ury Department in an avalanche of reporting forms, all but a very few of which would be unrelated to money laundering. Mr. Chairman, this concludes my prepared remarks. I would be happy to answer any questions the committee might have. [Statement of John Walker follows:] SUMMARY OF THE STATEMENT OF JOHN M. WALKER, JR. ASSISTANT SECRETARY (ENFORCEMENT AND OPERATIONS) AT THE HEARING OF THE SUBCOMMITTEE ON CRIME, COMMITTEE ON THE JUDICIARY, U.S. HOUSE OF REPRESENTATIVES JULY 24, 1985 I am pleased to discuss the several bills before the Committee that address the problem of money laundering and its connection with organized crime, especially H.R. 2785 and 2786 (identical bills), "the Money Laundering and Related Crimes Act of 1985," prepared by the Department of Justice and the Department of the Treasury. My remarks concern mostly section 3 and section 5 of the bill dealing with amendments to the Right to Financial Privacy Act (RFPA) and the Bank Secrecy Act, respectively. The amendments to the RFPA are designed to refine the extent to which financial institutions may cooperate in law enforcement efforts without risk of civil liability under the RFPA. Among the highlights of the Bank Secrecy Act amendments are the following: O Bank Secrecy Act summons authority for the Secretary of Increased Bank Secrecy Act civil penalties, up to o A penalty for negligent Bank Secrecy Act violations. O Clarification of the Secretary's authority to I would also like to update the Committee on recent Bank Secrecy Act enforcement activities by the Department of Treasury since the Bank of Boston case, including: Imposition of civil penalties on banks for Bank Secrecy Establishment of a supervisory agency task force to Promulgation of regulations that allow Treasury to Promulgation of regulations that impose certain Bank STATEMENT OF JOHN M. WALKER, JR. ASSISTANT SECRETARY (ENFORCEMENT AND OPERATIONS) AT THE HEARING OF THE SUBCOMMITTEE ON CRIME, COMMITTEE ON THE JUDICIARY, U.S. HOUSE OF REPRESENTATIVES JULY 24, 1985 I WANT TO THANK THE CHAIRMAN AND THE COMMITTEE FOR THEIR CONTINUED INTEREST IN AND SUPPORT FOR OUR GOVERNMENT'S ATTACK ON MONEY LAUNDERING AND THE ILLEGALITY THAT IT SUPPORTS. I ALSO APPRECIATE THIS OPPORTUNITY TO TESTIFY ABOUT THE SEVERAL BILLS BEFORE THE COMMITTEE THAT ADDRESS THE PROBLEM OF MONEY LAUNDERING AND ITS CONNECTIONS WITH ORGANIZED CRIME IN OUR SOCIETY. WHILE ALL THE BILLS BEFORE THE COMMITTEE HAVE MUCH TO COMMEND THEM, I AM ESPECIALLY PLEASED TO DISCUSS H.R. 2785 AND 2786 (IDENTICAL BILLS), THE "MONEY LAUNDERING AND RELATED CRIMES ACT OF 1985," WHICH WAS PREPARED BY THE DEPARTMENT OF JUSTICE AND THE DEPARTMENT OF THE TREASURY. NOT ONLY WOULD THIS BILL CREATE A NEW CRIMINAL OFFENSE OF MONEY LAUNDERING, BUT IT WOULD -2 SIGNIFICANTLY STRENGTHEN TREASURY'S BANK SECRECY ACT ENFORCEMENT EFFORT. ANOTHER SIGNIFICANT BENEFIT OF THIS BILL IS ITS REMOVAL OF CERTAIN IMPEDIMENTS TO LAW ENFORCEMENT POSED BY THE RIGHT TO FINANCIAL PRIVACY ACT. IT IS THESE ASPECTS OF THE BILL - THE BANK SECRECY ACT AMENDMENTS IN SECTION 5 AND THE RIGHT TO FINANCIAL PRIVACY ACT AMENDMENTS IN SECTION 3 THAT I WILL BE MOST CONCERNED WITH IN MY REMARKS TODAY. THE PROVISIONS IN THE BILL AMENDING THE CRIMINAL CODE, INCLUDING THE NEW OFFENSE OF MONEY LAUNDERING, WILL BE ADDRESSED BY THE ASSISTANT ATTORNEY GENERAL FOR THE CRIMINAL DIVISION. BEFORE DISCUSSING THE MONEY LAUNDERING INITIATIVES, I WOULD LIKE TO TAKE THIS OPPORTUNITY TO UPDATE THE COMMITTEE ON TREASURY'S BANK SECRECY ACT ENFORCEMENT ACTIVITIES SINCE I WAS LAST BEFORE THE COMMITTEE ON APRIL 16TH: FIRST, IN THE WAKE OF THE CRIMINAL INVESTIGATION IN WHICH THE BANK OF BOSTON PLEADED GUILTY TO NUMEROUS VIOLATIONS OF THE BANK SECRECY ACT, IT HAS BECOME APPARENT THAT BANK SECRECY ACT COMPLIANCE IS IN NEED OF IMPROVEMENT THROUGHOUT THE FINANCIAL COMMUNITY. OVER FORTY BANKS HAVE COME FORWARD TO TREASURY, MOSTLY ON A VOLUNTEER BASIS, TO CONFESS BANK SECRECY ACT VIOLATIONS. ON JUNE 18, 1985, TREASURY ANNOUNCED THAT CIVIL PENALTIES RANGING FROM $210,000 To $360,000 HAD BEEN IMPOSED ON FOUR OF THESE BANKS CHASE MANHATTAN BANK, MANUFACTURERS HANOVER TRUST, IRVING TRUST AND CHEMICAL BANK. THE APPROPRIATE -3 DISPOSITION OF THE CASES OF MANY OTHER BANKS THAT HAVE COME FORWARD IS UNDER REVIEW. SINCE IN ADDITION, MY OFFICE HAS REFERRED A NUMBER OF CASES TO THE IRS FOR CRIMINAL BANK SECRECY ACT INVESTIGATIONS. FEBRUARY, APPROXIMATELY 140 CASES HAVE BEEN REFERRED. WE ALSO HAVE BEEN WORKING WITH THE FINANCIAL INSTITUTION REGULATORY AGENCIES TO STRENGTHEN THEIR BANK SECRECY ACT AUDIT PROCEDURES. MORE STRENUOUS AUDITS SHOULD LEAD TO DISCOVERY OF MORE VIOLATIONS BY FINANCIAL INSTITUTIONS. FINANCIAL INSTITUTIONS WHOSE VIOLATIONS ARE UNEARTHED BY A REGULATORY AGENCY AUDIT WILL BE SUBJECT TO MORE STRINGENT CIVIL PENALTIES THAN THOSE WHO HAVE VOLUNTEERED. SECOND, WE HAVE STRENGTHENED THE TREASURY BANK SECRECY ACT REGULATIONS IN SEVERAL RESPECTS: ON MAY 7, 1985, REGULATIONS BECAME EFFECTIVE THAT DESIGNATED CASINOS AS FINANCIAL INSTITUTIONS SUBJECT TO CERTAIN BANK SECRECY ACT REPORTING AND RECORDKEEPING REQUIREMENTS. AS EVIDENCED BY THE RECENT HEARINGS BY THE PRESIDENT'S COMMISSION ON ORGANIZED CRIME, MONEY LAUNDERING THROUGH CASINOS MAY BE EVEN MORE WIDESPREAD THAN ONCE THOUGHT. THE TREASURY REGULATIONS SHOULD FORECLOSE THE ATTRACTIVENESS OF THE USE OF CASINOS FOR MONEY LAUNDERING. |