Find a Security Clearance Job!

Military

26 September 2001

Text: Justice Official Urges Tighter Money Laundering Laws

(Asst. Attorney General Chertoff testifies before Senate)  (2590)
A top U.S. Department of Justice (DOJ) official is urging Congress to
approve tougher laws against money laundering as a necessary tool
against terrorism and other forms of international crime.
In Senate testimony September 26, Assistant Attorney General Michael
Chertoff noted that the Bush Administration's response to the
terrorist attacks against the United States included creation of an
interagency group that will investigate the financial activities of
the terrorists and their supporters.
"We know one thing," Chertoff said. "We know that if terror operates
in cells, the lifeblood of those cells is money. They cannot exist and
survive and flourish if they can't fund their activities. So it
becomes critical that we strike at that funding."
He told the Senate Banking Committee that current U.S. money
laundering laws are woefully out of date, and urged quick action on a
series of legislative changes proposed by the Bush Administration.
These include reforms that would make it illegal for U.S. institutions
to launder the proceeds of foreign crimes. "Simply put, we do not want
to be a safe haven for the ill-gotten gains of corrupt international
bribe-takers or for terrorists who commit violent acts abroad," he
said.
Moreover, U.S. officials need the authority to enforce foreign court
judgments against terrorists in this country, "because we want to show
our foreign partners that we will work with them in attacking
terrorism," Chertoff said.
He urged action against the abuse of so-called "correspondent
accounts," which allow foreign banks to use U.S. banking services and
thus give their clients direct access to the U.S. financial system.
"We need to be able to say to correspondent banks that they cannot
raise the 'innocent owner' defense to protect the assets of foreign
terrorists that are being held in foreign correspondent bank accounts
in U.S. banks," he said. "We need to be able to say to foreign
correspondent banks that ... if they want to have bank accounts with
U.S. banks, they've got to appoint people who will respond to
subpoenas and to American process, so we can get the information that
we need to track down and prosecute those who launder terrorist bank
accounts and terrorist monies."
The administration also believes that new laws are needed to deal with
the movement of cash outside the formal banking system. "Where there
is bulk transfer of money in interstate or foreign commerce, we need
to be able to make that a criminal offense," Chertoff said. "At the
same time, we need to strengthen the criminal laws against smuggling
cash illegally into our own country."
Chertoff stressed in his testimony that the proposed reforms would
target a wide range of international criminal activities. "When we
talk about money laundering ... we talk not only about terrorists, but
we talk about international organized crime, international drug
dealing, international corruption -- not only because these are bad in
themselves, but because, frankly, we can't differentiate between
terrorism and organized crime and drug dealing."
Following is the text of Chertoff's testimony, as submitted to the
Senate:
(begin text)
Testimony of Michael Chertoff
Assistant Attorney General, Criminal Division
United States Department of Justice
on September 26, 2001
Before the Committee on Banking, Housing and Urban Affairs
United States Senate
Chairman Sarbanes, Senator Gramm, and distinguished members of the
Committee, I am pleased to appear before the Committee today to
discuss the ever-increasingly important issue of money laundering and
the Bush Administration's 2001 National Money Laundering Strategy. As
I understand it, today's hearing was originally scheduled for
September 12th. Any testimony prepared for that day was rendered
obsolete by the events of September 11th. Tuesday, September 11th
marked a turning point in this country's fight against terrorism and
all other kinds of unlawful activity. President Bush has announced
that we will meet that unspeakable attack on democracy with a full
commitment or resources and with a firm resolve to rid the world of
terrorism. As the President so eloquently stated, "Whether we bring
our enemies to justice or bring justice to our enemies, justice will
be done."
We in law enforcement must do everything within our powers to
apprehend those persons who have committed and seek to commit
terrorist acts, and we must eradicate the forces of terrorism in our
country and around the world. As an initial step toward accomplishing
this national mission against terrorism, the Attorney General has
directed the creation of an Anti-Terrorism Task Force within each
judicial district to be made up of prosecutors from the U.S.
Attorney's Office, members of the federal law enforcement agencies,
including the FBI, INS, DEA, Customs Service, Marshals Service, Secret
Service, IRS, and the ATF, as well as the primary state and local
police forces in that district. These task forces will be arms of the
national effort to coordinate the collection, analysis and
dissemination of information and to develop the investigative and
prosecutive strategy for the country. As an integral part of this
national effort, the Department of Justice and the FBI have
established an interagency Financial Review Group to coordinate the
investigation of the financial aspects surrounding the terrorist
events of September 11th and beyond. All members of this Committee
recognize the importance of understanding the financial components of
terrorist and criminal organizations. These financial links will be
critical to the larger criminal investigation, while also providing a
trail to the sources of funding for these heinous crimes. The
importance of "following the money," in this instance, as well as in
the investigation of all criminal enterprises, cannot be overstated.
The members of this Committee are also well aware that money
laundering constitutes a threat to the safety of our communities, to
the integrity of our financial institutions and to our national
security. In order to address this serious threat, we must apply and
coordinate all the efforts and available resources of the federal
government, along with those of our state and local authorities, as
well as our foreign counterparts, if we are to be effective in our
campaign against domestic and international money launderers. Money
laundering techniques are innumerable, diverse, complex, subtle and
secret. The 2001 National Money Laundering Strategy not only sets
forth a plan to identify, disrupt and dismantle major money laundering
organizations and the various financial systems they use but continues
previous efforts to establish and expand effective countermeasures to
detect and deter present and emergent money laundering techniques.
Under Secretary Gurule has detailed the principal provisions of the
2001 Strategy. I would like to focus on an area of the Strategy in
which we especially need the Congress' help -- updating the money
laundering laws.
The Need for New Legislation
In his address to the nation last Friday, President Bush stated:
We will direct every resource at our command -- every means of
diplomacy, every tool of intelligence, every instrument of law
enforcement, every financial influence, and every necessary weapon of
war -- to the destruction and to the defeat of the global terror
network.
However, as Attorney General Ashcroft stated in his remarks in Chicago
on August 7th to the Organized Crime Conference sponsored by the
Chicago Police Department, and as I and other representatives of the
Department of Justice have stated on several occasions in testimony
before this and other Committees, we are fighting with outdated
weapons in the money laundering arena today. When the money laundering
laws were first enacted in 1986, they were designed to address what
was primarily a domestic problem. Since 1986, money laundering
increasingly has become a global problem, involving international
financial transactions, the smuggling of currency across borders, and
the laundering in one country of the proceeds of crimes committed in
another country. Currency, monetary instruments and electronic funds
flow easily across international borders, allowing criminals in
foreign countries to hide their money in the United States, and
allowing criminals in this country to conceal their illicit funds in
any one of hundreds of countries around the world with scant concern
that their activities will be detected by law enforcement.
International organized criminal groups based in Asia, Africa, Europe
and this hemisphere have seized upon these opportunities for
laundering of their assets. These criminals look upon globalization as
an invitation to vastly expand the size and scope of their criminal
activities -- whether these organized criminal groups engage in
narcotics trafficking, securities fraud, bank fraud and other white
collar crimes, trafficking in persons, or terrorism. With their
expanded power and reach, international organized criminals seek to
corrupt police and public officials in countries around the world to
protect their criminal enterprises and enhance their money-making
opportunities. Foreign organized crime groups today threaten
Americans, their businesses, and their property, as these groups work
to expand their influence into this country.
In this environment, law enforcement is challenged, and the criminals
often hold the advantage. Criminals are able to adapt to changing
circumstances quickly. They pay no heed to the requirements of laws
and regulations and recognize no sovereign's borders. Further, these
criminal groups have learned to be adaptable and innovative and as we
succeed in a new enforcement effort or implement a new regulatory
regime, they quickly alter their methods and modes of operation to
adapt to the new circumstances.
The reality of international money laundering in this new century has
caused countries from Northern Europe to South Africa, and from here
in the West to the financial centers of the Far East, to look for ways
to update their domestic laws to address this threat to our security.
Equally important, countries around the globe are searching for ways
to work together to address this problem jointly, irrespective of our
different legal systems, customs and traditions. Criminal proceeds can
be moved from country to country in an instant. It is thus critical
that our laws are brought up to date, so that we may act effectively
and cooperate fully with our partners in law enforcement abroad. The
United States should be the leader in this process, but sadly we are
falling behind. While our laws have remained mostly static for 14
years, other countries are moving ahead to criminalize international
money laundering and to take other steps to separate criminals from
their criminal proceeds.
Legislative Initiatives
We are not suffering in this endeavor from the lack of ideas or
proposals. The provisions of our proposed Money Laundering Act of 2001
would go a long way toward modernizing our money laundering laws by
authorizing new and improved tools for our law enforcement agents and
prosecutors, and by increasing our ability to cooperate with our
international counterparts in tracing, freezing and seizing criminal
funds in the United States.
In addition to the Department's legislative proposals, members of
Congress have also recognized the need to update our money laundering
laws. For example, Senators Levin, Grassley, Dewine, Kyl, Nelson and
Chairman Sarbanes recently introduced a money laundering bill, S.1371.
We look forward to working with you as you consider these and related
proposals.
I would like to highlight a few of the pending legislative proposals
for the Committee that we believe would be particularly beneficial.
First, we must make it a crime to launder the proceeds of specified
foreign crimes in the United States. People who commit crimes abroad,
and then hide that money in the United States, are committing an
offense that is at least as serious as the one committed by our
home-grown criminals who hide their money at the local bank. The
potential for terrorist organizations to finance their atrocities with
money generated by committing crimes in other countries is obvious.
(S. 1371, Sec. 3; Money Laundering Act of 2001, Sec. 6).
Second, it is important that the federal courts be given authority to
restrain a criminal defendant's assets pending trial, so that he is
not free to disburse his money before he is convicted and ordered to
turn it over to the Government. It is meaningless to authorize the
courts to enter post-conviction forfeiture judgments -- as the current
laws provide -- yet allow the criminal to send the money beyond the
reach of the court in the months before he is convicted. (DOJ
Anti-Terrorism Act of 2001,  406).
Third, the federal courts should be given authority to enforce the
orders of foreign courts relating to criminal proceeds in the United
States. Federal law already permits this in drug cases: a court in
Virginia can enforce art order from a court in London if it relates to
drug money found in the U.S. (28 U.S.C.  2467). As we speak, foreign
countries are working to determine what assets of terrorist acts
occurring within their borders may have involved funds in the United
States. If foreign courts issue orders to confiscate that money, we
need to be able to enforce them. As a result, the current law needs to
be expanded beyond drug trafficking crimes. (Money Laundering Act of
2001,  39).
Fourth, the limitations period on seizing electronic funds from a bank
account should be extended from one year to two years. Current law
requires that the government trace the money it wants to seize to the
offense in which the money was involved. The law recognizes, however,
that money is fungible, and that one dollar in a given bank account is
the same as any other dollar. This "fungible property" rule, however,
only applies for one year (18 U.S.C.  984). If the money has been in
the bank account for more than a year, the government cannot seize it
without a strict tracing analysis -- something that is all but
impossible if the account was active. We need to be able to go back at
least two years to give true effect to the purposes underlying this
law. (Money Laundering Act of 2001,  15, S. 1371,  10).
There are other provisions in the Department's anti-money laundering
bill that would help us enormously in tracking the assets of
terrorists. I mention these few as among the most critical, but a
comprehensive revamping of these laws is necessary if we are to make
meaningful headway against terrorism and other forms of international
organized crime. The Department's Money Laundering Act of 2001 sets
out a core group of statutory tools that are necessary in order, to
meet the domestic and transnational organized crime threats of the
21st Century. Attorney General Ashcroft considers passage of this
legislation essential to any success in disrupting and dismantling the
business of organized crime and the cruel reality of terrorism.
Conclusion
I believe that the extraordinary events of September 11th should
provide the impetus to jump-start consideration of money laundering
legislation that will allow us to address the threats presented to us
by international terrorists and criminals. The Department stands ready
to provide any assistance it can to facilitate prompt consideration of
its legislative proposals.
I would like to conclude by expressing the gratitude of the Department
of Justice for the continuing support that this Committee has
demonstrated for our anti-money laundering activities. We in the
Department of Justice look forward to working alongside our Treasury
colleagues, with this Committee, with your other colleagues in the
Senate and your counterparts in the House to strengthen the U.S.
anti-money laundering regime at this critical hour.
Thank you, Mr. Chairman. I would welcome any questions you may have at
this time.
(end text)
(Distributed by the Office of International Information Programs, U.S.
Department of State. Web site: http://usinfo.state.gov)



NEWSLETTER
Join the GlobalSecurity.org mailing list