Sidebilder
PDF
ePub

CURRENT PROBLEM OF MONEY LAUNDERING

TUESDAY, APRIL 16, 1985

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON CRIME,
COMMITTEE ON THE JUDICIARY,
Washington, DC.

The subcommittee met at 1:15 p.m., in room 2237, Rayburn House Office Building, Hon. William J. Hughes (chairman of the subcommittee) presiding.

Present: Representatives McCollum, Mazzoli, Staggers, Lungren, and Shaw.

Staff present: Hayden W. Gregory, chief counsel; Eric E. Sterling and Edward O'Connell, assistant counsel; Charlene Vanlier, associate counsel; and Phyllis Henderson, clerk.

Mr. HUGHES. It is requested to cover this hearing in whole or in part by television broadcast, radio broadcast, and photography. In accordance with committee rule 5(a), permission will be granted unless there is an objection.

Coverage of this hearing will, then, be permitted.

This afternoon the Subcommittee on Crime is holding its first hearing of the 99th Congress. I want to again welcome the members of the subcommittee, and especially, Bill McCollum of Florida, the ranking Republican member.

Our first hearing today focuses on the newest front on the nation's war against drug traffickers and organized crime figures.

Money laundering demands our attention because the corruptive forces of organized crime and drug trafficking threaten to poison the blood of the world economic system, the intricate financial relationships that connect every bank in the world with the local and national bank on Main Street, U.S.A.

This subject also commands our attention because it reveals the most significant innovations by the drug traffickers to avoid exposure by law enforcement authorities.

The term "money laundering" has been thrown around a great deal recently, particularly in connection with the shocking disclosure of the Bank of Boston in criminally failing to report over $1 billion in cash transactions with Swiss banks.

This hearing is designed to clarify just what money laundering is, how it is accomplished, and why it is so dangerous to the entire Nation. Even more importantly, we are going to look at the Federal effort to prevent money laundering directed by the Treasury Department and carried out in part by the Office of the Comptroller of the Currency.

I think it is fair to say that recent disclosures in connection with the case of the Bank of Boston reveal shocking mismanagement by one of our largest and most prestigious banks. But even more seriously, it has exposed a scandalous failure by the Government agencies to carry out their responsibilities properly.

That scandal has held up to ridicule the entire effort to assure compliance with the Bank Secrecy Act. However, there have been significant cases made by financial investigative teams of assistant U.S. attorneys, IRS agents, Customs agents, and DEA agents in many parts of the country.

Today we will begin to explore what we must do to give law enforcement agents the tools necessary to prosecute money launderers; what we must do to assure that the financial community is protected from criminal subversion; and, what we must do to create effective roadblocks for drug traffickers, organized crime figures, and others who would use our Nation's financial community as unwitting allies in taking home the profits of their crimes.

I look forward to hearing from the witnesses today and at this time we recognize the gentleman from Florida.

Mr. MCCOLLUM. Thank you, Mr. Chairman.

I think it is especially appropriate that we kick off our hearings today with the standpoint of learning more information on the subject of money laundering. There isn't anything that is more in the minds, I think, of those of us concerned with crime today than drug trafficking and the enormous money that is involved in that. We recently have been made aware of some of the reporting failures of some of the larger financial institutions in the country, but underneath all of that is the absence of corrective legislative measures. Even money laundering itself is not presently a crime.

And as the chairman has introduced his bill, and I have introduced a bill, and there are several other questions of legislation floating around since the President's Organized Crime Commission made it's recommendation last fall, I really am very happy that this hearing is being held and we are proceeding to move in the direction of legislation to finally make money laundering a crime and hopefully to help stop some of this activity that is at the heart of the concerns of most Americans when we think of crime today. Thank you.

Mr. HUGHES. Thank you.

I just want to say that Mr. McCollum is also a member of the Banking Committee, and as you well know we share jurisdiction on this most important issue and it provides a natural bridge for the two committees to try to work together and provide the tools, initial tools, needed.

Our first witness this afternoon is John M. Walker, Jr., the Assistant Secretary of the Treasury for Enforcement and Operations. In this position Mr. Walker supervises the Bureau of Alcohol, Tobacco and Firearms, the Secret Service, U.S. Custom Service and the Federal Law Enforcement Training Center in Georgia. Mr. Walker is a graduate of Yale University and the University of Michigan Law School. He served as a narcotic prosecutor in the office of the U.S. attorney for the Southern District of New York. He was in private law practice before assuming his current post in

Mr. Walker, again we would like to welcome you and we have received your written statement which without objection will be made a part of the record in full and you may proceed.

STATEMENT OF JOHN M. WALKER, JR., ASSISTANT SECRETARY (ENFORCEMENT AND OPERATIONS), U.S. DEPARTMENT OF THE TREASURY, ACCOMPANIED BY MR. MERBER, ASSOCIATE GENERAL COUNSEL

Mr. WALKER. Thank you very much, Mr. Chairman.

Mr. Chairman and members of the committee, I am indeed pleased to have the opportunity to appear before you today to discuss the problem of money laundering. As this committee is fully aware, money laundering is a serious challenge to law enforcement and a clear danger to the soundness and integrity of our financial system.

In my testimony today, I will discuss the scope of the money laundering problem and some of the reasons why it is so pervasive. I will explain why Treasury believes that an attack on money laundering is essential to a successful fight against organized crime and drug trafficking. I will then summarize the progress we have made and discuss initiatives with the potential to further our progress. The Treasury Department sincerely welcomes the interest that you, Chairman Hughes, and you, Congressman McCollum and the committee have expressed in this critical topic, and we look forward to assisting you as you consider possible legislative measures to enhance our country's efforts against money laundering and other organized crime.

Mr. Chairman, for a number of reasons, money laundering is a major challenge for law enforcement. First, the scope of the problem is staggering. While no one knows with certainty how much money is laundered in the United States every year, some estimates point to anywhere between $50 and $65 billion in laundered crime proceeds from drug trafficking alone. From money laundering cases Treasury has investigated, we know that a single money laundering enterprise can wash $300 million or more in crime proceeds in less than a year's time.

Suppressing money laundering is enormously difficult for another reason. There are seemingly infinite ways for criminals to accomplish it. Treasury's investigators have uncovered money laundering schemes that are as varied as the human imagination will allow. They can be conducted domestically or internationally, and they can exploit various types of financial institutions. Because all organized crime depends on skilled money launderers for its very existence, there is a continuous incentive for criminals to develop new methods for circumventing Federal reporting requirements and for concealing cash and pools of assets from the eyes of law enforcement.

Money laundering has seen unprecedented growth over the last decade for another basic reason. It is an extremely lucrative criminal enterprise in its own right. Treasury's investigations has uncovered members of an emerging criminal class. They are the professional money launderers who aid and abet other criminals through financial activities. These individuals do not fit the stereotype of an

underworld criminal. They are accountants, attorneys, money brokers, and members of other legitimate professions. They need not become involved with the underlying criminal activity except to conceal and transfer the proceeds that result from it. They are drawn to their illicit activity for the same reason that drug traf ficking attracts new criminals to replace those who are convicted and imprisoned; and that reason quite simply is greed. Money laundering, for them, is an easy route to almost limitless wealth.

Our free society and our diverse economy, with its ready access to international financial networks, provide the setting for the money launderer's operations. We must recognize that while our law enforcement tools, chiefly the Bank Secrecy Act, allow us the means to obtain reporting that can disclose suspicious transactions, there are limitations on the amount and type of information that law enforcement may obtain. Later in my testimony, I will describe how Treasury is seeking to overcome some of these limitations. I will also address the subject of possible legislative changes that have the potential to strengthen the tools at law enforcement's disposal for use against the money laundering problem.

Mr. Chairman, the difficulties that I have mentioned should not cause anyone to believe that our fight against money laundering is a hopeless one. Quite to the contrary. In the past 4 years, we have recorded substantial and remarkable progress. I will give some examples of this progress in a moment. But for now, let me stress a principle that our financial investigations have demonstrated time and time again.

We could never hope to control drug trafficking and other forms of organized crime in our society unless we continue our efforts to go after the money that is at the heart of every criminal enterprise. The reasons behind this conclusion are fundamental ones. Money, of course, is the motivation behind every organized crime transaction and the thread that ties together components of criminal enterprises. If we can trace the money, the trail will often lead to high-level criminals. The leaders in any criminal enterprise usually take great pains to distance themselves from the illegal source of their income. But they can usually be found close to the money.

The money, if seized, is potentially devastating evidence at a criminal trial. A jury can get lost in the technical details of a white collar crime. But if jurors can be shown the illicit proceeds, they can more readily understand the full impact of the crime.

Also, through seizure and forfeiture, we can deprive a criminal enterprise of its life blood. For instance, drugs can be readily replaced by a drug trafficking organization, but its cash reserves are essential to its functioning. It is this cash that finances new drug importing ventures and is the means of corrupting justice. Large monetary seizures can cripple the organization and possibly put it out of business altogether.

Finally, the Bank Secrecy Act is itself the authority for criminal and civil penalties. As an independent basis for prosecution, it can be the statutory weapon that breaks up a criminal enterprise and imprisons its members.

Treasury's investigative successes under the Bank Secrecy Act demonstrate the validity of this approach. In 1980, Treasury, with the support of the Justice Department, organized Operation Green

« ForrigeFortsett »