04 October 2001

Senate Banking Committee Advances Anti-Money Laundering Bill

Washington -- The Senate Banking Committee has approved legislation to prevent, detect and punish money laundering by non-U.S. nationals and foreign financial institutions.

The bill would give more authority to the Treasury secretary and attorney general to thwart money laundering and the financing of terrorist groups. It also would prevent corrupt foreign officials from having access to the U.S. financial system. The bill was approved by unanimous vote October 4.

The full Senate is expected to vote on the "International Money Laundering Abatement and Anti-Terrorist Act of 2001" the week of October 15. Both the House of Representatives and Senate must pass a final anti-money laundering bill before it is sent to the president for signature or veto.

"We've been presented with a major challenge and we need to treat it that way," Senator Paul Sarbanes, the committee's Democratic chairman, said of the legislation's fast pace since the September 11 terrorist attacks on the World Trade Center and Pentagon. Financing of the attacks has been linked to international money laundering networks.

"The fact that terrorists are using our own financial institutions against us demonstrates the need to understand our vulnerabilities and take new measures to protect ourselves from similar abuse down the road, said Senator Carl Levin of Michigan in an October 4 statement. Levin co-sponsored the bill with Iowa Senator Chuck Grassley.

"Shutting down the money pipeline is key to shutting down terrorist activities," Grassley added in a statement following the bill's approval.

Provisions of the bill would:

• Require financial institutions with accounts in the United States for non-U.S. persons to establish "due diligence" policies and procedures to prevent, detect and report possible instances of money laundering. The Treasury secretary would be authorized to establish minimum standards for institutions to follow in developing procedures. The bill also would increase to as much as $1 million the penalty for a willful violation of the "due diligence" requirements.

• Prohibit foreign financial institutions from establishing or managing accounts in the United States for foreign shell banks. A shell bank is one that does not have a physical presence in any country.

• Authorize regulatory authorities to share information about persons suspected of being involved with terrorism or money laundering with U.S. intelligence agencies and financial institutions, and financial institutions to share such information among themselves.

• Expand offenses considered as money laundering to include misuse of international development aid funds. The bill also would require more strict accounting of funds sent abroad by international aid organizations to ensure the money does not end up in terrorist organizations.

• Permit enforcement authorities to seize funds in an account involving a U.S. and a foreign bank -- an "interbank account" -- that are suspected of being linked to criminal activity. The bill would not require the government to prove that the funds seized are directly traceable to funds deposited into the foreign bank.

• Authorize the Treasury secretary or attorney general to subpoena the records of an account maintained in the United States by a foreign bank.

• Authorize authorities to monitor underground banking systems, or networks of brokers, that enable individuals to transfer cash from one country to recipients in another country without the funds crossing borders or the transactions recorded. The networks are also known as "hawalas."

• Prohibit non-U.S. persons from entering the United States if the attorney general knows or believes such persons are or have been involved in money laundering.

• Prohibit a corporation representing a fugitive from filing a claim contesting the confiscation of the proceeds of a crime.

• Limit liability for the voluntary disclosure of suspicious activity by a financial institution or individual connected to such an institution.

• Make the intentional smuggling of more than $10,000 into or outside the United States a crime punishable by up to five years in prison and forfeiture of the money involved.

• Expand the Bank Secrecy Act Advisory Group to include nongovernmental organizations that advocate financial privacy.

• Require the secretary of the Treasury to report annually to Congress on anti-money laundering activities.