 5313,
5313A, 5314, 5316, or 5318(g)'' after ``records of reports'';
and
(3) by adding the following new sentence after the last
sentence: ``The Secretary of the Treasury may permit the
dissemination of information in any such reports to any self-
regulatory organization (as defined in section 3(a)(26) of the
Securities Exchange Act of 1934), if the Securities and
Exchange Commission determines that such dissemination is
necessary or appropriate to permit such organization to perform
its function under the Securities Exchange Act of 1934 and
regulations prescribed under such Act.''.
SEC. 4. EXPANSION OF SCOPE OF SUMMONS POWER.
Section 5318(b)(1) of title 31, United States Code, is amended by
inserting ``examinations to determine compliance with the requirements
of this subchapter, section 21 of the Federal Deposit Insurance Act,
and chapter 2 of Public Law 91-508 and regulations prescribed pursuant
to such provisions, investigations relating to reports filed by
financial institutions or other persons pursuant to any such provision
or regulation, and'' after ``in connection with''.
SEC. 5. PENALTIES FOR VIOLATIONS OF GEOGRAPHIC TARGETING ORDERS AND
CERTAIN RECORDKEEPING REQUIREMENTS.
(a) Civil Penalty for Violation of Targeting Order or Certain
Recordkeeping Requirements.--Section 5321(a)(1) of title 31, United
States Code, is amended--
(1) by inserting ``or order issued'' after ``regulation
prescribed'' the 1st place it appears; and
(2) by inserting ``, or willfully violating a regulation
prescribed under section 21 of the Federal Deposit Insurance
Act or under section 123 of Public Law 91-508,'' before ``is
liable''.
(b) Criminal Penalties for Violation of Targeting Order or Certain
Recordkeeping Requirements.--Section 5322 of title 31, United States
Code, is amended--
(1) in each of subsections (a) and (b), by inserting ``or
order issued'' after ``regulation prescribed'' the 1st place it
appears;
(2) in subsection (a), by inserting ``, or willfully
violating a regulation prescribed under section 21 of the
Federal Deposit Insurance Act or under section 123 of Public
Law 91-508,'' before ``shall''; and
(3) in subsection (b), by inserting ``or willfully violating
a regulation prescribed under section 21 of the Federal Deposit
Insurance Act or under section 123 of Public Law 91-508,''
before ``while violating''.
(c) Structuring Transactions To Evade Targeting Order or Certain
Recordkeeping Requirements.--Section 5324(a) of title 31, United States
Code, is amended--
(1) in the portion of such section which precedes paragraph
(1), by inserting ``, the reporting requirements imposed by any
order issued under section 5326, or the recordkeeping
requirements imposed by any regulation prescribed under section
21 of the Federal Deposit Insurance Act or section 123 of
Public Law 91-508'' after ``regulation prescribed under any
such section''; and
(2) in paragraphs (1) and (2), by inserting ``, to file a
report required by any order issued under section 5326, or to
maintain a record required pursuant to any regulation
prescribed under section 21 of the Federal Deposit Insurance
Act or section 123 of Public Law 91-508'' after ``regulation
prescribed under any such section'' where such term appears in
each such paragraph.
(d) Increase in Civil Penalties for Violation of Certain
Recordkeeping Requirements.--
(1) Federal deposit insurance act.--Section 21(j)(1) of the
Federal Deposit Insurance Act (12 U.S.C. 1829b(j)(1)) is
amended by striking ``$10,000'' and inserting ``the greater of
the amount (not to exceed $100,000) involved in the transaction
(if any) with respect to which the violation occurred or
$25,000''.
(2) Public law 91-508.--Section 125(a) of Public Law 91-508
(12 U.S.C. 1955(a)) is amended by striking ``$10,000'' and
inserting ``the greater of the amount (not to exceed $100,000)
involved in the transaction (if any) with respect to which the
violation occurred or $25,000''.
(e) Criminal Penalties for Violation of Certain Recordkeeping
Requirements.--
(1) Section 126.--Section 126 of Public Law 91-508 (12 U.S.C.
1956) is amended to read as follows:
``Sec. 126. Criminal penalty
``A person willfully violating this chapter, section 21 of the
Federal Deposit Insurance Act, or a regulation prescribed under this
chapter or such section, shall be fined not more than $250,000, or
imprisoned for not more than five years, or both.''.
(2) Section 127.--Section 127 of Public Law 91-508 (12 U.S.C.
1957) is amended to read as follows:
``Sec. 127. Additional criminal penalty in certain cases
``A person willfully violating this chapter, section 21 of the
Federal Deposit Insurance Act, or a regulation prescribed under this
chapter or such section, while violating another law of the United
States or as part of a pattern of any illegal activity involving more
than $100,000 in a 12-month period, shall be fined not more than
$500,000, imprisoned for not more than 10 years, or both.''.
SEC. 6. REPEAL OF CERTAIN REPORTING REQUIREMENTS.
Section 407(d) of the Money Laundering Suppression Act of 1994 (31
U.S.C. 5311 note) is amended by striking ``subsection (c)'' and
inserting ``subsection (c)(2)''.
SEC. 7. LIMITED EXEMPTION FROM PAPERWORK REDUCTION ACT.
Section 3518(c)(1) of title 44, United States Code, is amended--
(1) by redesignating subparagraphs (C) and (D) as
subparagraphs (D) and (E), respectively; and
(2) by inserting after subparagraph (B) the following new
subparagraph:
``(C) pursuant to regulations prescribed or orders issued by
the Secretary of the Treasury under section 5318(h) or 5326 of
title 31;''.
SEC. 8. TRANSFER OF REPORTING REQUIREMENTS FROM SECTION 6050I OF THE
INTERNAL REVENUE CODE OF 1986 TO TITLE 31, UNITED
STATES CODE.
(a) Reenactment of Section 6050I.--Subchapter II of chapter 53 of
title 31, United States Code, is amended by inserting after section
5313 the following new section:
``Sec. 5313A. Reports relating to coins and currency received in
nonfinancial trade or business
``(a) Coin and Currency Receipts of More Than $10,000.--Any person--
``(1) who is engaged in a trade or business; and
``(2) who, in the course of such trade or business, receives
more than $10,000 in coins or currency in 1 transaction (or 2
or more related transactions),
shall file a report described in subsection (b) with respect to such
transaction (or related transactions) at such time as the Secretary may
by regulations prescribe.
``(b) Form and Manner of Reports.--A report is described in this
subsection if such report--
``(1) is in such form as the Secretary may prescribe;
``(2) contains--
``(A) the name, address, and taxpayer identification
number of the person from whom the coins or currency
was received;
``(B) the amount of coins or currency received;
``(C) the date and nature of the transaction; and
``(D) such other information as the Secretary may
prescribe.
``(c) Exceptions.--
``(1) Amounts received by financial institutions.--Subsection
(a) shall not apply to amounts received in a transaction
reported under section 5313 and regulations prescribed under
such section.
``(2) Transactions occurring outside the united states.--
Except to the extent provided in regulations prescribed by the
Secretary, subsection (a) shall not apply to any transaction if
the entire transaction occurs outside the United States.
``(d) Currency Includes Foreign Currency and Certain Monetary
Instruments.--
``(1) In general.--For purposes of this section, the term
`currency' includes--
``(A) foreign currency; and
``(B) to the extent provided in regulations
prescribed by the Secretary, any monetary instrument
(whether or not in bearer form) with a face amount of
not more than $10,000.
``(2) Scope of application.--Paragraph (1)(B) shall not apply
to any check drawn on the account of the writer in a financial
institution referred to in subparagraph (A), (B), (C), (D),
(E), (F), (G), (J), (K), (R), or (S) of section 5312(a)(2).
``(e) Coins or Currency Received by Criminal Court Clerks.--
``(1) In general.--Every clerk of a Federal or State criminal
court who receives more than $10,000 in coins or currency as
bail for any individual charged with a specified criminal
offense shall file a report described in paragraph (2) (at such
time as the Secretary may by regulations prescribe) with
respect to the receipt of such bail.
``(2) Report.--A report is described in this paragraph if
such report--
``(A) is in such form as the Secretary may prescribe;
and
``(B) contains--
``(i) the name, address, and taxpayer
identification number of--
``(I) the individual charged with the
specified criminal offense; and
``(II) each person posting the bail
(other than a person licensed as a bail
bondsman);
``(ii) the amount of coins or currency
received;
``(iii) the date the coins or currency was
received; and
``(iv) such other information as the
Secretary may prescribe.
``(3) Specified criminal offense.--For purposes of this
subsection, the term `specified criminal offense' means--
``(A) any Federal criminal offense involving a
controlled substance;
``(B) racketeering (as defined in section 1951, 1952,
or 1955 of title 18, United States Code);
``(C) money laundering (as defined in section 1956 or
1957 of such title); and
``(D) any State criminal offense substantially
similar to an offense described in subparagraph (A),
(B), or (C).
``(4) Information to federal prosecutors.--Each clerk
required to include in a report under paragraph (1) the
information described in paragraph (2)(B) with respect to an
individual described in paragraph (2)(B)(i)(I) shall furnish
(at such time as the Secretary may by regulations prescribe) a
written statement showing such information to the United States
Attorney for the jurisdiction in which such individual resides
and the jurisdiction in which the specified criminal offense
occurred.
``(5) Information to payors of bail.--Each clerk required to
file a report under paragraph (1) shall furnish (at such time
as the Secretary may by regulations prescribe) to each person
whose name is required to be set forth in such report by reason
of paragraph (2)(B)(i)(II) a written statement showing--
``(A) the name and address of the clerk's office
required to file the report; and
``(B) the aggregate amount of coins and currency
described in paragraph (1) received by such clerk.''.
(b) Prohibition on Structuring Transactions.--
(1) In general.--Section 5324 of title 31, United States
Code, is amended--
(A) by redesignating subsections (b) and (c) as
subsections (c) and (d), respectively; and
(B) by inserting after subsection (a) the following
new subsection:
``(b) Domestic Coin and Currency Transactions Involving Nonfinancial
Trades or Businesses.--No person shall for the purpose of evading the
report requirements of section 5313A or any regulation prescribed under
such section--
``(1) cause or attempt to cause a nonfinancial trade or
business to fail to file a report required under section 5313A
or any regulation prescribed under such section;
``(2) cause or attempt to cause a nonfinancial trade or
business to file a report required under section 5313A or any
regulation prescribed under such section that contains a
material omission or misstatement of fact; or
``(3) structure or assist in structuring, or attempt to
structure or assist in structuring, any transaction with 1 or
more nonfinancial trades or businesses.''.
(2) Technical and conforming amendments.--
(A) The heading for subsection (a) of section 5324 of
title 31, United States Code, is amended by inserting
``Involving Financial Institutions'' after
``Transactions''.
(B) Section 5317(c) of title 31, United States Code,
is amended by striking ``5324(b)'' and inserting
``5324(c)''.
(c) Definition of Nonfinancial Trade or Business.--
(1) In general.--Section 5312(a) of title 31, United States
Code, is amended--
(A) by redesignating paragraphs (4) and (5) as
paragraphs (5) and (6), respectively; and
(B) by inserting after paragraph (3) the following
new paragraph:
``(4) Nonfinancial trade or business.--The term `nonfinancial
trade or business' means any trade or business other than a
financial institution that is subject to the reporting
requirements of section 5313 and regulations prescribed under
such section.''.
(2) Technical and conforming amendments.--
(A) Section 5312(a)(3)(C) of title 31, United States
Code, is amended by striking ``section 5316,'' and
inserting ``sections 5313A and 5316,''.
(B) Subsections (a) through (f) of section 5318 of
title 31, United States Code, and sections 5321, 5326,
and 5328 of such title are each amended--
(i) by inserting ``or nonfinancial trade or
business'' after ``financial institution'' each
place such term appears; and
(ii) by inserting ``or nonfinancial trades or
businesses'' after ``financial institutions''
each place such term appears.
(C) Section 981(a)(1)(A) of title 18, United States
Code, is amended by striking ``5313(a) or 5324(a) of
title 31,'' and inserting ``5313(a) or 5313A of title
31, or subsection (a) or (b) of section 5324 of such
title,''.
(D) Section 982(a)(1) of title 18, United States
Code, is amended by inserting ``5313A,'' after
``5313(a),''.
(d) Repeal of Duplicate Provision.--Section 6050I of the Internal
Revenue Code of 1986 is repealed.
(e) Clerical Amendments.--
(1) Title 31.--The tables of sections for chapter 53 of title
31, United States Code, is amended by inserting after the item
relating to section 5313 the following new item:
``5313A. Reports relating to coins and currency received in
nonfinancial trade or business.''.
(2) Internal revenue code of 1986.--
(A) The table of sections for subpart B of part III
of subchapter A of chapter 61 of the Internal Revenue
Code of 1986 is amended by striking the item relating
to section 6050I.
(B)(i) Subsection (l) of section 6103 of such Code is
amended by striking paragraph (15).
(ii) Subparagraph (A) of section 6103(p)(3) of such
Code is amended by striking ``(15),''.
(iii) Paragraph (4) of section 6103(p) of such Code
is amended by striking in the material preceding
subparagraph (A) ``(12)'' and all that follows through
``(16)'' and inserting ``(12), or (16)''.
(iv) Clause (ii) of section 6103(p)(4)(F) of such
Code is amended by striking ``(14), or (15)'' and
inserting ``or (14)''.
(C) Paragraph (2) of section 6721(e) of such Code is
amended--
(i) in subparagraph (A) by striking
``6050I,'' and by adding ``or'' at the end,
(ii) by striking ``or'' at the end of
subparagraph (B) and inserting ``and'', and
(iii) by striking subparagraph (C).
(D) Subparagraph (B) of section 6724(d)(1) of such
Code is amended by striking clause (iv) and by
redesignating the succeeding clauses accordingly.
(E) Paragraph (2) of section 6724(d) of such Code is
amended by striking subparagraph (K) and by
redesignating the succeeding subparagraphs accordingly.
(F) Section 7203 of such Code is amended by striking
the last sentence.
(f) Regulations; Effective Date.--
(1) Regulations.--Regulations which the Secretary of the
Treasury determines are necessary to implement this section
shall be published in final form before the end of the 6-month
period beginning on the date of the enactment of this Act.
(2) Effective date.--The amendments made by this section
shall take effect at the end of the 6-month period beginning on
the date the regulations referred to in paragraph (1) are
published in final form in the Federal Register.
SEC. 9. PROMULGATION OF ``KNOW YOUR CUSTOMER'' REGULATIONS.
Within 120 days after the date of the enactment of this Act, the
Secretary of the Treasury shall promulgate ``Know Your Customer''
regulations for financial institutions. This section shall not be
construed as precluding any supervisory agency for any financial
institution from requiring the financial institution to submit any
information or report to the agency or another agency pursuant to any
other applicable provision of law.
SEC. 10. FUNGIBLE PROPERTY IN BANK ACCOUNTS.
Section 984 of title 18, United States Code, is amended--
(1) so that subsection (a) reads as follows:
``(a) This section applies only if the action for forfeiture was
commenced by a seizure or an arrest in rem not later than 2 years after
the offense that is the basis for the forfeiture.'';
(2) by striking subsection (c);
(3) by redesignating subsection (d) as subsection (c), and in
such subsection--
(A) by striking ``(1)'' and all that follows through
the end of paragraph (1) and inserting the following:
``(1) Subsection (b) does not apply to an action against funds held
by a financial institution in an interbank account unless the account
holder knowingly engaged in the offense that is the basis for the
forfeiture.''; and
(B) by adding at the end the following new paragraph:
``(3) As used in this subsection, a `financial institution' includes
a foreign bank, as defined in paragraph (7) of section 1(b) of the
International Banking Act of 1978.''; and
(4) by adding at the end the following new subsection:
``(d) Nothing in this section is intended to limit the ability of the
Government to obtain the forfeiture of property under any statute where
the property involved in the offense giving rise to the forfeiture or
property traceable thereto is available for forfeiture.''.
SEC. 11. REPORT ON PRIVATE BANKING ACTIVITIES.
(a) In General.--Within 1 year after the date of the enactment of
this Act, the Secretary of the Treasury, in consultation with Federal
banking agencies, shall submit to the Committee on Banking and
Financial Services of the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the Senate a report on--
(1) the nature and extent of private banking activities in
the United States;
(2) regulatory efforts to monitor such activities and ensure
that such activities are conducted in compliance with the Bank
Secrecy Act; and
(3) policies and procedures of depository institutions that
are designed to ensure that such activities are conducted in
compliance with the Bank Secrecy Act.
(b) Private Banking Activities.--In subsection (a), the term
``private banking activities'', with respect to an institution,
includes, among other things, personalized services such as money
management, financial advice, and investment services that are provided
to clients with high net worth and that are not provided generally to
all clients of the institution.
SEC. 12. AVAILABILITY OF CERTAIN ACCOUNT INFORMATION.
Section 5318(h) of title 31, United States Code, is amended by adding
at the end the following new paragraph:
``(3) Availability of certain account information.--The
Secretary of the Treasury shall prescribe regulations under
this subsection which require financial institutions to
maintain all accounts in such a way as to ensure that the name
of an account holder and the number of the account are
associated with all account activity of the account holder, and
to ensure that all such information is available for purposes
of account supervision and law enforcement.''.
SEC. 13. SENSE OF THE CONGRESS.
It is the sense of the Congress that the Secretary of the Treasury
should make available to all Federal, State, and local law enforcement
agencies and financial regulatory agencies the full contents of the
data base of reports that have been filed pursuant to subchapter II of
chapter 53 of title 31, United States Code.
SEC. 14. DESIGNATION OF FOREIGN HIGH INTENSITY MONEY LAUNDERING AREAS.
(a) In General.--Subchapter II of chapter 53 of title 31, United
States Code, is amended by inserting after section 5326 the following
new section:
``Sec. 5327. Designation of foreign high intensity money laundering
areas
``(a) Criteria.--The Secretary of the Treasury, in consultation with
appropriate Federal law enforcement agencies, shall develop criteria by
which to identify areas outside the United States in which money
laundering activities are concentrated.
``(b) Designation.--The Secretary of the Treasury shall designate as
a foreign high intensity money laundering area any foreign country in
which there is an area which is identified, using the criteria
developed under subsection (a), as an area in which money laundering
activities are concentrated.
``(c) Notice.--On the designation under subsection (b) of a country
as a foreign high intensity money laundering area, the Secretary of the
Treasury shall provide written notice to each insured depository
institution (as defined in section 3(c)(2) of the Federal Deposit
Insurance Act) and each depository institution holding company (as
defined in section 3(w)(1) of such Act) that has control over an
insured depository institution of the identity of the foreign country
and include with the notice a written warning that there is a
concentration of money laundering activities in the foreign country.''.
(b) Clerical Amendment.--The table of sections for such chapter is
amended by inserting after the item relating to section 5326 the
following new item:
``5327. Designation of foreign high intensity money laundering
areas.''.
SEC. 15. DOUBLING OF CRIMINAL PENALTIES FOR VIOLATIONS OF LAWS AIMED AT
PREVENTING MONEY LAUNDERING IN FOREIGN HIGH
INTENSITY MONEY LAUNDERING AREAS.
Section 5322 of title 31, United States Code, is amended by adding at
the end the following new subsection:
``(d) The court may double the sentence of fine or imprisonment, or
both, that would otherwise be imposed on a person for a violation
described in subsection (a) or (b) if person commits the violation with
respect to a transaction involving a person in, a relationship
maintained for a person in, or a transport of a monetary instrument
involving a foreign country, knowing that the foreign country is
designated under section 5327(b) as a foreign high intensity money
laundering area.''.
Purpose and Summary
The purpose of this legislation is to strengthen Federal
law enforcement efforts to combat money laundering, the process
by which criminal elements seek to convert the monetary
proceeds of their illicit activity into funds with an
apparently legal source. The legislation is designed
principally to facilitate greater access by law enforcement
authorities to information relating to suspicious financial
transactions.
H.R. 4005, as amended by the Committee, (1) transfers from
the U.S. tax code to the Bank Secrecy Act the requirement that
non-financial trades or businesses, such as car dealers and
merchandise wholesalers, report cash transactions in excess of
$10,000 to the Federal government, thereby making such reports
more widely available in the law enforcement community; (2)
extends ``safe harbor'' protections to independent public
accountants who submit reports of suspicious financial activity
to the Federal government; (3) provides financial institutions
with immunity from liability when making employment references
that may include suspicions of an employee's involvement in
illegal activity, unless such suspicions are known to be false
or the institution has acted with malice or reckless disregard
for the truth; (4) makes reports of suspicious financial
activity filed with the Federal government available to self-
regulatory organizations as defined by the Securities and
Exchange Act of 1934; (5) clarifies the circumstances under
which the Federal government can obtain the forfeiture of
fungible assets when no property traceable to the underlying
offense is available, including extending the statute of
limitations on such forfeiture actions from one to two years;
and (6) requires the Secretary of the Treasury to promulgate
``Know Your Customer'' regulations within 120 days of enactment
of the legislation, submit a report on private banking to the
House and Senate Banking Committees, prescribe regulations
requiring financial institutions to maintain all accounts in
such a way as to ensure that the name of an account holder and
the number of his or her account are associated with all
activity in the account, and develop criteria to identify areas
outside of the United States where money laundering is
concentrated.
Background and Need for Legislation
It is estimated that upwards of $500 billion in laundered
funds--a large portion of it derived from narcotics
trafficking--is cycled through the U.S. financial system on an
annual basis. Any meaningful strategy for combating the
international drug trade and other global criminal enterprises
must include strong legal mechanisms for detecting the flows of
their illicit proceeds. Left unchecked, money laundering has
debilitating consequences for the integrity of financial
institutions, and, because it is the lifeblood of the drug
traffickers, a devastating impact on the social fabric as well.
The last decade has been characterized by an increasing
globalization of the financial services industry and
increasingly sophisticated technology being placed at the
disposal of criminal elements seeking to disguise the proceeds
of their illegal activity. Millions of dollars can now be
transferred through multiple accounts all over the world with
blinding speed. Moreover, the range of mechanisms through which
criminals can launder their ill-gotten gains has expanded far
beyond the boundaries of traditional depository institutions,
to include currency exchange houses, stock brokerages, money
and wire transmitters, casinos, insurance companies, and a host
of other non-bank financial institutions. All of these
developments present fundamental challenges to law enforcement
authorities in the U.S. and around the world.
Beginning with the passage of the Bank Secrecy Act (P.L.
91-508) in 1970, the Committee has been at the forefront of
legislative efforts to erect a system of financial reporting
and record-keeping designed to give law enforcement authorities
sufficient tools to detect and prosecute money laundering
offenses. The various reporting requirements imposed by the
Bank Secrecy Act and subsequent legislation promote the
disclosure of information relating to suspicious financial
transactions by financial institutions and other commercial
enterprises, and the subsequent dissemination of that
information among Federal, state and local law enforcement
authorities. In crafting these bills, Congress has sought to
advance a number of policy objectives, including facilitating
the law enforcement community's access to accurate and complete
information regarding possible money laundering, and
encouraging safe and sound practices at Federally-insured
depository institutions, while at the same time protecting the
free flow of legitimate commerce and the privacy interests of
bank customers.
Federal law enforcement officials have testified to the
Committee that the point at which laundered funds are most
vulnerable to detection is at their initial placement in the
financial system. For example, a narco-trafficking organization
that collects cash from its U.S. customers has a choice of
either attempting to smuggle the currency across our border, or
seeking to enter it into the legitimate financial system in the
U.S. If the latter option is selected, the Bank Secrecy Act's
wide array of reporting requirements increase the likelihood
that law enforcement authorities will be alerted, and that the
narco-traffickers will ultimately be subjected to criminal
accountability.
H.R. 4005 represents an attempt to strengthen the anti-
money laundering regime of Bank Secrecy Act laws and
regulations, by adding provisions to the United States Code
that promote greater reporting of suspicious transactions and
wider circulation of such reports within the law enforcement
community.
Hearings
Many of H.R. 4005's specific provisions grew out of a
series of hearings held by the Subcommittee on General
Oversight and Investigations during the 105th Congress. On
March 11, 1997, the Subcommittee examined the Treasury
Department's use of a Geographic Targeting Order authorized
under the Bank Secrecy Act to target money laundering by
representatives of Colombian drug cartels at money transmitting
businesses located in New York City. The Subcommittee held two
separate hearings, on March 21, 1997, and April 1, 1998, to
review the operations of the Financial Crimes
EnforcementNetwork (FinCEN), the component of the Treasury Department
responsible for collecting and analyzing the various reports to be
filed under the Bank Secrecy Act. On July 30, 1997, the Subcommittee
reviewed regulations promulgated by FinCEN imposing certain
registration and reporting requirements on Money Services Businesses,
such as currency dealers, check cashers, and money transmitters.
Finally, on October 22, 1997, the Subcommittee examined efforts by
Federal law enforcement authorities to combat a form of money
laundering known as black market peso brokering, involving the
manipulation of trade in durable goods by Colombian drug cartels
seeking to conceal the proceeds of their U.S. operations.
On June 5, 1998, Chairman Leach introduced H.R. 4005, the
Money Laundering Deterrence Act. The Committee held a hearing
on the legislation and related issues on June 11, 1998.
Testifying at the hearing were The Honorable Charles Grassley
(R-Iowa); Raymond Kelly, Treasury Undersecretary for
Enforcement; Mary Lee Warren, Deputy Assistant Attorney General
for the Criminal Division; Jonathan Weiner, Deputy Assistant
Secretary of State; Herbert A. Biern, Associate Director of the
Federal Reserve Board's Division of Banking Supervision and
Regulation; Robert B. Serino, Deputy Chief Counsel of the
Office of the Comptroller of the Currency; Jack A. Blum of the
law firm of Lobel, Novins & Lamont, and Charles S. Saphos of
the law firm of Fila & Saphos.
Committee Consideration and Votes
On June 11, 1998, the full Committee met in open session to
mark up H.R. 4005, the Money Laundering Deterrence Act of 1998.
The Committee called up H.R. 4005 as original text for purposes
of amendment.
During the mark up, the Manager's Amendment and 11 other
amendments were offered. The Manager's Amendment and 7 of the
11 amendments were adopted by voice vote.
Amendments that were adopted
1. Manager's Amendment, making technical and grammatical
corrections to H.R. 4005, as introduced,
2. An amendment offered by Mr. Ryun to add to the
Congressional findings that (1) money laundering by
international criminal enterprises undermines the financial and
economic stability of national governments; and (2) the
structure of international criminal enterprises engaged in
money laundering is complex, diverse and fragmented, making
them highly resistant to conventional law enforcement
techniques.
3. An amendment offered by Mr. Campbell to clarify the law
applicable to actions by the government to seize fungible
property in bank accounts, including extending the statute of
limitations on such actions from one to two years.
4. An amendment offered by Ms. Waters, as amended by
Chairman Leach, to require the Secretary of the Treasury to
promulgate ``Know your Customer'' regulations within 120 days
of the date of enactment of this legislation.
5. An amendment offered by Ms. Waters, as amended by
Chairman Leach after consultation with Ms. Roukema, to require
the Secretary of the Treasury, in consultation with the Federal
banking agencies, to submit to the House Committee on Banking
and Financial Services and Senate Committee on Banking,
Housing, and Urban Affairs a report on the nature and extent of
private banking activities in the United States; regulatory
efforts to monitor such activities; and policies and procedures
of depository institutions that are designed to ensure that
such activities are conducted in compliance with the Bank
Secrecy Act.
6. An amendment offered by Ms. Waters, as amended by
Chairman Leach, to require a financial institution to maintain
accounts in such a way as to ensure that the name of an account
holder and the number of the account are associated with all
account activity of the account holder.
7. An amendment offered by Ms. Waters and Mr. Hinchey, as
amended, to require the Secretary of the Treasury and Federal
law enforcement agencies to develop criteria to identify areas
outside the U.S. where money laundering is concentrated, and to
increase the criminal penalties for certain offenses.
8. An amendment offered by Mr. Barr to express the sense of
the Congress that the Secretary of the Treasury should make
available to all Federal, state, and local law enforcement
agencies and financial regulatory agencies the full content of
the data base of reports that have been filed pursuant to
subchapter II of chapter 53 of title 31 of the U.S. Code.
Amendments that were withdrawn
1. An amendment offered by Ms. Waters to require that
financial institutions engaging in private banking services
file annual reports with the Secretary of the Treasury
describing (1) policies and procedures followed in conducting
such activities; and (2) the manner and extent to which
compliance with Federal money laundering laws is achieved.
2. An amendment offered by Ms. Waters to convert maximum
criminal penalties imposed for violations of Federal money
laundering laws into minimum criminal penalties.
3. An amendment offered by Ms. Waters to require the
termination of deposit insurance of a financial institution
found criminally or civilly liable for money laundering three
times within a ten-year period.
4. An amendment offered by Ms. Waters to require that in
reviewing merger applications, Federal regulators (1) consider
the effectiveness of the institutions involved in the
transactions in combating money laundering; (2) disapprove
transactions involving any institution which is the subject of
pending Federal investigation or prosecution for money
laundering or other related financial crimes; and (3)
disapprove transactions involving any institution which has
been found criminally or civilly liable for money laundering
during the preceding 5-year period.
The Committee adopted, by voice vote, a motion by Mr.
Bereuter to authorize the Chairman to offer such motions as may
be necessary in the House of Representatives to go to
conference with the Senate.
Committee Oversight Findings
In compliance with clause 2(l)(3)(A) of rule XI of the
Rules of the House of Representatives, the Committee reports
that the findings and recommendations of the Committee, based
on oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Committee on Government Reform and Oversight Findings
No findings and recommendations of the Committee on
Government Reform and Oversight were received as referred to in
clause 2(l)(3)(D) of rule XI of the Rules of the House of
Representatives.
Constitutional Authority
In compliance with clause 2(l)(4) of rule XI of the Rules
of the House of the Representatives, the constitutional
authority for Congress to enact this legislation is derived
from the interstate commerce clause (Clause 3, Section 8,
Article I). In addition, the power ``to provide for the
punishment of counterfeiting * * * current coin of the U.S.''
(Clause 6, Section 8, Article I) and to ``coin money'' and
``regulate the value thereof'' (Clause 5, Section 8, Article I)
has been broadly construed to allow for the Federal regulation
of the provision of credit, financial institutions and money.
New Budget Authority and Tax Expenditures
Clause 2(l)(3)(B) of rule XI of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Congressional Accountability Act
The reporting requirement under section 102(b)(3) of the
Congressional Accountability Act (P.L. 104-1) is inapplicable
because this legislation does not relate to terms and
conditions of employment or access to public services or
accommodations.
Congressional Budget Office Cost Estimate and Unfunded Mandates
Analysis
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 25, 1998.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services, House of
Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4005, the Money
Laundering Deterrence Act of 1998.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are John R.
Righter and Mark Grabowicz. The staff contact for the estimated
impact on state, local, and tribal governments is Marc Nicole,
and the contact for the estimated impact on the private sector
is Jean Wooster.
Sincerely,
June E. O'Neill, Director.
Enclosure.
H.R. 4005--The Laundering Deterrence Act of 1998
Summary: H.R. 4005 would amend Title 31 of the U.S. Code so
as to help federal agencies detect and prevent financial
crimes. Subject to the availability of appropriated funds, CBO
estimates that implementing H.R. 4005 would increase federal
costs to combat money laundering by between $500,000 and $1
million in fiscal year 1999. For fiscal year 2000 and
subsequent years, we estimate that implementing the bill would
cost less than $500,000 a year, and could result in some
savings. Because H.R. 4005 could increase the amounts collected
from civil and criminal fines, as well as the amounts seized
from forfeited assets, pay-as-you-go procedures would apply.
CBO estimates that the net effect of such changes for pay-as-
you-go purposes would be less than $500,000 annually.
H.R. 4005 contains intergovernmental mandates as defined in
the Unfunded Mandates Reform Act (UMRA) because it would
preempt certain state laws. CBO estimates that no costs would
result from these mandates. The bill would not have any other
significant effects on the budgets of state, local, or tribal
governments.
H.R. 4005 also would impose private-sector mandates on
independent public accountants and financial institutions. CBO
estimates that the annual direct costs of complying with those
mandates would not exceed the statutory threshold for private-
sector mandates ($100 million in 1996, adjusted annually for
inflation).
Description of bill's major provisions: Under current law,
certain private-sector entities are required to report cash
transactions in excess of $10,000 to the Internal Revenue
Service (IRS). H.R. 4005 would require them, instead, to file
reports with the Department of the Treasury. The bill also
would extend fromone to two years--after a money laundering
offense--the period of time during which the Department of Justice
(DOJ) can seize property in bank accounts that are holding or have held
laundered funds. H.R. 4005 also would increase the civil and criminal
penalties for violating targeting orders and certain recordkeeping
requirements, and would increase the criminal penalties for violating
certain laws aimed at preventing money laundering in designated high-
intensity areas. Finally, the bill would require the Treasury
Department to submit a report to the Congress on private banking
activities, develop criteria for designating countries as high-
intensity areas for money laundering activities, and issue regulations
to implement several of the bill's provisions.
Estimated cost to the Federal Government
Spending subject to appropriation
Subject to the availability of funds, CBO estimates that
implementing H.R. 4005 would increase costs to combat money
laundering by between $500,000 and $1 million in fiscal year
1999. For fiscal years 2000 and thereafter, we estimate that
implementing the bill would increase annual costs by less than
$500,000, with the possibility that it could result in annual
savings (in some or all years). The estimate for 1999 reflects
the costs for the Department of the Treasury to submit a report
to the Congress on private banking activities, develop criteria
for designating countries as high-risk areas for money
laundering activities, and issue regulations to implement
several of the bill's provisions. The estimate for fiscal years
2000 and thereafter covers remaining annual costs, such as the
cost of notifying insured depository institutions of foreign
countries that have been designated as high-risk areas for
money laundering activities.
The bill could also result in small savings to federal
agencies. For instance, it would require that certain private-
sector entities begin reporting cash transactions in excess of
$10,000 to the Treasury rather than to the IRS, as required
under current law. As a consequence, the reported information
would become available for use by law enforcement agencies,
possibly saving some investigation costs.
Direct spending and revenues
The bill would extend from one to two years the period of
time in which DOJ can seize fungible property in bank accounts
that are holding or have held laundered funds. By extending the
period of time, the provision could lead to an increase in the
amount of assets seized by the federal government each year,
thus adding to government receipts. However, CBO has no basis
for estimating the amount of any such increase. Because DOJ can
spend amounts seized without further appropriation action, any
increase in governmental receipts would be offset over time by
an equivalent increase in direct spending.
Additionally, the bill would both clarify and increase the
civil and criminal penalties for violating targeting orders and
certain recordkeeping requirements. It would also increase the
criminal penalties for violating certain laws aimed at
preventing money laundering in designated high-intensity areas.
CBO estimates that the additional collections of civil and
criminal penalties, both of which are recorded in the budget as
governmental receipts, would be less than $500,000 annually.
Because collections of criminal fines are deposited in the
Crime Victims Fund and spent in the following year, the
provision would also increase direct spending. We estimate,
however, that the additional direct spending also would be less
than $500,000 annually.
Pay-as-you-go consideration: Section 252 of the Balanced
Budget and Emergency Deficit Control Act sets up pay-as-you-go
procedures for legislation affecting direct spending or
receipts. H.R. 4005 would affect both direct spending and
governmental receipts; however, CBO estimates that the effect
of such changes would be less than $500,000 annually.
Estimated impact on State, local and tribal governments: In
general, H.R. 4005 would help law enforcement agencies,
including state and local agencies, identify and prosecute
money launderers. In doing so, the bill would impose
intergovernmental mandates as defined in UMRA. It would broaden
an existing preemption of state law by limiting the civil
liability of independent public accountants who audit financial
institutions and disclose information about any public
accountants who audit financial institutions and disclose
information about any possible involvement in illegal activity.
It would also shield financial institutions and their employees
from liability in connection with certain employment references
they may provide. Under UMRA such preemptions of state law are
mandates. However, because the preemptions would simply limit
the application of state law in some circumstances, CBO
estimates that no costs would result from these mandates. The
bill would not have any other significant effects on the
budgets of state, local, or tribal governments.
Estimated impact on the private sector: H.R. 4005 would
impose private-sector mandates, but CBO estimates that any
costs would be negligible. Section 3 would prohibit financial
institutions and independent publicaccountants that audit
financial institutions and report any suspicious transactions to a
government agency from disclosing any information included in the
report to any involved individual. CBO estimates that financial
institutions and independent public accountants would not incur any
additional costs in complying with this mandate.
Section 12 would require that financial institutions
maintain all accounts so that the name of the account holder
and the number of the account are associated with all account
activity of the account holder. That information would also be
required to be available for regulatory review and law
enforcement. According to representatives from the banking
industry and the Treasury Department, most financial
institutions currently have this information. This mandate
would minimally increase financial institutions' record keeping
responsibility, including the retention and retrieval of
required information.
Section 9 would require that the Treasury Department issue
``Know Your Customer'' regulations for financial institutions
within 120 days after the enactment date of H.R. 4005. ``Know
Your Customer'' policies allow banks to establish and maintain
procedures to identify their customers and to understand the
sources of funds and the normal and expected transactions of
their customers. Those provisions are included in the Bank
Secrecy Act, and the Treasury Department is in the process of
developing regulations to implement them. CBO concludes that
section 9 would not impose a new mandate on financial
institutions.
Estimate prepared by: Federal costs: John R. Righter and
Mark Grabowicz; Impact on State, Local, and Tribal governments:
Marc Nicole; and Impact on the Private Sector: Jean Wooster.
Estimate approved by: Robert A. Sunshine, Deputy Assistant
Director for Budget Analysis.
Committee Correspondence
House of Representatives,
Committee on Commerce,
Washington, DC, June 25, 1998.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services, Rayburn House
Office Building, Washington, DC.
Dear Chairman Leach: It is my understanding that the
Committee on Banking and Financial Services is prepared to file
reports on two bills in which the Committee on Commerce has an
interest: H.R. 4005, the Money Laundering Deterrence Act of
1998; and H.R. 1756, the Money Laundering and Financial Crimes
Strategy Act of 1998.
The Commerce Committee's interest in H.R. 4005 arises in
Section 9 of the bill, entitled ``Promulgation of `Know Your
Customer' Regulations,'' which would require the Secretary of
the Treasury to promulgate ``know your customer'' regulations
for ``financial institutions.'' Because the legislation does
not define the term ``financial institutions,'' this broad term
could be interpreted to include such individuals and entities
as securities brokers and dealers, investment companies, and
investment advisers. In fact, such an interpretation is likely
given the fact that the term ``financial institutions'' is
specifically defined to include securities brokers and dealers
and investment companies in Section 5312(a)(2) of Title 31 of
the United States Code.
As you may know, securities brokers and dealers, investment
companies, and investment advisers are already subject to
extensive ``know your customer'' regulations under the Federal
securities laws and regulations issued under those laws,
including the regulations of self-regulatory organizations.
These regulations fall within the jurisdiction of the Committee
on Commerce pursuant to Rule X of the Rules of the House of
Representatives. I am concerned that the mandate in Section 9
of H.R. 4005 would result in a whole new set of ``know your
customer'' regulations which are either duplicative of, or
inconsistent with, existing regulations which apply to brokers,
dealers, and others subject to the Federal securities laws.
In order to avoid such regulatory inconsistency and
overlap, it is my understanding that you have agreed to offer
an amendment to H.R. 4005 that would add the following language
after the first sentence of Section 9:
As used in this section, the term ``financial
institutions'' does not include a broker, dealer,
investment company, or investment adviser, as such
terms are defined in the Securities Exchange Act of
1934.
With respect to H.R. 1756, Section 2 of the legislation
amends Chapter 53 of Title 31 of the United States Code to
direct the Secretary of the Treasury to ``regularly review
enforcement efforts under this subchapter and other provisions
of law and, when appropriate, modify existing regulations or
prescribe new regulations for purposes of preventing such
criminal activity. * * *'' I am concerned that such a broad
mandate could be interpreted to authorize the Secretary of the
Treasury to review enforcement actions under the Federal
securities laws or to modify regulations promulgated pursuant
to the Federal securities laws, or to grant to the Secretary
new or additional authority to prescribe regulations applicable
to entities that are regulated pursuant to the Federal
securities laws.
It is my understanding that you do not intend this language
of H.R. 1756 to require or invite the Treasury Secretary to
conduct a review of enforcement actions and activities pursuant
to the Federal securities laws, or to grant to the Secretary
any new or additional authority to prescribe regulations
applicable to entities that are regulated pursuant to the
Federal securities laws. It is further my understanding that
you have agreed to clarify, in a statement on the Floor of the
House of Representatives during consideration of the bill, that
it is not your intent for this language to grant the Secretary
of the Treasury any such new or additional authority, or to
require or encourage the Secretary of the Treasury to review
enforcement actions under the Federal securities laws or to
modify, or recommend the modification of, regulations
promulgated under the Federal securities laws.
I recognize your interest in moving these bills
expeditiously to the House floor and, in consideration of the
agreements described above, I would commit not to seek a
sequential referral of either bill. By agreeing not to assert
its jurisdiction over either bill, the Commerce Committee does
not waive its jurisdiction over these bills or similar bills.
Furthermore, the Committee reserves its prerogative to seek
representation on any House-Senate conference that may be
convened on either bill. Finally, I would ask that a copy of
this letter and your response be included in the Banking
Committee's reports on H.R. 4005 and H.R. 1756.
I appreciate your cooperation in accommodating the
interests of the Commerce Committee.
Sincerely,
Tom Bliley, Chairman.
------
House of Representatives,
Committee on Banking and Financial Services,
Washington, DC, June 25, 1998.
Hon. Tom Bliley,
Chairman, Committee on Commerce,
Rayburn House Office Building, Washington, DC.
Dear Tom: I have received your letter of June 25, 1998,
concerning H.R. 4005 and H.R. 1756, two bills which the
Committee on Banking and Financial Services on June 11, 1998,
voted to favorably report to the House. In your letter you
indicate that the Committee on Commerce would agree not to seek
a referral of H.R. 4005 if section 9 of that legislation is
amended to exclude securities firms, investment companies and
investment advisers and of H.R. 1756 if the legislative history
of that bill is clarified to indicate that the Secretary of the
Treasury is not granted any new or additional authority to
prescribe regulations for entities that are regulated pursuant
to Federal securities laws. Without conceding to any
jurisdictional claim of the Commerce Committee over these two
bills, I would agree to seek the changes outlined in your
letter and as described below.
H.R. 4005, among other things, would increase the tools
available to law enforcement authorities to combat money
laundering, while H.R. 1756 would establish a coordinated
government-wide effort against money laundering. As noted in
your letter, section 9 of H.R. 4005, directs the Secretary of
the Treasury to promulgate ``Know Your Customer'' regulations
for financial institutions within 120 days after enactment.
Under the Bank Secrecy Act (BSA), the Treasury Department
already has broad authority to develop rules and regulations
that would require banks, securities firms and other money
transmitters and intermediaries--all defined as financial
institutions under the BSA--to develop procedures and policies
to better identify the true ownership of a customer's accounts
in order to protect the institution from being victimized by
money launderers or other perpetrators of financial crimes.
Section 9 merely imposes a specified timeline on promulgation
of these regulations.
Your letter indicates that the Committee on Commerce has
concerns over how these regulations may affect the securities
markets and the ``Know Your Customer'' and suitability
requirements already imposed on securities firms by the
exchanges and other regulatory bodies. Even though extant
``Know Your Customer'' requirements imposed on securities firms
are designed more to protect the customer rather than the
financial institution (while those contemplated in H.R. 4005
are primarily intended to preserve the integrity of financial
institutions whose customers seek to use them for money
laundering purposes) it would be my intent to support and seek
the amendment provided for in your letter.
My agreement to such an amendment to section 9 of H.R.
4005, however, should not be construed to limit the existing
statutory authority of the Secretary of the Treasury to
promulgate regulations applicable to ``financial
institutions,'' as that term is defined in the BSA. Nor should
exclusion of securities firms, investment companies and
investment advisers from section 9 be interpreted as precluding
the Secretary of the Treasury from promulgating ``Know Your
Customer'' regulations applicable to such firms, after
appropriate consultation with other Federal financial
regulatory agencies regarding the interplay and potential
overlap between regulations of the kind contemplated by H.R.
4005 and the requirements imposed by existing securities laws
and regulations.
With regard to H.R. 1756, you correctly note that this
legislation should not be interpreted as granting the Secretary
of the Treasury any new or additional authority over Federal
securities laws. Accordingly, I will agree to insert in my
floor statement the clarification outlined in your letter.
Finally pursuant to your request a copy of your letter and my
response will be included in the Committee's reports on these
two bills.
Thanks for you cooperation in this matter.
Sincerely,
James A. Leach, Chairman.
Section-by-Section Analysis
section 1. short title
``Money Laundering Deterrence Act of 1998''.
section 2. findings and purposes
The bill contains seven ``findings'' drawn largely from
hearings held over the last two years by the Committee and the
Subcommittee on General Oversight and Investigations. The bill
also notes three purposes; (1) to provide the law enforcement
community with the necessary legal authority to combat money
laundering; (2) to broaden the law enforcement community's
access to transactional information already being collected by
the government; and (3) to expedite the issuance by the
Secretary of the Treasury of regulations designed to deter
money laundering activities at certain types of financial
institutions.
Section 3. provisions relating to the reporting of suspicious
activities
This section of the bill, comprised of four subsections,
amends existing suspicious activity reporting requirements
outlined in the Bank Secrecy Act. The amendments are designed
to facilitate the flow of information regarding suspicious
transactions among law enforcement and financial regulatory
agencies. Subsection (a) extends the ``safe harbor'' provisions
of 31 U.S.C. Sec. 5318 to independent public accountants who
file Suspicious Activity Reports. Extending immunity from civil
liability to accountants advances the underlying purposes of
the Bank Secrecy Act, by encouraging disclosures of suspicious
activities uncovered in the course of audits and routine
examinations of a financial institution's books and records.
Subsection (b) clarifies existing statutory language limiting
the circumstances under which the filing of a Suspicious
Activity Report may be disclosed. Subsection (c) provides
financial institutions with immunity from liability when making
employment references that include suspicions of a prospective
employee's possible involvement in a violation of law or
regulation, unless such suspicions are known by the financial
institution to be false or the institution acts with malice or
reckless disregard for the truth in making such a reference.
The financial institution is not permitted under this
subsection to disclose the fact that a Suspicious Activity
Report has been filed, or that the information included in an
employment reference was the subject of a Suspicious Activity
Report. Subsection (d) makes Suspicious Activity Reports
available to self-regulatory organizations as defined by the
Securities and Exchange Act of 1934.
section 4. expansion of scope of summons power
Under the current law, summons power under 31 U.S.C.
Sec. 5318(b)(1) is limited to ``investigations for the purpose
of civil enforcement'' of the Bank Secrecy Act. This section
expands the scope of the summons authority to examinations to
determine compliance with the Bank Secrecy Act, as well as
investigations relating to reports filed pursuant to the Act.
The expanded summons authority granted to the Secretary of the
Treasury under this section is particularly needed in the case
of non-depository institutions whose activities are not subject
to regulatory oversight. However, with respect to depository
institutions subject to regular examinations, the Committee
expects that the Secretary of the Treasury will coordinate the
use of its expanded authority over these institutions with the
appropriate Federal banking regulators.
Section 5. penalties for violations of geographic targeting orders and
certain record-keeping requirements
This section clarifies existing statutory language making
it illegal to violate reporting requirements mandated by a
geographic targeting order issued by the Secretary of the
Treasury or the funds transfer record-keeping rules.
section 6. repeal of certain reporting requirements
This section eliminates the obligation of the Secretary of
the Treasury to report to Congress on the status of states'
adoption of uniform laws regulating money transmitters. This
directive has been rendered unnecessary by the Treasury
Department's recently promulgated regulations for Money
Services Businesses, which include money transmitters.
section 7. limited exemption from paperwork reduction ACT
This section exempts Bank Secrecy Act reporting
requirements, including those imposed by geographic targeting
orders, from consideration under the Paperwork Reduction Act.
section 8. transfer of reporting requirements from section 6050I of the
internal revenue code to title 31, United States code \1\
This section transfers from the Internal Revenue Code to
the Bank Secrecy Act the requirement that any person engaged in
a trade or business (other than financial institutions required
to report under the Bank Secrecy Act) file a report with the
Federal government on cash transactions in excess of $10,000.
Reports filed pursuant to this requirement provide law
enforcement authorities with a paper trail that can, among
other things, help identify a lifestyle that is not
commensurate with an individual's known sources of legitimate
income.
---------------------------------------------------------------------------
\1\ This portion of the section-by-section analysis draws
extensively upon work conducted by the General Accounting Office in the
105th Congress at the request of Chairman Bachus, Chairman of the
Subcommittee on General Oversight and Investigations.
---------------------------------------------------------------------------
Under current law, non-financial institutions are required
to report cash transactions exceeding $10,000 to the Internal
Revenue Service on IRS Form 8300. Because the requirement that
such reports be filed is contained in the Internal Revenue
Code, Form 8300 information is considered tax return
information, and, as such, may not be disclosed to any persons
or used in any manner not authorized by the Internal Revenue
Code. Authorized disclosures of Form 8300 information are
subject to the procedural and record-keeping requirements of
section 6103 of the Internal Revenue Code. For example, section
6103(p)(4)(E) requires agencies seeking Form 8300 information
to file a report with the Secretary of the Treasury that
describes the procedures established and utilized by the agency
for ensuring the confidentiality of the information. IRS
requires that agencies requesting Form 8300 information file a
``Safeguard Procedures Report'' which must be approved by the
IRS before any such information can be released.
While the IRS uses Form 8300 to identify individuals who
may be engaged in tax evasion, the information collected on the
form can also be useful to other law enforcement agencies
investigating other financial crimes, including money
laundering. Form 8300 information can be instrumental in
helping law enforcement authorities trace cash payments by drug
traffickers and other criminals for luxury cars, jewelry, and
other expensive merchandise. Because of the restrictions on
their dissemination outlined above, however, Form 8300s are not
nearly as accessible to law enforcement authorities as the
various reports mandated by the Bank Secrecy Act, which can
typically be retrieved electronically from a database
maintained by the Treasury Department. The differential access
to the two kinds of reports is made anomalous by the fact that
Form 8300 elicits much the same information that is required to
be disclosed by the Bank Secrecy Act. For example, just as Form
8300 seeks the name, address, and social security number of a
customer who engages in a cash transaction exceeding $10,000
with a trade or business, Currency Transaction Reports (CTRs)
mandated by the Bank Secrecy Act require the same information
to be reported on a cash transaction exceeding $10,000 between
a financial institution and its customer.
Congress has sought in the past to ease the restrictions
imposed by the Internal Revenue Code on law enforcement's
access to Form 8300 information. The Anti-Drug Abuse Act of
1988 (P.L. 100-690) included a special temporary rule
permitting IRS to disclose Form 8300 information to other
Federal agencies for the purpose of administering statutes
unrelated to tax administration. The special rule, originally
scheduled to expire in 1990, was extended for two years before
lapsing in 1992.
Codification of the temporary rule in effect from 1988 to
1992 ensures that the entire Federal law enforcement
community--not just tax agents--will have access to information
that has proven to be beneficial in detecting attempts by
criminal elements to launder the proceeds of their illegal
activities. It is the Committee's expectation that the IRS will
continue to devote resources to the administration and
enforcement of the reporting requirements applicable to non-
financial trades or businesses.
section 9. promulgation of ``know your customer'' regulations
This section mandates that within 120 days of enactment of
the legislation, the Secretary of the Treasury shall promulgate
``Know Your Customer'' regulations for financial institutions.
The regulations, which have been the subject of lengthy
discussion and study among Federal banking and financial
regulatory agencies, including the Treasury Department, the
Federal Reserve Board of Governors, the Office of the
Comptroller of the Currency, and the Federal Deposit Insurance
Corporation, are intended to assist financial institutions in
verifying that their customers' funds are derived from
legitimate sources. By requiring the Secretary of the Treasury
to promulgate these regulations by a date certain, the
Committee does not intend to preclude any supervisory agency
for any financial institution from promulgating ``Know Your
Customer'' regulations of its own. For example, testimony
before the Committee on June 11, 1998, indicated that both the
Board of Governors of the Federal Reserve and the Office of the
Comptroller of the Currency will likely be in a position to
issue such regulations for depository institutions that they
regulate prior to the expiration of the 120-day period
contemplated by this provision. The Committee is supportive of
these efforts.
section 10. fungible property in bank accounts
Vigorous enforcement of laws authorizing the seizure of the
proceeds of illicit activity are an integral part of any
effective strategy for combating money laundering. 18 U.S.C.
Sec. 984, first enacted as part of the Annunzio-Wylie Anti-
Money Laundering Act of 1992, provides that all bank deposits
are fungible, and thus authorizes the forfeiture of money held
in the bank account of a criminal actor without requiring the
government to prove that the money in the account on one day is
the ``same money'' as was in the account on a prior occasion.
This section of the legislation amends 18 U.S.C. Sec. 984 by
extending the statute of limitations applicable in such
forfeiture actions from one to two years, and making other
clarifying changes.
The amendment was endorsed by the Department of Justice in
testimony before the Committee on June 11, 1998. Mary Lee
Warren, Deputy Assistant Attorney General for the Criminal
Division, pointed out that investigations of money laundering
offenses are often complex and last for several years. Under
the current statute of limitations, the government can only
avail itself of the fungibility provisions of 18 U.S.C.
Sec. 984 if it initiates a forfeiture action within one year of
the underlying money laundering offense. By extending the
limitations period to two years, this section strengthens the
government's ability to recover the proceeds of illicit
activity.
section 11. report on private banking activities
This provision requires the Secretary of the Treasury, in
consultation with ``federal banking agencies'' and within one
year of enactment of this legislation, to prepare a report on
the nature and extent of private banking activities in the
U.S.; regulatory efforts to monitor private banking activities
and ensure that they are conducted in compliance with the Bank
Secrecy Act; and policies and procedures of depository
institutions that are designed to ensure that private banking
activities are conducted in compliance with the Bank Secrecy
Act. This section defines ``private banking activities'' to
include ``personalized services such as money management,
financial advice, and investment services that are provided to
clients with high net worth and are not provided generally to
all clients of the institution.'' For purposes of this section,
the term ``federal banking agencies'' is intended to have the
meaning given to such term in section 3(z) of the Federal
Deposit Insurance Act, and therefore includes the Comptroller
of the Currency, the Director of the Office of Thrift
Supervision, the Board of Governors of the Federal Reserve
System, and the Federal Deposit Insurance Corporation.
In preparing the report mandated by this section, the
Treasury Department and the federal banking agencies should
consult with the General Accounting Office, which recently
completed an extensive review of private banking activities in
the United States and the vulnerability of such activities to
money laundering, pursuant to a March 5, 1997, request by Mr.
Bachus, Chairman of the Subcommittee on General Oversight and
Investigations.
section 12. availability of certain account information
This section requires the Secretary of the Treasury to
prescribe regulations requiring financial institutions to
maintain all accounts in such a way as to ensure that the name
of an account holder and the number of the account are
associated with all account activity of the account holder, and
to ensure that all such information is available for purposes
of account supervision and law enforcement.
In making rules pursuant to this provision, the Secretary
of the Treasury should limit only the use of those accounts
within a financial institution that mask the activities or
identity of one or more of a financial institution's clients.
The provision is not intended in any way to interfere with the
normal correspondent or clearing relationships among financial
institutions. For example, the provision is not intended to
affect in any way accounts at one financial institution held
for the benefit of customers of other brokers, dealers, or
investment advisers registered with the Securities and Exchange
Commission. In clearing relationships among securities firms,
at least one financial institution in a chain of institutions
involved with an account maintains the account holder and
account activity information, and the provision is not intended
to affect these accounts. Similarly, the provision is not
intended to affect suspense accounts of broker-dealers where
funds whose ownership is being researched are held, or the
various bulk accounts maintained for financing or other
legitimate business purposes by firms registered with the SEC.
section 13. sense of the congress
This section expresses the sense of the Congress that the
Secretary of the Treasury should make available to all Federal,
State and local law enforcement agencies and financial
regulatory agencies the full contents of the electronic
database of reports required to be filed under the Bank Secrecy
Act.
section 14. designation of foreign high intensity money laundering
areas
This section directs the Secretary of the Treasury, in
consultation with appropriate Federal law enforcement
authorities, to develop criteria by which to identify areas
outside the United States in which money laundering activities
are concentrated, and to designate any areas so identified as
foreign high intensity money laundering areas. The Committee
recognizes that the Federal government, including the
Department of the Treasury, already invests significant
resources in identifying those foreign countries that serve as
safe havens for money laundering. The International Narcotics
Strategy Control Report, published annually by the Department
of State, is a good example of the government's efforts in this
regard. It is the Committee's intention that the Secretary of
the Treasury make full use of such reports--and any other
relevant information available elsewhere in the executive
branch--in making the designations mandated by this section.
section 15. doubling of criminal penalties for violations of laws aimed
at preventing money laundering in foreign high intensity money
laundering areas
This section authorizes the doubling of criminal penalties
for Bank Secrecy Act violations committed with respect to a
transaction involving a person in, a relationship maintained
in, or transport of a monetary instrument involving a foreign
country known to have been designated as a foreign high
intensity money laundering area pursuant to the preceding
section.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3 of rule XIII of the Rules of the
House of Representatives, changes in existing law made by the
bill, as reported, are shown as follows (existing law proposed
to be omitted is enclosed in black brackets, new matter is
printed in italic, existing law in which no change is proposed
is shown in roman):
TITLE 31, UNITED STATES CODE
* * * * * * *
CHAPTER 53--MONETARY TRANSACTIONS
SUBCHAPTER I--CREDIT AND MONETARY EXPANSION
Sec.
5301. Buying obligations of the United States Government.
* * * * * * *
SUBCHAPTER II--RECORDS AND REPORTS ON MONETARY INSTRUMENTS TRANSACTIONS
5311. Declaration of purpose.
5312. Definitions and application.
5313. Reports on domestic coins and currency transactions.
5313A. Reports relating to coins and currency received in nonfinancial
trade or business.
* * * * * * *
5327. Designation of foreign high intensity money laundering areas.
* * * * * * *
SUBCHAPTER II--RECORDS AND REPORTS ON MONETARY INSTRUMENTS TRANSACTIONS
* * * * * * *
Sec. 5312. Definitions and application
(a) In this subchapter--
(1) * * *
* * * * * * *
(3) ``monetary instruments'' means--
(A) * * *
* * * * * * *
(C) as the Secretary of the Treasury shall
provide by regulation for purposes of [section
5316,] sections 5313A and 5316, checks, drafts,
notes, money orders, and other similar
instruments which are drawn on or by a foreign
financial institution and are not in bearer
form.
(4) Nonfinancial trade or business.--The term
``nonfinancial trade or business'' means any trade or
business other than a financial institution that is
subject to the reporting requirements of section 5313
and regulations prescribed under such section.
[(4)] (5) ``person'', in addition to its meaning
under section 1 of title 1, includes a trustee, a
representative of an estate and, when the Secretary
prescribes, a governmental entity.
[(5)] (6) ``United States'' means the States of the
United States, the District of Columbia, and, when the
Secretary prescribes by regulation, the Commonwealth of
Puerto Rico, the Virgin Islands, Guam, the Northern
Mariana Islands, American Samoa, the Trust Territory of
the Pacific Islands, a territory or possession of the
United States, or a military or diplomatic
establishment.
* * * * * * *
Sec. 5313A. Reports relating to coins and currency received in
nonfinancial trade or business
(a) Coin and Currency Receipts of More Than $10,000.--Any
person--
(1) who is engaged in a trade or business; and
(2) who, in the course of such trade or business,
receives more than $10,000 in coins or currency in 1
transaction (or 2 or more related transactions),
shall file a report described in subsection (b) with respect to
such transaction (or related transactions) at such time as the
Secretary may by regulations prescribe.
(b) Form and Manner of Reports.--A report is described in
this subsection if such report--
(1) is in such form as the Secretary may prescribe;
(2) contains--
(A) the name, address, and taxpayer
identification number of the person from whom
the coins or currency was received;
(B) the amount of coins or currency received;
(C) the date and nature of the transaction;
and
(D) such other information as the Secretary
may prescribe.
(c) Exceptions.--
(1) Amounts received by financial institutions.--
Subsection (a) shall not apply to amounts received in a
transaction reported under section 5313 and regulations
prescribed under such section.
(2) Transactions occurring outside the united
states.--Except to the extent provided in regulations
prescribed by the Secretary, subsection (a) shall not
apply to any transaction if the entire transaction
occurs outside the United States.
(d) Currency Includes Foreign Currency and Certain Monetary
Instruments.--
(1) In general.--For purposes of this section, the
term ``currency'' includes--
(A) foreign currency; and
(B) to the extent provided in regulations
prescribed by the Secretary, any monetary
instrument (whether or not in bearer form) with
a face amount of not more than $10,000.
(2) Scope of application.--Paragraph (1)(B) shall not
apply to any check drawn on the account of the writer
in a financial institution referred to in subparagraph
(A), (B), (C), (D), (E), (F), (G), (J), (K), (R), or
(S) of section 5312(a)(2).
(e) Coins or Currency Received by Criminal Court Clerks.--
(1) In general.--Every clerk of a Federal or State
criminal court who receives more than $10,000 in coins
or currency as bail for any individual charged with a
specified criminal offense shall file a report
described in paragraph (2) (at such time as the
Secretary may by regulations prescribe) with respect to
the receipt of such bail.
(2) Report.--A report is described in this paragraph
if such report--
(A) is in such form as the Secretary may
prescribe; and
(B) contains--
(i) the name, address, and taxpayer
identification number of--
(I) the individual charged
with the specified criminal
offense; and
(II) each person posting the
bail (other than a person
licensed as a bail bondsman);
(ii) the amount of coins or currency
received;
(iii) the date the coins or currency
was received; and
(iv) such other information as the
Secretary may prescribe.
(3) Specified criminal offense.--For purposes of this
subsection, the term ``specified criminal offense''
means--
(A) any Federal criminal offense involving a
controlled substance;
(B) racketeering (as defined in section 1951,
1952, or 1955 of title 18, United States Code);
(C) money laundering (as defined in section
1956 or 1957 of such title); and
(D) any State criminal offense substantially
similar to an offense described in subparagraph
(A), (B), or (C).
(4) Information to federal prosecutors.--Each clerk
required to include in a report under paragraph (1) the
information described in paragraph (2)(B) with respect
to an individual described in paragraph (2)(B)(i)(I)
shall furnish (at such time as the Secretary may by
regulations prescribe) a written statement showing such
information to the United States Attorney for the
jurisdiction in which such individual resides and the
jurisdiction in which the specified criminal offense
occurred.
(5) Information to payors of bail.--Each clerk
required to file a report under paragraph (1) shall
furnish (at such time as the Secretary may by
regulations prescribe) to each person whose name is
required to be set forth in such report by reason of
paragraph (2)(B)(i)(II) a written statement showing--
(A) the name and address of the clerk's
office required to file the report; and
(B) the aggregate amount of coins and
currency described in paragraph (1) received by
such clerk.
* * * * * * *
Sec. 5317. Search and forfeiture of monetary instruments
(a) * * *
* * * * * * *
(c) If a report required under section 5316 with respect to
any monetary instrument is not filed (or if filed, contains a
material omission or misstatement of fact), the instrument and
any interest in property, including a deposit in a financial
institution, traceable to such instrument may be seized and
forfeited to the United States Government. Any property, real
or personal, involved in a transaction or attempted transaction
in violation of section [5324(b)] 5324(c), or any property
traceable to such property, may be seized and forfeited to the
United States Government. A monetary instrument transported by
mail or a common carrier, messenger, or bailee is being
transported under this subsection from the time the instrument
is delivered to the United States Postal Service, common
carrier, messenger, or bailee through the time it is delivered
to the addressee, intended recipient, or agent of the addressee
or intended recipient without being transported further in, or
taken out of, the United States.
* * * * * * *
Sec. 5318. Compliance, exemptions, and summons authority
(a) General Powers of Secretary.--The Secretary of the
Treasury may (except under section 5315 of this title and
regulations prescribed under section 5315)--
(1) except as provided in subsection (b)(2), delegate
duties and powers under this subchapter to an
appropriate supervising agency and the United States
Postal Service;
(2) require a class of domestic financial
institutions or nonfinancial trades or businesses to
maintain appropriate procedures to ensure compliance
with this subchapter and regulations prescribed under
this subchapter or to guard against money laundering;
(3) examine any books, papers, records, or other data
of domestic financial institutions or nonfinancial
trades or businesses relevant to the recordkeeping or
reporting requirements of this subchapter;
(4) summon a financial institution or nonfinancial
trade or business, an officer or employee of a
financial institution (including a former officer or
employee), or any person having possession, custody, or
care of the reports and records required under this
subchapter, to appear before the Secretary of the
Treasury or his delegate at a time and place named in
the summons and to produce such books, papers, records,
or other data, and to give testimony, under oath, as
may be relevant or material to an investigation
described in subsection (b);
* * * * * * *
(b) Limitations on Summons Power.--
(1) Scope of power.--The Secretary of the Treasury
may take any action described in paragraph (3) or (4)
of subsection (a) only in connection with examinations
to determine compliance with the requirements of this
subchapter, section 21 of the Federal Deposit Insurance
Act, and chapter 2 of Public Law 91-508 and regulations
prescribed pursuant to such provisions, investigations
relating to reports filed by financial institutions or
other persons pursuant to any such provision or
regulation, and investigations for the purpose of civil
enforcement of violations of this subchapter, section
21 of the Federal Deposit Insurance Act, section 411 of
the National Housing Act, or chapter 2 of Public Law
91-508 (12 U.S.C. 1951 et seq.) or any regulation under
any such provision.
(2) Authority to issue.--A summons may be issued
under subsection (a)(4) only by, or with the approval
of, the Secretary of the Treasury or a supervisory
level delegate of the Secretary of the Treasury.
(c) Administrative Aspects of Summons.--
(1) Production at designated site.--A summons issued
pursuant to this section may require that books,
papers, records, or other data stored or maintained at
any place be produced at any designated location in any
State or in any territory or other place subject to the
jurisdiction of the United States not more than 500
miles distant from any place where the financial
institution or nonfinancial trade or business operates
or conducts business in the United States.
* * * * * * *
(f) Written and Signed Statement Required.--No person shall
qualify for an exemption under subsection (a)(5) unless the
relevant financial institution or nonfinancial trade or
business prepares and maintains a statement which--
(1) describes in detail the reasons why such person
is qualified for such exemption; and
(2) contains the signature of such person.
(g) Reporting of Suspicious Transactions.--
(1) * * *
[(2) Notification prohibited.--A financial
institution, and a director, officer, employee, or
agent of any financial institution, who voluntarily
reports a suspicious transaction, or that reports a
suspicious transaction pursuant to this section or any
other authority, may not notify any person involved in
the transaction that the transaction has been reported.
[(3) Liability for disclosures.--Any financial
institution that makes a disclosure of any possible
violation of law or regulation or a disclosure pursuant
to this subsection or any other authority, and any
director, officer, employee, or agent of such
institution, shall not be liable to any person under
any law or regulation of the United States or any
constitution, law, or regulation of any State or
political subdivision thereof, for such disclosure or
for any failure to notify the person involved in the
transaction or any other person of such disclosure.]
(2) Notification prohibited.--
(A) In general.--If a financial institution,
any director, officer, employee, or agent of
any financial institution, or any independent
public accountant who audits any financial
institution, voluntarily or pursuant to this
section or any other authority, reports a
suspicious transaction to an appropriate
government agency--
(i) the financial institution,
director, officer, employee, agent, or
accountant may not notify any person
involved in the transaction that the
transaction has been reported and may
not disclose any information included
in the report to any such person; and
(ii) any other person, including any
officer or employee of any government,
who has any knowledge that such report
was made may not disclose to any person
involved in the transaction that the
transaction has been reported or any
information included in the report.
(B) Coordination with paragraph (5).--
Subparagraph (A) shall not be construed as
prohibiting any financial institution, or any
director, officer, employee, or agent of such
institution, from including, in a written
employment reference that is provided in
accordance with paragraph (5) in response to a
request from another financial institution,
information that was included in a report to
which subparagraph (A) applies, but such
written employment reference may not disclose
that such information was also included in any
such report or that such report was made.
(3) Liability for disclosures.--
(A) In general.--Notwithstanding any other
provision of law--
(i) any financial institution that--
(I) makes a disclosure of any
possible violation of law or
regulation to an appropriate
government agency; or
(II) makes a disclosure
pursuant to this subsection or
any other authority;
(ii) any director, officer, employee,
or agent of such institution who makes,
or requires another to make any such
disclosure; and
(iii) any independent public
accountant who audits any such
financial institution and makes a
disclosure described in clause (i),
shall not be liable to any person under any law
or regulation of the United States, any
constitution, law, or regulation of any State
or political subdivision thereof, or under any
contract or other legally enforceable agreement
(including any arbitration agreement), for such
disclosure or for any failure to notify the
person who is the subject of such disclosure or
any other person identified in the disclosure.
(B) Exception.--Subparagraph (A) shall not
apply to a disclosure or communication required
under Federal securities law, other than
provisions of law that specifically refer to
the Currency and Foreign Transactions Reporting
Act of 1970.
* * * * * * *
(5) Employment references may include suspicions of
involvement in illegal activity.--
(A) In general.--Notwithstanding any other
provision of law and subject to subparagraph
(B) of this paragraphand paragraph (2)(C), any
financial institution, and any director, officer, employee, or agent of
such institution, may disclose, in any written employment reference
relating to a current or former institution-affiliated party of such
institution which is provided to another financial institution in
response to a request from such other institution, information
concerning the possible involvement of such institution-affiliated
party in any suspicious transaction relevant to a possible violation of
law or regulation.
(B) Limit on liability for disclosures.--A
financial institution, and any director,
officer, employee, or agent of such
institution, shall not be liable to any person
under any law or regulation of the United
States, any constitution, law, or regulation of
any State or political subdivision thereof, or
under any contract or other legally enforceable
agreement (including any arbitration
agreement), for any disclosure under
subparagraph (A), to the extent--
(i) the disclosure does not contain
information which the institution,
director, officer, employee, agent, or
accountant knows to be false; and
(ii) the institution, director,
officer, employee, agent, or accountant
has not acted with malice or with
reckless disregard for the truth in
making the disclosure.
(C) Institution-affiliated party defined.--
For purposes of this paragraph, the term
``institution-affiliated party'' has the
meaning given to such term in section 3(u) of
the Federal Deposit Insurance Act, except such
section 3(u) shall be applied by substituting
``financial institution'' for ``insured
depository institution''.
(h) Anti-Money Laundering Programs.--
(1) * * *
* * * * * * *
(3) Availability of certain account information.--The
Secretary of the Treasury shall prescribe regulations
under this subsection which require financial
institutions to maintain all accounts in such a way as
to ensure that the name of an account holder and the
number of the account are associated with all account
activity of the account holder, and to ensure that all
such information is available for purposes of account
supervision and law enforcement.
Sec. 5319. Availability of reports
The Secretary of the Treasury shall make information in a
report filed under section 5313, [5314, or 5316] 5313A, 5314,
5316, or 5318(g) of this title available to an agency,
including any State financial institutions supervisory agency,
on request of the head of the agency. The report shall be
available for a purpose consistent with those sections or a
regulation prescribed under those sections. The Secretary may
only require reports on the use of such information by any
State financial institutions supervisory agency for other than
supervisory purposes. However, a report and records of reports
under section 5313, 5313A, 5314, 5316, or 5318(g) are exempt
from disclosure under section 552 of title 5. The Secretary of
the Treasury may permit the dissemination of information in any
such reports to any self-regulatory organization (as defined in
section 3(a)(26) of the Securities Exchange Act of 1934), if
the Securities and Exchange Commission determines that such
dissemination is necessary or appropriate to permit such
organization to perform its function under the Securities
Exchange Act of 1934 and regulations prescribed under such Act.
* * * * * * *
Sec. 5321. Civil penalties
(a)(1) A domestic financial institution or nonfinancial trade
or business, and a partner, director, officer, or employee of a
domestic financial institution or nonfinancial trade or
business, willfully violating this subchapter or a regulation
prescribed or order issued under this subchapter (except
sections 5314 and 5315 of this title or a regulation prescribed
under sections 5314 and 5315), or willfully violating a
regulation prescribed under section 21 of the Federal Deposit
Insurance Act or under section 123 of Public Law 91-508, is
liable to the United States Government for a civil penalty of
not more than the greater of the amount (not to exceed
$100,000) involved in the transaction (if any) or $25,000. For
a violation of section 5318(a)(2) of this title or a regulation
prescribed under section 5318(a)(2), a separate violation
occurs for each day the violation continues and at each office,
branch, or place of business at which a violation occurs or
continues.
* * * * * * *
(6) Negligence.--
(A) In general.--The Secretary of the Treasury may
impose a civil money penalty of not more than $500 on
any financial institution or nonfinancial trade or
business which negligently violates any provision of
this subchapter or any regulation prescribed under this
subchapter.
(B) Pattern of negligent activity.--If any financial
institution or nonfinancial trade or business engages
in a pattern of negligent violations of any provision
of this subchapter or any regulation prescribed under
this subchapter, the Secretary of the Treasury may, in
addition to any penalty imposed under subparagraph (A)
with respect to any such violation, impose a civil
money penalty of not more than $50,000 on the financial
institution or nonfinancial trade or business.
* * * * * * *
Sec. 5322. Criminal penalties
(a) A person willfully violating this subchapter or a
regulation prescribed or order issued under this subchapter
(except section 5315 or 5324 of this title or a regulation
prescribed under section 5315 or 5324), or willfully violating
a regulation prescribed under section 21 of the Federal Deposit
Insurance Act or under section 123 of Public Law 91-508, shall
be fined not more than $250,000, or imprisoned for not more
than five years, or both.
(b) a person willfully violating this subchapter or a
regulation prescribed or order issued under this subchapter
(except section 5315 or 5324 of this title or a regulation
prescribed under section 5315 or 5324), or willfully violating
a regulation prescribed under section 21 of the Federal Deposit
Insurance Act or under section 123 of Public Law 91-508, while
violating another law of the United States or as part of a
pattern of any illegal activity involving more than $100,000 in
a 12-month period, shall be fined not more than $500,000,
imprisoned for not more than 10 years, or both.
* * * * * * *
(d) The court may double the sentence of fine or
imprisonment, or both, that would otherwise be imposed on a
person for a violation described in subsection (a) or (b) if
person commits the violation with respect to a transaction
involving a person in, a relationship maintained for a person
in, or a transport of a monetary instrument involving a foreign
country, knowing that the foreign country is designated under
section 5327(b) as a foreign high intensity money laundering
area.
* * * * * * *
Sec. 5324. Structuring transactions to evade reporting requirement
prohibited
(a) Domestic Coin and Currency Transactions Involving
Financial Institutions.--No person shall for the purpose of
evading the reporting requirements of section 5313(a) or 5325
or any regulation prescribed under any such section, the
reporting requirements imposed by any order issued under
section 5326, or the recordkeeping requirements imposed by any
regulation prescribed under section 21 of the Federal Deposit
Insurance Act or section 123 of Public Law 91-508--
(1) cause or attempt to cause a domestic financial
institution to fail to file a report required under
section 5313(a) or 5325 or any regulation prescribed
under any such section, to file a report required by
any order issued under section 5326, or to maintain a
record required pursuant to any regulation prescribed
under section 21 of the Federal Deposit Insurance Act
or section 123 of Public Law 91-508;
(2) cause or attempt to cause a domestic financial
institution to file a report required under section
5313(a) or 5325 or any regulation prescribed under any
such section, to file a report required by any order
issued under section 5326, or to maintain a record
required pursuant to any regulation prescribed under
section 21 of the Federal Deposit Insurance Act or
section 123 of Public Law 91-508 that contains a
material omission or misstatement of fact; or
* * * * * * *
(b) Domestic Coin and Currency Transactions Involving
Nonfinancial Trades or Businesses.--No person shall for the
purpose of evading the report requirements of section 5313A or
any regulation prescribed under such section--
(1) cause or attempt to cause a nonfinancial trade or
business to fail to file a report required under
section 5313A or any regulation prescribed under such
section;
(2) cause or attempt to cause a nonfinancial trade or
business to file a report required under section 5313A
or any regulation prescribed under such section that
contains a material omission or misstatement of fact;
or
(3) structure or assist in structuring, or attempt to
structure or assist in structuring, any transaction
with 1 or more nonfinancial trades or businesses.
[(b)] (c) International Monetary Instrument Transactions.--No
person shall, for the purpose of evading the reporting
requirements of section 5316--
(1) fail to file a report required by section 5316,
or cause or attempt to cause a person to fail to file
such a report;
(2) file or cause or attempt to cause a person to
file a report required under section 5316 that contains
a material omission or misstatement of fact; or
(3) structure or assist in structuring, or attempt to
structure or assist in structuring, any importation or
exportation of monetary instruments.
[(c)] (d) Criminal Penalty.--
(1) In general.--Whoever violates this section shall
be fined in accordance with title 18, United States
Code, imprisoned for not more than 5 years, or both.
(2) Enhanced penalty for aggravated cases.--Whoever
violates this section while violating another law of
the United States or as part of a pattern of any
illegal activity involving more than $100,000 in a 12-
month period shall be fined twice the amount provided
in subsection (b)(3) or (c)(3) (as the case may be) of