Homeland Security

Executive Director, Operations East

United States Customs Service

Before the House Committee on The Judiciary

Subcommittee on Crime

Chairman McCollum, Members of the Sub-Committee, good afternoon. I am

pleased to join my colleagues from the Department of Justice, Assistant Attorney General James Robinson and Assistant Chief Stefan Cassella to discuss our efforts in combating money laundering. I am especially pleased to have

the opportunity to comment on The Money Laundering Act of 2000.

Mr. Chairman, in September 1999, the Department of the Treasury and the Department of Justice released the first National Money Laundering Strategy as Congress directed. The 1999 National Money Laundering Strategy set forth a series of action items designed to advance four fundamental goals in the fight against money laundering: strengthening domestic enforcement, enhancing the measures taken by banks and other financial institutions, building stronger partnerships with state and local governments, and bolstering international cooperation.

Since September, the Departments of Treasury and Justice have been working hard in a comprehensive - and cooperative - interagency process to accomplish these goals. That interagency process is directed by Deputy Secretary Eizenstat and Deputy Attorney General Holder, and some of the results of this work should be apparent this later this month when the 2000 National Money Laundering Strategy is transmitted to Congress.

The 1999 National Money Laundering Strategy recognized that Federal law enforcement authorities could combat money laundering even more effectively if some loopholes and missing pieces that remain in our nation's counter-money laundering legal structure were repaired.

The 1999 Strategy announced the Administration's intention to submit this very bill, and Deputy Secretary Eizenstat and Deputy Attorney General Holder fulfilled that promise on November 10, 1999. The Money Laundering Act of 2000 is designed to enhance the ability of law enforcement to investigate and prosecute money laundering. The Department of the Treasury supports the Money Laundering Act of 2000, and will continue to work with this subcommittee and other members of Congress to seek the enactment of this bill.

The passage of this bill will greatly assist the Federal government and Treasury Department's ongoing efforts to combat money laundering in the U.S. and across the globe.

I would like to begin my testimony by providing you with an overview of Customs

anti-money laundering efforts and then turn to the proposed legislation.

The Customs Service plays a critical role in the Federal government's efforts to combat money laundering and it provides key support to the National Money Laundering Strategy. In order to target the money launderers and the systems they employ, the United States Customs Service has been given a broad grant of authority in the conduct of international financial crime and money laundering investigations. This authority is primarily derived from the Bank Secrecy Act and the Money Laundering Control Acts of 1986 and 1988.

Customs has implemented an aggressive strategy to combat money laundering, and now dedicates in excess of 400 agents worldwide to money laundering investigations. Combined with our unique border search authority, Customs enforcement efforts focus on the most significant international criminal organizations whose corrupt influence often impacts global trade, as well as economic and financial systems. These efforts against money laundering are not limited to drug related money laundering, but to the proceeds of all crime laundered in a variety of ways. During Fiscal Years 1998 and 1999, our money laundering investigations resulted in the arrest of over 2,100 violators and the seizure of more than $600 million dollars.

International Criminal Organizations launder their ill gotten gains through a

variety of different means, methods, and systems. These systems range from

the very simple, such as bulk cash smuggling, to the most complex, such as the

Black Market Peso Exchange. They are best attacked through a

combination of inter related enforcement techniques which, when aligned, succeed in disrupting and dismantling the criminal enterprise's core function: the laundering and investments of the proceeds and profits of their illegal activity.

The Customs Service maintains a variety of enforcement tools to attack these money-laundering systems:

1. U.S. CUSTOMS UNDERCOVER INVESTIGATIONS

The U.S. Customs Service is a leader in combating money laundering through undercover operations. U.S. Customs undercover operations directed at money launderers have resulted in the seizure of approximately $1 billion dollars in cash and monetary instruments, over 2,000 arrests and the seizure of more than 37,000 kilograms of cocaine.

Customs undercover operations first exposed the criminal money

laundering activities of the Bank of Credit and Commerce International

(BCCI).

As you know, in 1998, U.S. Customs announced the conclusion of Operation Casablanca, the largest, and most successful drug money laundering investigation in the history of U.S. law enforcement. This investigation resulted in the indictment and conviction of two Mexican banks on criminal money laundering charges and the civil money laundering plea of a third Mexican bank. We also seized over $100 million dollars in that case and have convicted more than 30 Mexican and Venezuelan bankers , along with their Cali and Juarez Cartel associates.

2. ASSET IDENTIFICATION AND REMOVAL GROUPS

In response to the threat and challenge of identifying criminal assets,

Customs created the prototype Asset Identification and Removal Groups,

or AIRGs, to target the assets of criminal organizations as early as possible

within all of Customs' investigative areas. Currently Customs has trained and equipped 21 AIRGs, composed of Special Agents, Auditors, and forensic accountants.

It was the excellent work performed by our Asset Removal Group in South Florida that traced the assets of a convicted marijuana smuggler, who for nearly 15 years, had hidden his assets through a myriad of nominee corporations, business dealings, and off shore bank accounts. Despite his best efforts, the Asset Removal Group was able to trace the profits of his drug trade. Just last year, this convicted drug smuggler forfeited 50 million dollars to Customs, the largest single Customs Service and Treasury Department monetary seizure. The Monroe County (Florida) Sheriff's Office provided substantial assistance to the investigation and, based upon their contributions, last year, Commissioner Kelly shared 25 million dollars of the seized money with that department.

As part of Customs' efforts to implement the 1999 National Money Laundering Strategy, these groups will be augmented this year to focus on the Black Market Peso Exchange. There will also be a Suspicious Activity and Review Unit within each group that will work to disseminate intelligence gathered from the SARs and

distribute the information to our field agents.

III. THE MONEY LAUNDERING COORDINATION CENTER

The U.S. Customs Money Laundering Coordination Center, or MLCC, is now

operational and will soon provide 24 hour deconfliction support to all U.S. Customs undercover financial investigations. By doing so, the MLCC acts as a safety mechanism so that all Customs undercover actions are tracked and coordinated in real time, thus ensuring that our numerous money laundering investigations don't conflict with one another and that undercover agents are not unknowingly pursuing the same target. The MLCC also analyzes information provided by these operations in order to more fully develop targets and expand investigations. We have invited all Federal law enforcement agencies that are conducting relevant investigations to participate in the MLCC.

As outlined in the National Money Laundering Strategy, the Money Laundering Coordination Center is also the repository for all U.S. Government information relating to the Black Market Peso Exchange. Information is gathered on, among other targets, money brokers, bank accounts, and trade data. The information is analyzed by Customs and targets, systems, and patterns are detected and sent to our field offices for further investigation.

COMMENTS ON THE PROPOSED LEGISLATION

Mr. Chairman, members of the Committee, I am extremely grateful and pleased to have the opportunity to comment on The Money Laundering Act of 2000. There have been a number of committees in Congress that have worked with Customs, Treasury, and Justice in proposing legislation that enables us to continue the fight against money laundering. And I would like to thank you for those efforts.

As I have just outlined, Customs conducts a myriad of money laundering investigations, ranging from bulk cash smuggling cases to money remitters to the Black Market Peso Exchange. We believe all of the proposals encompassed in The Money Laundering Act of 2000 will have a dramatic and positive impact on the way money-laundering investigations are conducted by the U.S. Customs Service . Additionally, the Department of the Treasury supports the bill, which provides important new tools to all of its law enforcement bureaus, including the Customs Service, in the fight against money laundering.

Please allow me to comment on the most significant aspects of the legislation from a Customs perspective.

The portion of this bill that will have the most immediate impact upon Customs falls under Sections 22 and 23, which deal with Bulk Cash Smuggling and Currency Couriers. As the term "bulk cash smuggling" implies, criminal organizations collect sizable amounts of currency, derived from varied crimes, and then smuggle the cash in large shipments out of the United States. Over the past four years, the Customs Service has seized more than $233 million dollars in outbound currency seizures at our land borders, seaports and airports.

There are a number of reasons for criminal organizations to smuggle cash. The

first and most important, is to avoid the reporting requirements of the Bank

Secrecy Act. Additionally, currency smuggling is used to evade filing Currency

Transaction Reports which require the reporting of transactions greater than

$10, 000 conducted in U.S. financial institutions.

The proposed Bulk Cash legislation takes the standard failure to report currency and monetary instruments offenses and adds the element of "knowing concealment". In this way, the government can focus on those who "knowingly" smuggle unreported cash. The forfeiture provisions in the bill are restructured to provide a clearer basis for determining what property is subject to forfeiture and more importantly adds a standard for determining a proportional forfeiture.

As members of the Committee are aware, the Customs Service leads the El Dorado Money Laundering Task Force in New York. El Dorado developed evidence that certain New York area money remitters and their agents were moving drug money to Colombia by breaking up large cash transactions to avoid BSA reporting requirements.

In response to this evidence, in August 1996, then Under Secretary of the Treasury Raymond Kelly issued a GTO that required 12 New York area money remitters and their approximately 1200 agents to report identifying information on all cash remittances of $750 or more to Colombia. The GTO was expanded several times, to include wire transfers to the Dominican Republic, before it expired in October 1997.

This series of GTOS had a significant impact on the flow of drug proceeds through the targeted remitters. Several of the remitters targeted under the GTOs stopped sending funds to Colombia altogether, while many others sent significantly lower amounts. The GTOs also forced the traffickers to resort to other, less effective and riskier tactics to move their money. In the first six months after the GTOs went into effect, Customs' currency seizures at East Coast port of entry increased approximately four hundred percent as traffickers were forced to move money in bulk.

The GTOs played an important role in severely disrupting a drug money laundering system. This legislation strengthens our ability to enforce the GTOs. At the same time the legislation enhances the penalties for violations of the GTOs, which are an important anti-money laundering tool.

Mr. Chairman, the Customs Service is pursuing aggressive investigative initiatives designed to target the Black Market Peso Exchange. Section 15 of the legislation will assist Customs in these initiatives by amending Title 18 USC 981(a) to better define the term "money broker" as a person who sells cash at a premium.

Finally, Mr. Chairman, the legislation expands the universe of Specified Unlawful Activities, which are the underlying violations for money laundering charges, to include falsely classifying goods and export control violations. These are important steps against those who illegally traffic in international arms sales and will provide Customs and other Federal agencies with the tools to remove the profit from this trade.

Mr. Chairman, I thank you for the opportunity to comment on The Money Laundering Act of 2000. I would like to thank you and commend you and the members of the Committee for your work in providing Customs and all Federal law enforcement agencies with the legislation necessary to more effectively fight global money laundering.

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