21 July 1998
Source: http://www.access.gpo.gov/su_docs/aces/aaces002.html

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[DOCID: f:hr611p1.105]
From the House Reports Online via GPO Access
[wais.access.gpo.gov]

105th Congress                                            Rept. 105-611
                        HOUSE OF REPRESENTATIVES

 2d Session                                                      Part 1
_______________________________________________________________________


                MONEY LAUNDERING DETERRENCE ACT OF 1998
                                _______


                  July 8, 1998.--Ordered to be printed

                                _______


   Mr. Leach, from the Committee on Banking and Financial Services,
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 4005]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Banking and Financial Services, to whom
was referred the bill (H.R. 4005) to amend title 31 of the
United States Code to improve methods for preventing financial
crimes, and for other purposes, having considered the same,
report favorably thereon with an amendment and recommend that
the bill as amended do pass.
    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu
thereof the following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Money Laundering Deterrence Act of
1998''.

SEC. 2. FINDINGS AND PURPOSES.

  (a) Findings.--The Congress finds as follows:
          (1) The dollar amount involved in international money
        laundering likely exceeds $500,000,000,000 annually.
          (2) Organized crime groups are continually devising new
        methods to launder the proceeds of illegal activities in an
        effort to subvert the transaction reporting requirements of
        subchapter II of chapter 53 of title 31, United States Code,
        and chapter 2 of Public Law 91-508.
          (3) A number of methods to launder the proceeds of criminal
        activity were identified and described in congressional
        hearings, including the use of financial service providers
        which are not depository institutions, such as money
        transmitters and check cashing services, the purchase and
        resale of durable goods, and the exchange of foreign currency
        in the so-called ``black market''.
          (4) Recent successes in combating domestic money laundering
        have involved the application of the heretofore seldom-used
        authority granted to the Secretary of the Treasury and the
        cooperative efforts of Federal, State, and local law
        enforcement agencies.
          (5) Such successes have been exemplified by the
        implementation of the geographic targeting order in New York
        City and through the work of the El Dorado task force, a group
        comprised of agents of Department of the Treasury law
        enforcement agencies, New York State troopers, and New York
        City police officers.
          (6) Money laundering by international criminal enterprises
        challenges the legitimate authority of national governments,
        corrupts government institutions, endangers the financial and
        economic stability of nations, and routinely violates legal
        norms, property rights, and human rights. In some countries,
        such as Columbia, Mexico, and Russia, the wealth and power of
        organized criminal enterprises rivals their own government's.
          (7) The structure of international criminal enterprises
        engaged in money laundering is complex, diverse, and
        fragmented. Organized criminal enterprises such as the
        Colombian and Mexican cartels, the Russian ``mafiya'', Sicilian
        crime families, and Chinese gangs are highly resistant to
        conventional law enforcement techniques. Their financial
        management and organizational infrastructure are highly
        sophisticated and difficult to track because of the
        globalization of the financial service industry.
  (b) Purposes.--The purposes of this Act are as follows:
          (1) To amend subchapter II of chapter 53 of title 31, United
        States Code, to provide the law enforcement community with the
        necessary legal authority to combat money laundering.
          (2) To broaden the law enforcement community's access to
        transactional information already being collected which relate
        to coins and currency received in a nonfinancial trade or
        business.
          (3) To expedite the issuance by the Secretary of the Treasury
        of regulations designed to deter money laundering activities at
        certain types of financial institutions.

SEC. 3. AMENDMENTS RELATING TO REPORTING OF SUSPICIOUS ACTIVITIES.

  (a) Amendment Relating to Civil Liability Immunity for Disclosures.--
Section 5318(g)(3) of title 31, United States Code, is amended to read
as follows:
          ``(3) Liability for disclosures.--
                  ``(A) In general.--Notwithstanding any other
                provision of law--
                          ``(i) any financial institution that--
                                  ``(I) makes a disclosure of any
                                possible violation of law or regulation
                                to an appropriate government agency; or
                                  ``(II) makes a disclosure pursuant to
                                this subsection or any other authority;
                          ``(ii) any director, officer, employee, or
                        agent of such institution who makes, or
                        requires another to make any such disclosure;
                        and
                          ``(iii) any independent public accountant who
                        audits any such financial institution and makes
                        a disclosure described in clause (i),
                shall not be liable to any person under any law or
                regulation of the United States, any constitution, law,
                or regulation of any State or political subdivision
                thereof, or under any contract or other legally
                enforceable agreement (including any arbitration
                agreement), for such disclosure or for any failure to
                notify the person who is the subject of such disclosure
                or any other person identified in the disclosure.
                  ``(B) Exception.--Subparagraph (A) shall not apply to
                a disclosure or communication required under Federal
                securities law, other than provisions of law that
                specifically refer to the Currency and Foreign
                Transactions Reporting Act of 1970.''.
  (b) Prohibition on Notification of Disclosures.--Section 5318(g)(2)
of title 31, United States Code, is amended to read as follows:
          ``(2) Notification prohibited.--
                  ``(A) In general.--If a financial institution, any
                director, officer, employee, or agent of any financial
                institution, or any independent public accountant who
                audits any financial institution, voluntarily or
                pursuant to this section or any other authority,
                reports a suspicious transaction to an appropriate
                government agency--
                          ``(i) the financial institution, director,
                        officer, employee, agent, or accountant may not
                        notify any person involved in the transaction
                        that the transaction has been reported and may
                        not disclose any information included in the
                        report to any such person; and
                          ``(ii) any other person, including any
                        officer or employee of any government, who has
                        any knowledge that such report was made may not
                        disclose to any person involved in the
                        transaction that the transaction has been
                        reported or any information included in the
                        report.
                  ``(B) Coordination with paragraph (5).--Subparagraph
                (A) shall not be construed as prohibiting any financial
                institution, or any director, officer, employee, or
                agent of such institution, from including, in a written
                employment reference that is provided in accordance
                with paragraph (5) in response to a request from
                another financial institution, information that was
                included in a report to which subparagraph (A) applies,
                but such written employment reference may not disclose
                that such information was also included in any such
                report or that such report was made.''.
  (c) Authorization To Include Suspicions of Illegal Activity in
Employment References.--Section 5318(g) of title 31, United States
Code, is amended by adding at the end the following new paragraph:
          ``(5) Employment references may include suspicions of
        involvement in illegal activity.--
                  ``(A) In general.--Notwithstanding any other
                provision of law and subject to subparagraph (B) of
                this paragraph and paragraph (2)(C), any financial
                institution, and any director, officer, employee, or
                agent of such institution, may disclose, in any written
                employment reference relating to a current or former
                institution-affiliated party of such institution which
                is provided to another financial institution in
                response to a request from such other institution,
                information concerning the possible involvement of such
                institution-affiliated party in any suspicious
                transaction relevant to a possible violation of law or
                regulation.
                  ``(B) Limit on liability for disclosures.--A
                financial institution, and any director, officer,
                employee, or agent of such institution, shall not be
                liable to any person under any law or regulation of the
                United States, any constitution, law, or regulation of
                any State or political subdivision thereof, or under
                any contract or other legally enforceable agreement
                (including any arbitration agreement), for any
                disclosure under subparagraph (A), to the extent--
                          ``(i) the disclosure does not contain
                        information which the institution, director,
                        officer, employee, agent, or accountant knows
                        to be false; and
                          ``(ii) the institution, director, officer,
                        employee, agent, or accountant has not acted
                        with malice or with reckless disregard for the
                        truth in making the disclosure.
                  ``(C) Institution-affiliated party defined.--For
                purposes of this paragraph, the term `institution-
                affiliated party' has the meaning given to such term in
                section 3(u) of the Federal Deposit Insurance Act,
                except such section 3(u) shall be applied by
                substituting `financial institution' for `insured
                depository institution'.''.
  (d) Amendments Relating to Availability of Suspicious Activity
Reports for Other Agencies.--Section 5319 of title 31, United States
Code, is amended--
          (1) in the 1st sentence, by striking ``5314, or 5316'' and
        inserting ``5313A, 5314, 5316, or 5318(g)'';
          (2) in the last sentence, by inserting ``under section 5313,
        5313A, 5314, 5316, or 5318(g)'' after ``records of reports'';
        and
          (3) by adding the following new sentence after the last
        sentence: ``The Secretary of the Treasury may permit the
        dissemination of information in any such reports to any self-
        regulatory organization (as defined in section 3(a)(26) of the
        Securities Exchange Act of 1934), if the Securities and
        Exchange Commission determines that such dissemination is
        necessary or appropriate to permit such organization to perform
        its function under the Securities Exchange Act of 1934 and
        regulations prescribed under such Act.''.

SEC. 4. EXPANSION OF SCOPE OF SUMMONS POWER.

  Section 5318(b)(1) of title 31, United States Code, is amended by
inserting ``examinations to determine compliance with the requirements
of this subchapter, section 21 of the Federal Deposit Insurance Act,
and chapter 2 of Public Law 91-508 and regulations prescribed pursuant
to such provisions, investigations relating to reports filed by
financial institutions or other persons pursuant to any such provision
or regulation, and'' after ``in connection with''.

SEC. 5. PENALTIES FOR VIOLATIONS OF GEOGRAPHIC TARGETING ORDERS AND
                    CERTAIN RECORDKEEPING REQUIREMENTS.

  (a) Civil Penalty for Violation of Targeting Order or Certain
Recordkeeping Requirements.--Section 5321(a)(1) of title 31, United
States Code, is amended--
          (1) by inserting ``or order issued'' after ``regulation
        prescribed'' the 1st place it appears; and
          (2) by inserting ``, or willfully violating a regulation
        prescribed under section 21 of the Federal Deposit Insurance
        Act or under section 123 of Public Law 91-508,'' before ``is
        liable''.
  (b) Criminal Penalties for Violation of Targeting Order or Certain
Recordkeeping Requirements.--Section 5322 of title 31, United States
Code, is amended--
          (1) in each of subsections (a) and (b), by inserting ``or
        order issued'' after ``regulation prescribed'' the 1st place it
        appears;
          (2) in subsection (a), by inserting ``, or willfully
        violating a regulation prescribed under section 21 of the
        Federal Deposit Insurance Act or under section 123 of Public
        Law 91-508,'' before ``shall''; and
          (3) in subsection (b), by inserting ``or willfully violating
        a regulation prescribed under section 21 of the Federal Deposit
        Insurance Act or under section 123 of Public Law 91-508,''
        before ``while violating''.
  (c) Structuring Transactions To Evade Targeting Order or Certain
Recordkeeping Requirements.--Section 5324(a) of title 31, United States
Code, is amended--
          (1) in the portion of such section which precedes paragraph
        (1), by inserting ``, the reporting requirements imposed by any
        order issued under section 5326, or the recordkeeping
        requirements imposed by any regulation prescribed under section
        21 of the Federal Deposit Insurance Act or section 123 of
        Public Law 91-508'' after ``regulation prescribed under any
        such section''; and
          (2) in paragraphs (1) and (2), by inserting ``, to file a
        report required by any order issued under section 5326, or to
        maintain a record required pursuant to any regulation
        prescribed under section 21 of the Federal Deposit Insurance
        Act or section 123 of Public Law 91-508'' after ``regulation
        prescribed under any such section'' where such term appears in
        each such paragraph.
  (d) Increase in Civil Penalties for Violation of Certain
Recordkeeping Requirements.--
          (1) Federal deposit insurance act.--Section 21(j)(1) of the
        Federal Deposit Insurance Act (12 U.S.C. 1829b(j)(1)) is
        amended by striking ``$10,000'' and inserting ``the greater of
        the amount (not to exceed $100,000) involved in the transaction
        (if any) with respect to which the violation occurred or
        $25,000''.
          (2) Public law 91-508.--Section 125(a) of Public Law 91-508
        (12 U.S.C. 1955(a)) is amended by striking ``$10,000'' and
        inserting ``the greater of the amount (not to exceed $100,000)
        involved in the transaction (if any) with respect to which the
        violation occurred or $25,000''.
  (e) Criminal Penalties for Violation of Certain Recordkeeping
Requirements.--
          (1) Section 126.--Section 126 of Public Law 91-508 (12 U.S.C.
        1956) is amended to read as follows:

``Sec. 126. Criminal penalty

  ``A person willfully violating this chapter, section 21 of the
Federal Deposit Insurance Act, or a regulation prescribed under this
chapter or such section, shall be fined not more than $250,000, or
imprisoned for not more than five years, or both.''.
          (2) Section 127.--Section 127 of Public Law 91-508 (12 U.S.C.
        1957) is amended to read as follows:

``Sec. 127. Additional criminal penalty in certain cases

  ``A person willfully violating this chapter, section 21 of the
Federal Deposit Insurance Act, or a regulation prescribed under this
chapter or such section, while violating another law of the United
States or as part of a pattern of any illegal activity involving more
than $100,000 in a 12-month period, shall be fined not more than
$500,000, imprisoned for not more than 10 years, or both.''.

SEC. 6. REPEAL OF CERTAIN REPORTING REQUIREMENTS.

  Section 407(d) of the Money Laundering Suppression Act of 1994 (31
U.S.C. 5311 note) is amended by striking ``subsection (c)'' and
inserting ``subsection (c)(2)''.

SEC. 7. LIMITED EXEMPTION FROM PAPERWORK REDUCTION ACT.

  Section 3518(c)(1) of title 44, United States Code, is amended--
          (1) by redesignating subparagraphs (C) and (D) as
        subparagraphs (D) and (E), respectively; and
          (2) by inserting after subparagraph (B) the following new
        subparagraph:
          ``(C) pursuant to regulations prescribed or orders issued by
        the Secretary of the Treasury under section 5318(h) or 5326 of
        title 31;''.

SEC. 8. TRANSFER OF REPORTING REQUIREMENTS FROM SECTION 6050I OF THE
                    INTERNAL REVENUE CODE OF 1986 TO TITLE 31, UNITED
                    STATES CODE.

  (a) Reenactment of Section 6050I.--Subchapter II of chapter 53 of
title 31, United States Code, is amended by inserting after section
5313 the following new section:

``Sec. 5313A. Reports relating to coins and currency received in
                    nonfinancial trade or business

  ``(a) Coin and Currency Receipts of More Than $10,000.--Any person--
          ``(1) who is engaged in a trade or business; and
          ``(2) who, in the course of such trade or business, receives
        more than $10,000 in coins or currency in 1 transaction (or 2
        or more related transactions),
shall file a report described in subsection (b) with respect to such
transaction (or related transactions) at such time as the Secretary may
by regulations prescribe.
  ``(b) Form and Manner of Reports.--A report is described in this
subsection if such report--
          ``(1) is in such form as the Secretary may prescribe;
          ``(2) contains--
                  ``(A) the name, address, and taxpayer identification
                number of the person from whom the coins or currency
                was received;
                  ``(B) the amount of coins or currency received;
                  ``(C) the date and nature of the transaction; and
                  ``(D) such other information as the Secretary may
                prescribe.
  ``(c) Exceptions.--
          ``(1) Amounts received by financial institutions.--Subsection
        (a) shall not apply to amounts received in a transaction
        reported under section 5313 and regulations prescribed under
        such section.
          ``(2) Transactions occurring outside the united states.--
        Except to the extent provided in regulations prescribed by the
        Secretary, subsection (a) shall not apply to any transaction if
        the entire transaction occurs outside the United States.
  ``(d) Currency Includes Foreign Currency and Certain Monetary
Instruments.--
          ``(1) In general.--For purposes of this section, the term
        `currency' includes--
                  ``(A) foreign currency; and
                  ``(B) to the extent provided in regulations
                prescribed by the Secretary, any monetary instrument
                (whether or not in bearer form) with a face amount of
                not more than $10,000.
          ``(2) Scope of application.--Paragraph (1)(B) shall not apply
        to any check drawn on the account of the writer in a financial
        institution referred to in subparagraph (A), (B), (C), (D),
        (E), (F), (G), (J), (K), (R), or (S) of section 5312(a)(2).
  ``(e) Coins or Currency Received by Criminal Court Clerks.--
          ``(1) In general.--Every clerk of a Federal or State criminal
        court who receives more than $10,000 in coins or currency as
        bail for any individual charged with a specified criminal
        offense shall file a report described in paragraph (2) (at such
        time as the Secretary may by regulations prescribe) with
        respect to the receipt of such bail.
          ``(2) Report.--A report is described in this paragraph if
        such report--
                  ``(A) is in such form as the Secretary may prescribe;
                and
                  ``(B) contains--
                          ``(i) the name, address, and taxpayer
                        identification number of--
                                  ``(I) the individual charged with the
                                specified criminal offense; and
                                  ``(II) each person posting the bail
                                (other than a person licensed as a bail
                                bondsman);
                          ``(ii) the amount of coins or currency
                        received;
                          ``(iii) the date the coins or currency was
                        received; and
                          ``(iv) such other information as the
                        Secretary may prescribe.
          ``(3) Specified criminal offense.--For purposes of this
        subsection, the term `specified criminal offense' means--
                  ``(A) any Federal criminal offense involving a
                controlled substance;
                  ``(B) racketeering (as defined in section 1951, 1952,
                or 1955 of title 18, United States Code);
                  ``(C) money laundering (as defined in section 1956 or
                1957 of such title); and
                  ``(D) any State criminal offense substantially
                similar to an offense described in subparagraph (A),
                (B), or (C).
          ``(4) Information to federal prosecutors.--Each clerk
        required to include in a report under paragraph (1) the
        information described in paragraph (2)(B) with respect to an
        individual described in paragraph (2)(B)(i)(I) shall furnish
        (at such time as the Secretary may by regulations prescribe) a
        written statement showing such information to the United States
        Attorney for the jurisdiction in which such individual resides
        and the jurisdiction in which the specified criminal offense
        occurred.
          ``(5) Information to payors of bail.--Each clerk required to
        file a report under paragraph (1) shall furnish (at such time
        as the Secretary may by regulations prescribe) to each person
        whose name is required to be set forth in such report by reason
        of paragraph (2)(B)(i)(II) a written statement showing--
                  ``(A) the name and address of the clerk's office
                required to file the report; and
                  ``(B) the aggregate amount of coins and currency
                described in paragraph (1) received by such clerk.''.
  (b) Prohibition on Structuring Transactions.--
          (1) In general.--Section 5324 of title 31, United States
        Code, is amended--
                  (A) by redesignating subsections (b) and (c) as
                subsections (c) and (d), respectively; and
                  (B) by inserting after subsection (a) the following
                new subsection:
  ``(b) Domestic Coin and Currency Transactions Involving Nonfinancial
Trades or Businesses.--No person shall for the purpose of evading the
report requirements of section 5313A or any regulation prescribed under
such section--
          ``(1) cause or attempt to cause a nonfinancial trade or
        business to fail to file a report required under section 5313A
        or any regulation prescribed under such section;
          ``(2) cause or attempt to cause a nonfinancial trade or
        business to file a report required under section 5313A or any
        regulation prescribed under such section that contains a
        material omission or misstatement of fact; or
          ``(3) structure or assist in structuring, or attempt to
        structure or assist in structuring, any transaction with 1 or
        more nonfinancial trades or businesses.''.
          (2) Technical and conforming amendments.--
                  (A) The heading for subsection (a) of section 5324 of
                title 31, United States Code, is amended by inserting
                ``Involving Financial Institutions'' after
                ``Transactions''.
                  (B) Section 5317(c) of title 31, United States Code,
                is amended by striking ``5324(b)'' and inserting
                ``5324(c)''.
  (c) Definition of Nonfinancial Trade or Business.--
          (1) In general.--Section 5312(a) of title 31, United States
        Code, is amended--
                  (A) by redesignating paragraphs (4) and (5) as
                paragraphs (5) and (6), respectively; and
                  (B) by inserting after paragraph (3) the following
                new paragraph:
          ``(4) Nonfinancial trade or business.--The term `nonfinancial
        trade or business' means any trade or business other than a
        financial institution that is subject to the reporting
        requirements of section 5313 and regulations prescribed under
        such section.''.
          (2) Technical and conforming amendments.--
                  (A) Section 5312(a)(3)(C) of title 31, United States
                Code, is amended by striking ``section 5316,'' and
                inserting ``sections 5313A and 5316,''.
                  (B) Subsections (a) through (f) of section 5318 of
                title 31, United States Code, and sections 5321, 5326,
                and 5328 of such title are each amended--
                          (i) by inserting ``or nonfinancial trade or
                        business'' after ``financial institution'' each
                        place such term appears; and
                          (ii) by inserting ``or nonfinancial trades or
                        businesses'' after ``financial institutions''
                        each place such term appears.
                  (C) Section 981(a)(1)(A) of title 18, United States
                Code, is amended by striking ``5313(a) or 5324(a) of
                title 31,'' and inserting ``5313(a) or 5313A of title
                31, or subsection (a) or (b) of section 5324 of such
                title,''.
                  (D) Section 982(a)(1) of title 18, United States
                Code, is amended by inserting ``5313A,'' after
                ``5313(a),''.
  (d) Repeal of Duplicate Provision.--Section 6050I of the Internal
Revenue Code of 1986 is repealed.
  (e) Clerical Amendments.--
          (1) Title 31.--The tables of sections for chapter 53 of title
        31, United States Code, is amended by inserting after the item
        relating to section 5313 the following new item:

``5313A. Reports relating to coins and currency received in
nonfinancial trade or business.''.

          (2) Internal revenue code of 1986.--
                  (A) The table of sections for subpart B of part III
                of subchapter A of chapter 61 of the Internal Revenue
                Code of 1986 is amended by striking the item relating
                to section 6050I.
                  (B)(i) Subsection (l) of section 6103 of such Code is
                amended by striking paragraph (15).
                  (ii) Subparagraph (A) of section 6103(p)(3) of such
                Code is amended by striking ``(15),''.
                  (iii) Paragraph (4) of section 6103(p) of such Code
                is amended by striking in the material preceding
                subparagraph (A) ``(12)'' and all that follows through
                ``(16)'' and inserting ``(12), or (16)''.
                  (iv) Clause (ii) of section 6103(p)(4)(F) of such
                Code is amended by striking ``(14), or (15)'' and
                inserting ``or (14)''.
                  (C) Paragraph (2) of section 6721(e) of such Code is
                amended--
                          (i) in subparagraph (A) by striking
                        ``6050I,'' and by adding ``or'' at the end,
                          (ii) by striking ``or'' at the end of
                        subparagraph (B) and inserting ``and'', and
                          (iii) by striking subparagraph (C).
                  (D) Subparagraph (B) of section 6724(d)(1) of such
                Code is amended by striking clause (iv) and by
                redesignating the succeeding clauses accordingly.
                  (E) Paragraph (2) of section 6724(d) of such Code is
                amended by striking subparagraph (K) and by
                redesignating the succeeding subparagraphs accordingly.
                  (F) Section 7203 of such Code is amended by striking
                the last sentence.
  (f) Regulations; Effective Date.--
          (1) Regulations.--Regulations which the Secretary of the
        Treasury determines are necessary to implement this section
        shall be published in final form before the end of the 6-month
        period beginning on the date of the enactment of this Act.
          (2) Effective date.--The amendments made by this section
        shall take effect at the end of the 6-month period beginning on
        the date the regulations referred to in paragraph (1) are
        published in final form in the Federal Register.

SEC. 9. PROMULGATION OF ``KNOW YOUR CUSTOMER'' REGULATIONS.

  Within 120 days after the date of the enactment of this Act, the
Secretary of the Treasury shall promulgate ``Know Your Customer''
regulations for financial institutions. This section shall not be
construed as precluding any supervisory agency for any financial
institution from requiring the financial institution to submit any
information or report to the agency or another agency pursuant to any
other applicable provision of law.

SEC. 10. FUNGIBLE PROPERTY IN BANK ACCOUNTS.

  Section 984 of title 18, United States Code, is amended--
          (1) so that subsection (a) reads as follows:
  ``(a) This section applies only if the action for forfeiture was
commenced by a seizure or an arrest in rem not later than 2 years after
the offense that is the basis for the forfeiture.'';
          (2) by striking subsection (c);
          (3) by redesignating subsection (d) as subsection (c), and in
        such subsection--
                  (A) by striking ``(1)'' and all that follows through
                the end of paragraph (1) and inserting the following:
  ``(1) Subsection (b) does not apply to an action against funds held
by a financial institution in an interbank account unless the account
holder knowingly engaged in the offense that is the basis for the
forfeiture.''; and
                  (B) by adding at the end the following new paragraph:
  ``(3) As used in this subsection, a `financial institution' includes
a foreign bank, as defined in paragraph (7) of section 1(b) of the
International Banking Act of 1978.''; and
          (4) by adding at the end the following new subsection:
  ``(d) Nothing in this section is intended to limit the ability of the
Government to obtain the forfeiture of property under any statute where
the property involved in the offense giving rise to the forfeiture or
property traceable thereto is available for forfeiture.''.

SEC. 11. REPORT ON PRIVATE BANKING ACTIVITIES.

  (a) In General.--Within 1 year after the date of the enactment of
this Act, the Secretary of the Treasury, in consultation with Federal
banking agencies, shall submit to the Committee on Banking and
Financial Services of the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the Senate a report on--
          (1) the nature and extent of private banking activities in
        the United States;
          (2) regulatory efforts to monitor such activities and ensure
        that such activities are conducted in compliance with the Bank
        Secrecy Act; and
          (3) policies and procedures of depository institutions that
        are designed to ensure that such activities are conducted in
        compliance with the Bank Secrecy Act.
  (b) Private Banking Activities.--In subsection (a), the term
``private banking activities'', with respect to an institution,
includes, among other things, personalized services such as money
management, financial advice, and investment services that are provided
to clients with high net worth and that are not provided generally to
all clients of the institution.

SEC. 12. AVAILABILITY OF CERTAIN ACCOUNT INFORMATION.

  Section 5318(h) of title 31, United States Code, is amended by adding
at the end the following new paragraph:
          ``(3) Availability of certain account information.--The
        Secretary of the Treasury shall prescribe regulations under
        this subsection which require financial institutions to
        maintain all accounts in such a way as to ensure that the name
        of an account holder and the number of the account are
        associated with all account activity of the account holder, and
        to ensure that all such information is available for purposes
        of account supervision and law enforcement.''.

SEC. 13. SENSE OF THE CONGRESS.

  It is the sense of the Congress that the Secretary of the Treasury
should make available to all Federal, State, and local law enforcement
agencies and financial regulatory agencies the full contents of the
data base of reports that have been filed pursuant to subchapter II of
chapter 53 of title 31, United States Code.

SEC. 14. DESIGNATION OF FOREIGN HIGH INTENSITY MONEY LAUNDERING AREAS.

  (a) In General.--Subchapter II of chapter 53 of title 31, United
States Code, is amended by inserting after section 5326 the following
new section:

``Sec. 5327. Designation of foreign high intensity money laundering
                    areas

  ``(a) Criteria.--The Secretary of the Treasury, in consultation with
appropriate Federal law enforcement agencies, shall develop criteria by
which to identify areas outside the United States in which money
laundering activities are concentrated.
  ``(b) Designation.--The Secretary of the Treasury shall designate as
a foreign high intensity money laundering area any foreign country in
which there is an area which is identified, using the criteria
developed under subsection (a), as an area in which money laundering
activities are concentrated.
  ``(c) Notice.--On the designation under subsection (b) of a country
as a foreign high intensity money laundering area, the Secretary of the
Treasury shall provide written notice to each insured depository
institution (as defined in section 3(c)(2) of the Federal Deposit
Insurance Act) and each depository institution holding company (as
defined in section 3(w)(1) of such Act) that has control over an
insured depository institution of the identity of the foreign country
and include with the notice a written warning that there is a
concentration of money laundering activities in the foreign country.''.
  (b) Clerical Amendment.--The table of sections for such chapter is
amended by inserting after the item relating to section 5326 the
following new item:

``5327. Designation of foreign high intensity money laundering
areas.''.

SEC. 15. DOUBLING OF CRIMINAL PENALTIES FOR VIOLATIONS OF LAWS AIMED AT
                    PREVENTING MONEY LAUNDERING IN FOREIGN HIGH
                    INTENSITY MONEY LAUNDERING AREAS.

  Section 5322 of title 31, United States Code, is amended by adding at
the end the following new subsection:
  ``(d) The court may double the sentence of fine or imprisonment, or
both, that would otherwise be imposed on a person for a violation
described in subsection (a) or (b) if person commits the violation with
respect to a transaction involving a person in, a relationship
maintained for a person in, or a transport of a monetary instrument
involving a foreign country, knowing that the foreign country is
designated under section 5327(b) as a foreign high intensity money
laundering area.''.

                          Purpose and Summary

    The purpose of this legislation is to strengthen Federal
law enforcement efforts to combat money laundering, the process
by which criminal elements seek to convert the monetary
proceeds of their illicit activity into funds with an
apparently legal source. The legislation is designed
principally to facilitate greater access by law enforcement
authorities to information relating to suspicious financial
transactions.
    H.R. 4005, as amended by the Committee, (1) transfers from
the U.S. tax code to the Bank Secrecy Act the requirement that
non-financial trades or businesses, such as car dealers and
merchandise wholesalers, report cash transactions in excess of
$10,000 to the Federal government, thereby making such reports
more widely available in the law enforcement community; (2)
extends ``safe harbor'' protections to independent public
accountants who submit reports of suspicious financial activity
to the Federal government; (3) provides financial institutions
with immunity from liability when making employment references
that may include suspicions of an employee's involvement in
illegal activity, unless such suspicions are known to be false
or the institution has acted with malice or reckless disregard
for the truth; (4) makes reports of suspicious financial
activity filed with the Federal government available to self-
regulatory organizations as defined by the Securities and
Exchange Act of 1934; (5) clarifies the circumstances under
which the Federal government can obtain the forfeiture of
fungible assets when no property traceable to the underlying
offense is available, including extending the statute of
limitations on such forfeiture actions from one to two years;
and (6) requires the Secretary of the Treasury to promulgate
``Know Your Customer'' regulations within 120 days of enactment
of the legislation, submit a report on private banking to the
House and Senate Banking Committees, prescribe regulations
requiring financial institutions to maintain all accounts in
such a way as to ensure that the name of an account holder and
the number of his or her account are associated with all
activity in the account, and develop criteria to identify areas
outside of the United States where money laundering is
concentrated.

                  Background and Need for Legislation

    It is estimated that upwards of $500 billion in laundered
funds--a large portion of it derived from narcotics
trafficking--is cycled through the U.S. financial system on an
annual basis. Any meaningful strategy for combating the
international drug trade and other global criminal enterprises
must include strong legal mechanisms for detecting the flows of
their illicit proceeds. Left unchecked, money laundering has
debilitating consequences for the integrity of financial
institutions, and, because it is the lifeblood of the drug
traffickers, a devastating impact on the social fabric as well.
    The last decade has been characterized by an increasing
globalization of the financial services industry and
increasingly sophisticated technology being placed at the
disposal of criminal elements seeking to disguise the proceeds
of their illegal activity. Millions of dollars can now be
transferred through multiple accounts all over the world with
blinding speed. Moreover, the range of mechanisms through which
criminals can launder their ill-gotten gains has expanded far
beyond the boundaries of traditional depository institutions,
to include currency exchange houses, stock brokerages, money
and wire transmitters, casinos, insurance companies, and a host
of other non-bank financial institutions. All of these
developments present fundamental challenges to law enforcement
authorities in the U.S. and around the world.
    Beginning with the passage of the Bank Secrecy Act (P.L.
91-508) in 1970, the Committee has been at the forefront of
legislative efforts to erect a system of financial reporting
and record-keeping designed to give law enforcement authorities
sufficient tools to detect and prosecute money laundering
offenses. The various reporting requirements imposed by the
Bank Secrecy Act and subsequent legislation promote the
disclosure of information relating to suspicious financial
transactions by financial institutions and other commercial
enterprises, and the subsequent dissemination of that
information among Federal, state and local law enforcement
authorities. In crafting these bills, Congress has sought to
advance a number of policy objectives, including facilitating
the law enforcement community's access to accurate and complete
information regarding possible money laundering, and
encouraging safe and sound practices at Federally-insured
depository institutions, while at the same time protecting the
free flow of legitimate commerce and the privacy interests of
bank customers.
    Federal law enforcement officials has testified to the
Committee that the point at which laundered funds are most
vulnerable to detection is at their initial placement in the
financial system. For example, a narco-trafficking organization
that collects cash from its U.S. customers has a choice of
either attempting to smuggle the currency across our border, or
seeking to enter it into the legitimate financial system in the
U.S. If the latter option is selected, the Bank Secrecy Act's
wide array of reporting requirements increase the likelihood
that law enforcement authorities will be alerted, and that the
narco-traffickers will ultimately be subjected to criminal
accountability.
    H.R. 4005 represents an attempt to strengthen the anti-
money laundering regime of Bank Secrecy Act laws and
regulations, by adding provisions to the United States Code
that promote greater reporting of suspicious transactions and
wider circulation of such reports within the law enforcement
community.

                                Hearings

    Many of H.R. 4005's specific provisions grew out of a
series of hearings held by the Subcommittee on General
Oversight and Investigations during the 105th Congress. On
March 11, 1997, the Subcommittee examined the Treasury
Department's use of a Geographic Targeting Order authorized
under the Bank Secrecy Act to target money laundering by
representatives of Colombian drug cartels at money transmitting
businesses located in New York City. The Subcommittee held two
separate hearings, on March 21, 1997, and April 1, 1998, to
review the operations of the Financial Crimes
EnforcementNetwork (FinCEN), the component of the Treasury Department
responsible for collecting and analyzing the various reports to be
filed under the Bank Secrecy Act. On July 30, 1997, the Subcommittee
reviewed regulations promulgated by FinCEN imposing certain
registration and reporting requirements on Money Services Businesses,
such as currency dealers, check cashers, and money transmitters.
Finally, on October 22, 1997, the Subcommittee examined efforts by
Federal law enforcement authorities to combat a form of money
laundering known as black market peso brokering, involving the
manipulation of trade in durable goods by Colombian drug cartels
seeking to conceal the proceeds of their U.S. operations.
    On June 5, 1998, Chairman Leach introduced H.R. 4005, the
Money Laundering Deterrence Act. The Committee held a hearing
on the legislation and related issues on June 11, 1998.
Testifying at the hearing were The Honorable Charles Grassley
(R-Iowa); Raymond Kelly, Treasury Undersecretary for
Enforcement; Mary Lee Warren, Deputy Assistant Attorney General
for the Criminal Division; Jonathan Weiner, Deputy Assistant
Secretary of State; Herbert A. Biern, Associate Director of the
Federal Reserve Board's Division of Banking Supervision and
Regulation; Robert B. Serino, Deputy Chief Counsel of the
Office of the Comptroller of the Currency; Jack A. Blum of the
law firm of Lobel, Novins & Lamont, and Charles S. Saphos of
the law firm of Fila & Saphos.

                   Committee Consideration and Votes

    On June 11, 1998, the full Committee met in open session to
mark up H.R. 4005, the Money Laundering Deterrence Act of 1998.
The Committee called up H.R. 4005 as original text for purposes
of amendment.
    During the mark up, the Manager's Amendment and 11 other
amendments were offered. The Manager's Amendment and 7 of the
11 amendments were adopted by voice vote.

Amendments that were adopted

    1. Manager's Amendment, making technical and grammatical
corrections to H.R. 4005, as introduced,
    2. An amendment offered by Mr. Ryun to add to the
Congressional findings that (1) money laundering by
international criminal enterprises undermines the financial and
economic stability of national governments; and (2) the
structure of international criminal enterprises engaged in
money laundering is complex, diverse and fragmented, making
them highly resistant to conventional law enforcement
techniques.
    3. An amendment offered by Mr. Campbell to clarify the law
applicable to actions by the government to seize fungible
property in bank accounts, including extending the statute of
limitations on such actions from one to two years.
    4. An amendment offered by Ms. Waters, as amended by
Chairman Leach, to require the Secretary of the Treasury to
promulgate ``Know your Customer'' regulations within 120 days
of the date of enactment of this legislation.
    5. An amendment offered by Ms. Waters, as amended by
Chairman Leach after consultation with Ms. Roukema, to require
the Secretary of the Treasury, in consultation with the Federal
banking agencies, to submit to the House Committee on Banking
and Financial Services and Senate Committee on Banking,
Housing, and Urban Affairs a report on the nature and extent of
private banking activities in the United States; regulatory
efforts to monitor such activities; and policies and procedures
of depository institutions that are designed to ensure that
such activities are conducted in compliance with the Bank
Secrecy Act.
    6. An amendment offered by Ms. Waters, as amended by
Chairman Leach, to require a financial institution to maintain
accounts in such a way as to ensure that the name of an account
holder and the number of the account are associated with all
account activity of the account holder.
    7. An amendment offered by Ms. Waters and Mr. Hinchey, as
amended, to require the Secretary of the Treasury and Federal
law enforcement agencies to develop criteria to identify areas
outside the U.S. where money laundering is concentrated, and to
increase the criminal penalties for certain offenses.
    8. An amendment offered by Mr. Barr to express the sense of
the Congress that the Secretary of the Treasury should make
available to all Federal, state, and local law enforcement
agencies and financial regulatory agencies the full content of
the data base of reports that have been filed pursuant to
subchapter II of chapter 53 of title 31 of the U.S. Code.

Amendments that were withdrawn

    1. An amendment offered by Ms. Waters to require that
financial institutions engaging in private banking services
file annual reports with the Secretary of the Treasury
describing (1) policies and procedures followed in conducting
such activities; and (2) the manner and extent to which
compliance with Federal money laundering laws is achieved.
    2. An amendment offered by Ms. Waters to convert maximum
criminal penalties imposed for violations of Federal money
laundering laws into minimum criminal penalties.
    3. An amendment offered by Ms. Waters to require the
termination of deposit insurance of a financial institution
found criminally or civilly liable for money laundering three
times within a ten-year period.
    4. An amendment offered by Ms. Waters to require that in
reviewing merger applications, Federal regulators (1) consider
the effectiveness of the institutions involved in the
transactions in combating money laundering; (2) disapprove
transactions involving any institution which is the subject of
pending Federal investigation or prosecution for money
laundering or other related financial crimes; and (3)
disapprove transactions involving any institution which has
been found criminally or civilly liable for money laundering
during the preceding 5-year period.
    The Committee adopted, by voice vote, a motion by Mr.
Bereuter to authorize the Chairman to offer such motions as may
be necessary in the House of Representatives to go to
conference with the Senate.

                      Committee Oversight Findings

    In compliance with clause 2(l)(3)(A) of rule XI of the
Rules of the House of Representatives, the Committee reports
that the findings and recommendations of the Committee, based
on oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.

         Committee on Government Reform and Oversight Findings

    No findings and recommendations of the Committee on
Government Reform and Oversight were received as referred to in
clause 2(l)(3)(D) of rule XI of the Rules of the House of
Representatives.

                        Constitutional Authority

    In compliance with clause 2(l)(4) of rule XI of the Rules
of the House of the Representatives, the constitutional
authority for Congress to enact this legislation is derived
from the interstate commerce clause (Clause 3, Section 8,
Article I). In addition, the power ``to provide for the
punishment of counterfeiting * * * current coin of the U.S.''
(Clause 6, Section 8, Article I) and to ``coin money'' and
``regulate the value thereof'' (Clause 5, Section 8, Article I)
has been broadly construed to allow for the Federal regulation
of the provision of credit, financial institutions and money.

               New Budget Authority and Tax Expenditures

    Clause 2(l)(3)(B) of rule XI of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.

                    Congressional Accountability Act

    The reporting requirement under section 102(b)(3) of the
Congressional Accountability Act (P.L. 104-1) is inapplicable
because this legislation does not relate to terms and
conditions of employment or access to public services or
accommodations.

    Congressional Budget Office Cost Estimate and Unfunded Mandates
                                Analysis

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 25, 1998.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services, House of
        Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4005, the Money
Laundering Deterrence Act of 1998.
    If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are John R.
Righter and Mark Grabowicz. The staff contact for the estimated
impact on state, local, and tribal governments is Marc Nicole,
and the contact for the estimated impact on the private sector
is Jean Wooster.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

H.R. 4005--The Laundering Deterrence Act of 1998

    Summary: H.R. 4005 would amend Title 31 of the U.S. Code so
as to help federal agencies detect and prevent financial
crimes. Subject to the availability of appropriated funds, CBO
estimates that implementing H.R. 4005 would increase federal
costs to combat money laundering by between $500,000 and $1
million in fiscal year 1999. For fiscal year 2000 and
subsequent years, we estimate that implementing the bill would
cost less than $500,000 a year, and could result in some
savings. Because H.R. 4005 could increase the amounts collected
from civil and criminal fines, as well as the amounts seized
from forfeited assets, pay-as-you-go procedures would apply.
CBO estimates that the net effect of such changes for pay-as-
you-go purposes would be less than $500,000 annually.
    H.R. 4005 contains intergovernmental mandates as defined in
the Unfunded Mandates Reform Act (UMRA) because it would
preempt certain state laws. CBO estimates that no costs would
result from these mandates. The bill would not have any other
significant effects on the budgets of state, local, or tribal
governments.
    H.R. 4005 also would impose private-sector mandates on
independent public accountants and financial institutions. CBO
estimates that the annual direct costs of complying with those
mandates would not exceed the statutory threshold for private-
sector mandates ($100 million in 1996, adjusted annually for
inflation).
    Description of bill's major provisions: Under current law,
certain private-sector entities are required to report cash
transactions in excess of $10,000 to the Internal Revenue
Service (IRS). H.R. 4005 would require them, instead, to file
reports with the Department of the Treasury. The bill also
would extend fromone to two years--after a money laundering
offense--the period of time during which the Department of Justice
(DOJ) can seize property in bank accounts that are holding or have held
laundered funds. H.R. 4005 also would increase the civil and criminal
penalties for violating targeting orders and certain recordkeeping
requirements, and would increase the criminal penalties for violating
certain laws aimed at preventing money laundering in designated high-
intensity areas. Finally, the bill would require the Treasury
Department to submit a report to the Congress on private banking
activities, develop criteria for designating countries as high-
intensity areas for money laundering activities, and issue regulations
to implement several of the bill's provisions.

Estimated cost to the Federal Government

            Spending subject to appropriation
    Subject to the availability of funds, CBO estimates that
implementing H.R. 4005 would increase costs to combat money
laundering by between $500,000 and $1 million in fiscal year
1999. For fiscal years 2000 and thereafter, we estimate that
implementing the bill would increase annual costs by less than
$500,000, with the possibility that it could result in annual
savings (in some or all years). The estimate for 1999 reflects
the costs for the Department of the Treasury to submit a report
to the Congress on private banking activities, develop criteria
for designating countries as high-risk areas for money
laundering activities, and issue regulations to implement
several of the bill's provisions. The estimate for fiscal years
2000 and thereafter covers remaining annual costs, such as the
cost of notifying insured depository institutions of foreign
countries that have been designated as high-risk areas for
money laundering activities.
    The bill could also result in small savings to federal
agencies. For instance, it would require that certain private-
sector entities begin reporting cash transactions in excess of
$10,000 to the Treasury rather than to the IRS, as required
under current law. As a consequence, the reported information
would become available for use by law enforcement agencies,
possibly saving some investigation costs.
            Direct spending and revenues
    The bill would extend from one to two years the period of
time in which DOJ can seize fungible property in bank accounts
that are holding or have held laundered funds. By extending the
period of time, the provision could lead to an increase in the
amount of assets seized by the federal government each year,
thus adding to government receipts. However, CBO has no basis
for estimating the amount of any such increase. Because DOJ can
spend amounts seized without further appropriation action, any
increase in governmental receipts would be offset over time by
an equivalent increase in direct spending.
    Additionally, the bill would both clarify and increase the
civil and criminal penalties for violating targeting orders and
certain recordkeeping requirements. It would also increase the
criminal penalties for violating certain laws aimed at
preventing money laundering in designated high-intensity areas.
CBO estimates that the additional collections of civil and
criminal penalties, both of which are recorded in the budget as
governmental receipts, would be less than $500,000 annually.
Because collections of criminal fines are deposited in the
Crime Victims Fund and spent in the following year, the
provision would also increase direct spending. We estimate,
however, that the additional direct spending also would be less
than $500,000 annually.
    Pay-as-you-go consideration: Section 252 of the Balanced
Budget and Emergency Deficit Control Act sets up pay-as-you-go
procedures for legislation affecting direct spending or
receipts. H.R. 4005 would affect both direct spending and
governmental receipts; however, CBO estimates that the effect
of such changes would be less than $500,000 annually.
    Estimated impact on State, local and tribal governments: In
general, H.R. 4005 would help law enforcement agencies,
including state and local agencies, identify and prosecute
money launderers. In doing so, the bill would impose
intergovernmental mandates as defined in UMRA. It would broaden
an existing preemption of state law by limiting the civil
liability of independent public accountants who audit financial
institutions and disclose information about any public
accountants who audit financial institutions and disclose
information about any possible involvement in illegal activity.
It would also shield financial institutions and their employees
from liability in connection with certain employment references
they may provide. Under UMRA such preemptions of state law are
mandates. However, because the preemptions would simply limit
the application of state law in some circumstances, CBO
estimates that no costs would result from these mandates. The
bill would not have any other significant effects on the
budgets of state, local, or tribal governments.
    Estimated impact on the private sector: H.R. 4005 would
impose private-sector mandates, but CBO estimates that any
costs would be negligible. Section 3 would prohibit financial
institutions and independent publicaccountants that audit
financial institutions and report any suspicious transactions to a
government agency from disclosing any information included in the
report to any involved individual. CBO estimates that financial
institutions and independent public accountants would not incur any
additional costs in complying with this mandate.
    Section 12 would require that financial institutions
maintain all accounts so that the name of the account holder
and the number of the account are associated with all account
activity of the account holder. That information would also be
required to be available for regulatory review and law
enforcement. According to representatives from the banking
industry and the Treasury Department, most financial
institutions currently have this information. This mandate
would minimally increase financial institutions' record keeping
responsibility, including the retention and retrieval of
required information.
    Section 9 would require that the Treasury Department issue
``Know Your Customer'' regulations for financial institutions
within 120 days after the enactment date of H.R. 4005. ``Know
Your Customer'' policies allow banks to establish and maintain
procedures to identify their customers and to understand the
sources of funds and the normal and expected transactions of
their customers. Those provisions are included in the Bank
Secrecy Act, and the Treasury Department is in the process of
developing regulations to implement them. CBO concludes that
section 9 would not impose a new mandate on financial
institutions.
    Estimate prepared by: Federal costs: John R. Righter and
Mark Grabowicz; Impact on State, Local, and Tribal governments:
Marc Nicole; and Impact on the Private Sector: Jean Wooster.
    Estimate approved by: Robert A. Sunshine, Deputy Assistant
Director for Budget Analysis.

                        Committee Correspondence

                          House of Representatives,
                                     Committee on Commerce,
                                     Washington, DC, June 25, 1998.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services, Rayburn House
        Office Building, Washington, DC.
    Dear Chairman Leach: It is my understanding that the
Committee on Banking and Financial Services is prepared to file
reports on two bills in which the Committee on Commerce has an
interest: H.R. 4005, the Money Laundering Deterrence Act of
1998; and H.R. 1756, the Money Laundering and Financial Crimes
Strategy Act of 1998.
    The Commerce Committee's interest in H.R. 4005 arises in
Section 9 of the bill, entitled ``Promulgation of `Know Your
Customer' Regulations,'' which would require the Secretary of
the Treasury to promulgate ``know your customer'' regulations
for ``financial institutions.'' Because the legislation does
not define the term ``financial institutions,'' this broad term
could be interpreted to include such individuals and entities
as securities brokers and dealers, investment companies, and
investment advisers. In fact, such an interpretation is likely
given the fact that the term ``financial institutions'' is
specifically defined to include securities brokers and dealers
and investment companies in Section 5312(a)(2) of Title 31 of
the United States Code.
    As you may know, securities brokers and dealers, investment
companies, and investment advisers are already subject to
extensive ``know your customer'' regulations under the Federal
securities laws and regulations issued under those laws,
including the regulations of self-regulatory organizations.
These regulations fall within the jurisdiction of the Committee
on Commerce pursuant to Rule X of the Rules of the House of
Representatives. I am concerned that the mandate in Section 9
of H.R. 4005 would result in a whole new set of ``know your
customer'' regulations which are either duplicative of, or
inconsistent with, existing regulations which apply to brokers,
dealers, and others subject to the Federal securities laws.
    In order to avoid such regulatory inconsistency and
overlap, it is my understanding that you have agreed to offer
an amendment to H.R. 4005 that would add the following language
after the first sentence of Section 9:

          As used in this section, the term ``financial
        institutions'' does not include a broker, dealer,
        investment company, or investment adviser, as such
        terms are defined in the Securities Exchange Act of
        1934.

    With respect to H.R. 1756, Section 2 of the legislation
amends Chapter 53 of Title 31 of the United States Code to
direct the Secretary of the Treasury to ``regularly review
enforcement efforts under this subchapter and other provisions
of law and, when appropriate, modify existing regulations or
prescribe new regulations for purposes of preventing such
criminal activity. * * *'' I am concerned that such a broad
mandate could be interpreted to authorize the Secretary of the
Treasury to review enforcement actions under the Federal
securities laws or to modify regulations promulgated pursuant
to the Federal securities laws, or to grant to the Secretary
new or additional authority to prescribe regulations applicable
to entities that are regulated pursuant to the Federal
securities laws.
    It is my understanding that you do not intend this language
of H.R. 1756 to require or invite the Treasury Secretary to
conduct a review of enforcement actions and activities pursuant
to the Federal securities laws, or to grant to the Secretary
any new or additional authority to prescribe regulations
applicable to entities that are regulated pursuant to the
Federal securities laws. It is further my understanding that
you have agreed to clarify, in a statement on the Floor of the
House of Representatives during consideration of the bill, that
it is not your intent for this language to grant the Secretary
of the Treasury any such new or additional authority, or to
require or encourage the Secretary of the Treasury to review
enforcement actions under the Federal securities laws or to
modify, or recommend the modification of, regulations
promulgated under the Federal securities laws.
    I recognize your interest in moving these bills
expeditiously to the House floor and, in consideration of the
agreements described above, I would commit not to seek a
sequential referral of either bill. By agreeing not to assert
its jurisdiction over either bill, the Commerce Committee does
not waive its jurisdiction over these bills or similar bills.
Furthermore, the Committee reserves its prerogative to seek
representation on any House-Senate conference that may be
convened on either bill. Finally, I would ask that a copy of
this letter and your response be included in the Banking
Committee's reports on H.R. 4005 and H.R. 1756.
    I appreciate your cooperation in accommodating the
interests of the Commerce Committee.
            Sincerely,
                                              Tom Bliley, Chairman.
                                ------

                          House of Representatives,
               Committee on Banking and Financial Services,
                                     Washington, DC, June 25, 1998.
Hon. Tom Bliley,
Chairman, Committee on Commerce,
Rayburn House Office Building, Washington, DC.
    Dear Tom: I have received your letter of June 25, 1998,
concerning H.R. 4005 and H.R. 1756, two bills which the
Committee on Banking and Financial Services on June 11, 1998,
voted to favorably report to the House. In your letter you
indicate that the Committee on Commerce would agree not to seek
a referral of H.R. 4005 if section 9 of that legislation is
amended to exclude securities firms, investment companies and
investment advisers and of H.R. 1756 if the legislative history
of that bill is clarified to indicate that the Secretary of the
Treasury is not granted any new or additional authority to
prescribe regulations for entities that are regulated pursuant
to Federal securities laws. Without conceding to any
jurisdictional claim of the Commerce Committee over these two
bills, I would agree to seek the changes outlined in your
letter and as descried below.
    H.R. 4005, among other things, would increase the tools
available to law enforcement authorities to combat money
laundering, while H.R. 1756 would establish a coordinated
government-wide effort against money laundering. As noted in
your letter, section 9 of H.R,. 4005, directs the Secretary of
the Treasury to promulgate ``Know Your Customer'' regulations
for financial institutions within 120 days after enactment.
Under the Bank Secrecy Act (BSA), the Treasury Department
already has broad authority to develop rules and regulations
that would require banks, securities firms and other money
transmitters and intermediaries--all defined as financial
institutions under the BSA--to develop procedures and policies
to better identify the true ownership of a customer's accounts
in order to protect the institution from being victimized by
money launderers or other perpetrators of financial crimes.
Section 9 merely imposes a specified timeline on promulgation
of these regulations.
    Your letter indicates that the Committee on Commerce has
concerns over how these regulations may affect the securities
markets and the ``Know Your Customer'' and suitability
requirements already imposed on securities firms by the
exchanges and other regulatory bodies. Even though extant
``Know Your Customer'' requirements imposed on securities firms
are designed more to protect the customer rather than the
financial institution (while those contemplated in H.R. 4005
are primarily intended to preserve the integrity of financial
institutions whose customers seek to use them for money
laundering purposes) it would be my intent to support and seek
the amendment provided for in your letter.
    My agreement to such an amendment to section 9 of H.R.
4005, however, should not be construed to limit the existing
statutory authority of the Secretary of the Treasury to
promulgate regulations applicable to ``financial
institutions,'' as that term is defined in the BAS. Nor should
exclusion of securities firms, investment companies and
investment advisers from section 9 be interpreted as precluding
the Secretary of the Treasury from promulgating ``Knowing Your
Customer'' regulations applicable to such firms, after
appropriate consultation with other Federal financial
regulatory agencies regarding the interplay and potential
overlap between regulations of the kind contemplated by H.R.
4005 and the requirements imposed by existing securities laws
and regulations.
    With regard to H.R. 1756, you correctly note that this
legislation should not be interpreted as granting the Secretary
of the Treasury any new or additional authority over Federal
securities laws. Accordingly, I will agree to insert in my
floor statement the clarification outlined in your letter.
Finally pursuant to your request a copy of your letter and my
response will be included in the Committee's reports on these
two bills.
    Thanks for you cooperation in this matter.
            Sincerely,
                                          James A. Leach, Chairman.

                      Section-by-Section Analysis

                         section 1. short title

    ``Money Laundering Deterrence Act of 1998''.

                    section 2. findings and purposes

    The bill contains seven ``findings'' drawn largely from
hearings held over the last two years by the Committee and the
Subcommittee on General Oversight and Investigations. The bill
also notes three purposes; (1) to provide the law enforcement
community with the necessary legal authority to combat money
laundering; (2) to broaden the law enforcement community's
access to transactional information already being collected by
the government; and (3) to expedite the issuance by the
Secretary of the Treasury of regulations designed to deter
money laundering activities at certain types of financial
institutions.

     Section 3. provisions relating to the reporting of suspicious
                               activities

    This section of the bill, comprised of four subsections,
amends existing suspicious activity reporting requirements
outlined in the Bank Secrecy Act. The amendments are designed
to facilitate the flow of information regarding suspicious
transactions among law enforcement and financial regulatory
agencies. Subsection (a) extends the ``safe harbor'' provisions
of 31 U.S.C. Sec. 5318 to independent public accountants who
file Suspicious Activity Reports. Extending immunity from civil
liability accountants advances the underlying purposes of the
Bank Secrecy Act, by encouraging disclosures of suspicious
activities uncovered in the course of audits and routine
examinations of a financial institution's books and records.
Subsection (b) clarifies existing statutory language limiting
the circumstances under which the filing of a Suspicious
Activity Report may be disclosed. Subsection (c) provides
financial institutions with immunity from liability when making
employment references that include suspicions of a prospective
employee's possible involvement in a violation of law or
regulation, unless such suspicions are known by the financial
institution to be false or the institution acts with malice or
reckless disregard for the truth in making such a reference.
The financial institution is not permitted under this
subsection to disclose the fact that a Suspicious Activity
Report has been filed, or that the information included in an
employment reference was the subject of a Suspicious Activity
Report. Subsection (d) makes Suspicious Activity Reports
available to self-regulatory organizations as defined by the
Securities and Exchange Act of 1934.

             section 4. expansion of scope of summons power

    Under the current law, summons power under 31 U.S.C.
Sec. 5318(b)(1) is limited to ``investigations for the purpose
of civil enforcement'' of the Bank Secrecy Act. This section
expands the scope of the summons authority to examinations to
determine compliance with the Bank Secrecy Act, as well as
investigations relating to reports filed pursuant to the Act.
The expanded summons authority granted to the Secretary of the
Treasury under this section is particularly needed in the case
of non-depository institutions whose activities are not subject
to regulatory oversight. However, with respect to depository
institutions subject to regular examinations, the Committee
expects that the Secretary of the Treasury will coordinate the
use of its expanded authority over these institutions with the
appropriate Federal banking regulators.

Section 5. penalties for violations of geographic targeting orders and
                  certain record-keeping requirements

    This section clarifies existing statutory language making
it illegal to violate reporting requirements mandated by a
geographic targeting order issued by the Secretary of the
Treasury or the funds transfer record-keeping rules.

          section 6. repeal of certain reporting requirements

    This section eliminates the obligation of the Secretary of
the Treasury to report to Congress on the status of states'
adoption of uniform laws regulating money transmitters. This
directive has been rendered unnecessary by the Treasury
Department's recently promulgated regulations for Money
Services Businesses, which include money transmitters.

       section 7. limited exemption from paperwork reduction ACT

    This section exempts Bank Secrecy Act reporting
requirements, including those imposed by geographic targeting
orders, from consideration under the Paperwork Reduction Act.

section 8. transfer of reporting requirements from section 6050I of the
       internal revenue code to title 31, United States code \1\

    This section transfers from the Internal Revenue Code to
the Bank Secrecy Act the requirement that any person engaged in
a trade or business (other than financial institutions required
to report under the Bank Secrecy Act) file a report with the
Federal government on cash transactions in excess of $10,000.
Reports filed pursuant to this requirement provide law
enforcement authorities with a paper trail that can, among
other ......
---------------------------------------------------------------------------
    \1\ This portion of the section-by-section analysis draws
extensively upon work conducted by the General Accounting Office in the
105th Congress at the request of Chairman Bachus, Chairman of the
Subcommittee on General Oversight and Investigations.
---------------------------------------------------------------------------
    Under current law, non-financial institutions are required
to report cash transactions exceeding $10,000 to the Internal
Revenue Service on IRS Form 8300. Because the requirement that
such reports be filed is contained in the Internal Revenue
Code, Form 8300 information is considered tax return
information, and, as such, may not be disclosed to any persons
or used in any manner not authorized by the Internal Revenue
Code. Authorized disclosures of Form 8300 information are
subject to the procedural and record-keeping requirements of
section 6103 of the Internal Revenue Code. For example, section
6103(p)(4)(E) requires agencies seeking Form 8300 information
to file a report with the Secretary of the Treasury that
describes the procedures established and utilized by the agency
for ensuring the confidentiality of the information. IRS
requires that agencies requesting Form 8300 information file a
``Safeguard Procedures Report'' which must be approved by the
IRS before any such information can be released.
    While the IRS uses Form 8300 to identify individuals who
may be engaged in tax evasion, the information collected on the
form can also be useful to other law enforcement agencies
investigating other financial crimes, including money
laundering. Form 8300 information can be instrumental in
helping law enforcement authorities trace cash payments by drug
traffickers and other criminals for luxury cars, jewelry, and
other expensive merchandise. Because of the restrictions on
their dissemination outlined above, however, Form 8300s are not
nearly as accessible to law enforcement authorities as the
various reports mandated by the Bank Secrecy Act, which can
typically be retrieved electronically from a database
maintained by the Treasury Department. The differential access
to the two kinds of reports is made anomalous by the fact that
Form 8300 elicits much the same information that is required to
be disclosed by the Bank Secrecy Act. For example, just as Form
8300 seeks the name, address, and social security number of a
customer who engages in a cash transaction exceeding $10,000
with a trade or business, Currency Transaction Reports (CTRs)
mandated by the Bank Secrecy Act require the same information
to be reported on a cash transaction exceeding $10,000 between
a financial institution and its customer.
    Congress has sought in the past to ease the restrictions
imposed by the Internal Revenue Code on law enforcement's
access to Form 8300 information. The Anti-Drug Abuse Act of
1988 (P.L. 100-690) included a special temporary rule
permitting IRS to disclose Form 8300 information to other
Federal agencies for the purpose of administering statutes
unrelated to tax administration. The special rule, originally
scheduled to expire in 1990, was extended for two years before
lapsing in 1992.
    Codification of the temporary rule in effect from 1988 to
1992 ensures that the entire Federal law enforcement
community--not just tax agents--will have access to information
that has proven to be beneficial in detecting attempts by
criminal elements to launder the proceeds of their illegal
activities. It is the Committee's expectation that the IRS will
continue to devote resources to the administration and
enforcement of the reporting requirements applicable to non-
financial trades or businesses.

     section 9. promulgation of ``know your customer'' regulations

    This section mandates that within 120 days of enactment of
the legislation, the Secretary of the Treasury shall promulgate
``Know Your Customer'' regulations for financial institutions.
The regulations, which have been the subject of lengthy
discussion and study among Federal banking and financial
regulatory agencies, including the Treasury Department, the
Federal Reserve Board of Governors, the Office of the
Comptroller of the Currency, and the Federal Deposit Insurance
Corporation, are intended to assist financial institutions in
verifying that their customers' funds are derived from
legitimate sources. By requiring the Secretary of the Treasury
to promulgate these regulations by a date certain, the
Committee does not intend to preclude any supervisory agency
for any financial institution from promulgating ``Know Your
Customer'' regulations of its own. For example, testimony
before the Committee on June 11, 1998, indicated that both the
Board of Governors of the Federal Reserve and the Office of the
Comptroller of the Currency will likely be in a position to
issue such regulations for depository institutions that they
regulate prior to the expiration of the 120-day period
contemplated by this provision. The Committee is supportive of
these efforts.

             section 10. fungible property in bank accounts

    Vigorous enforcement of laws authorizing the seizure of the
proceeds of illicit activity are an integral part of any
effective strategy for combating money laundering. 18 U.S.C.
Sec. 984, first enacted as part of the Annunzio-Wylie Anti-
Money Laundering Act of 1992, provides that all bank deposits
are fungible, and thus authorizes the forfeiture of money held
in the bank account of a criminal actor without requiring the
government to prove that the money in the account on one day is
the ``same money'' as was in the account on a prior occasion.
This section of the legislation amends 18 U.S.C. Sec. 984 by
extending the statute of limitations applicable in such
forfeiture actions from one to two years, and making other
clarifying changes.
    The amendment was endorsed by the Department of Justice in
testimony before the Committee on June 11, 1998. Mary Lee
Warren, Deputy Assistant Attorney General for the Criminal
Division, pointed out that investigations of money laundering
offenses are often complex and last for several years. Under
the current statute of limitations, the government can only
avail itself of the fungibility provisions of 18 U.S.C.
Sec. 984 if it initiates a forfeiture action within one year of
the underlying money laundering offense. By extending the
limitations period to two years, this section strengthens the
government's ability to recover the proceeds of illicit
activity.

            section 11. report on private banking activities

    This provision requires the Secretary of the Treasury, in
consultation with ``federal banking agencies'' and within one
year of enactment of this legislation, to prepare a report on
the nature and extent of private banking activities in the
U.S.; regulatory efforts to monitor private banking activities
and ensure that they are conducted in compliance with the Bank
Secrecy Act; and policies and procedures of depository
institutions that are designed to ensure that private banking
activities are conducted in compliance with the Bank Secrecy
Act. This section defines ``private banking activities'' to
include ``personalized services such as money management,
financial advice, and investment services that are provided to
clients with high net worth and are not provided generally to
all clients of the institution.'' For purposes of this section,
the term ``federal banking agencies'' is intended to have the
meaning given to such term in section 3(z) of the Federal
Deposit Insurance Act, and therefore includes the Comptroller
of the Currency, the Director of the Office of Thrift
Supervision, the Board of Governors of the Federal Reserve
System, and the Federal Deposit Insurance Corporation.
    In preparing the report mandated by this section, the
Treasury Department and the federal banking agencies should
consult with the General Accounting Office, which recently
completed an extensive review of private banking activities in
the United States and the vulnerability of such activities to
money laundering, pursuant to a March 5, 1997, request by Mr.
Bachus, Chairman of the Subcommittee on General Oversight and
Investigations.

        section 12. availability of certain account information

    This section requires the Secretary of the Treasury to
prescribe regulations requiring financial institutions to
maintain all accounts in such a way as to ensure that the name
of an account holder and the number of the account are
associated with all account activity of the account holder, and
to ensure that all such information is available for purposes
of account supervision and law enforcement.
    In making rules pursuant to this provision, the Secretary
of the Treasury should limit only the use of those accounts
within a financial institution that mask the activities or
identity of one or more of a financial institution's clients.
The provision is not intended in any way to interfere with the
normal correspondent or clearing relationships among financial
institutions. For example, the provision is not intended to
affect in any way accounts at one financial institution held
for the benefit of customers of other brokers, dealers, or
investment advisers registered with the Securities and Exchange
Commission. In clearing relationships among securities firms,
at least one financial institution in a chain of institutions
involved with an account maintains the account holder and
account activity information, and the provision is not intended
to affect these accounts. Similarly, the provision is not
intended to affect suspense accounts of broker-dealers where
funds whose ownership is being researched are held, or the
various bulk accounts maintained for financing or other
legitimate business purposes by firms registered with the SEC.

                   section 13. sense of the congress

    This section expresses the sense of the Congress that the
Secretary of the Treasury should make available to all Federal,
State and local law enforcement agencies and financial
regulatory agencies the full contents of the electronic
database of reports required to be filed under the Bank Secrecy
Act.

  section 14. designation of foreign high intensity money laundering
                                 areas

    This section directs the Secretary of the Treasury, in
consultation with appropriate Federal law enforcement
authorities, to develop criteria by which to identify areas
outside the United States in which money laundering activities
are concentrated, and to designate any areas so identified as
foreign high intensity money laundering areas. The Committee
recognizes that the Federal government, including the
Department of the Treasury, already invests significant
resources in identifying those foreign countries that serve as
safe havens for money laundering. The International Narcotics
Strategy Control Report, published annually by the Department
of State, is a good example of the government's efforts in this
regard. It is the Committee's intention that the Secretary of
the Treasury make full use of such reports--and any other
relevant information available elsewhere in the executive
branch--in making the designations mandated by this section.

section 15. doubling of criminal penalties for violations of laws aimed
    at preventing money laundering in foreign high intensity money
                            laundering areas

    This section authorizes the doubling of criminal penalties
for Bank Secrecy Act violations committed with respect to a
transaction involving a person in, a relationship maintained
in, or transport of a monetary instrument involving a foreign
country known to have been designated as a foreign high
intensity money laundering area pursuant to the preceding
section.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the
House of Representatives, changes in existing law made by the
bill, as reported, are shown as follows (existing law proposed
to be omitted is enclosed in black brackets, new matter is
printed in italic, existing law in which no change is proposed
is shown in roman):

TITLE 31, UNITED STATES CODE

           *       *       *       *       *       *       *

                   CHAPTER 53--MONETARY TRANSACTIONS

               SUBCHAPTER I--CREDIT AND MONETARY EXPANSION

Sec.
5301.  Buying obligations of the United States Government.
     * * * * * * *

 SUBCHAPTER II--RECORDS AND REPORTS ON MONETARY INSTRUMENTS TRANSACTIONS

5311.  Declaration of purpose.
5312.  Definitions and application.
5313.  Reports on domestic coins and currency transactions.
5313A.   Reports relating to coins and currency received in nonfinancial
          trade or business.
     * * * * * * *
5327.  Designation of foreign high intensity money laundering areas.
     * * * * * * *

SUBCHAPTER II--RECORDS AND REPORTS ON MONETARY INSTRUMENTS TRANSACTIONS

           *       *       *       *       *       *       *

Sec. 5312. Definitions and application

  (a) In this subchapter--
          (1) * * *

           *       *       *       *       *       *       *

          (3) ``monetary instruments'' means--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) as the Secretary of the Treasury shall
                provide by regulation for purposes of [section
                5316,] sections 5313A and 5316, checks, drafts,
                notes, money orders, and other similar
                instruments which are drawn on or by a foreign
                financial institution and are not in bearer
                form.
          (4) Nonfinancial trade or business.--The term
        ``nonfinancial trade or business'' means any trade or
        business other than a financial institution that is
        subject to the reporting requirements of section 5313
        and regulations prescribed under such section.
          [(4)] (5) ``person'', in addition to its meaning
        under section 1 of title 1, includes a trustee, a
        representative of an estate and, when the Secretary
        prescribes, a governmental entity.
          [(5)] (6) ``United States'' means the States of the
        United States, the District of Columbia, and, when the
        Secretary prescribes by regulation, the Commonwealth of
        Puerto Rico, the Virgin Islands, Guam, the Northern
        Mariana Islands, American Samoa, the Trust Territory of
        the Pacific Islands, a territory or possession of the
        United States, or a military or diplomatic
        establishment.

           *       *       *       *       *       *       *

Sec. 5313A. Reports relating to coins and currency received in
                    nonfinancial trade or business

  (a) Coin and Currency Receipts of More Than $10,000.--Any
person--
          (1) who is engaged in a trade or business; and
          (2) who, in the course of such trade or business,
        receives more than $10,000 in coins or currency in 1
        transaction (or 2 or more related transactions),
shall file a report described in subsection (b) with respect to
such transaction (or related transactions) at such time as the
Secretary may by regulations prescribe.
  (b) Form and Manner of Reports.--A report is described in
this subsection if such report--
          (1) is in such form as the Secretary may prescribe;
          (2) contains--
                  (A) the name, address, and taxpayer
                identification number of the person from whom
                the coins or currency was received;
                  (B) the amount of coins or currency received;
                  (C) the date and nature of the transaction;
                and
                  (D) such other information as the Secretary
                may prescribe.
  (c) Exceptions.--
          (1) Amounts received by financial institutions.--
        Subsection (a) shall not apply to amounts received in a
        transaction reported under section 5313 and regulations
        prescribed under such section.
          (2) Transactions occurring outside the united
        states.--Except to the extent provided in regulations
        prescribed by the Secretary, subsection (a) shall not
        apply to any transaction if the entire transaction
        occurs outside the United States.
  (d) Currency Includes Foreign Currency and Certain Monetary
Instruments.--
          (1) In general.--For purposes of this section, the
        term ``currency'' includes--
                  (A) foreign currency; and
                  (B) to the extent provided in regulations
                prescribed by the Secretary, any monetary
                instrument (whether or not in bearer form) with
                a face amount of not more than $10,000.
          (2) Scope of application.--Paragraph (1)(B) shall not
        apply to any check drawn on the account of the writer
        in a financial institution referred to in subparagraph
        (A), (B), (C), (D), (E), (F), (G), (J), (K), (R), or
        (S) of section 5312(a)(2).
  (e) Coins or Currency Received by Criminal Court Clerks.--
          (1) In general.--Every clerk of a Federal or State
        criminal court who receives more than $10,000 in coins
        or currency as bail for any individual charged with a
        specified criminal offense shall file a report
        described in paragraph (2) (at such time as the
        Secretary may by regulations prescribe) with respect to
        the receipt of such bail.
          (2) Report.--A report is described in this paragraph
        if such report--
                  (A) is in such form as the Secretary may
                prescribe; and
                  (B) contains--
                          (i) the name, address, and taxpayer
                        identification number of--
                                  (I) the individual charged
                                with the specified criminal
                                offense; and
                                  (II) each person posting the
                                bail (other than a person
                                licensed as a bail bondsman);
                          (ii) the amount of coins or currency
                        received;
                          (iii) the date the coins or currency
                        was received; and
                          (iv) such other information as the
                        Secretary may prescribe.
          (3) Specified criminal offense.--For purposes of this
        subsection, the term ``specified criminal offense''
        means--
                  (A) any Federal criminal offense involving a
                controlled substance;
                  (B) racketeering (as defined in section 1951,
                1952, or 1955 of title 18, United States Code);
                  (C) money laundering (as defined in section
                1956 or 1957 of such title); and
                  (D) any State criminal offense substantially
                similar to an offense described in subparagraph
                (A), (B), or (C).
          (4) Information to federal prosecutors.--Each clerk
        required to include in a report under paragraph (1) the
        information described in paragraph (2)(B) with respect
        to an individual described in paragraph (2)(B)(i)(I)
        shall furnish (at such time as the Secretary may by
        regulations prescribe) a written statement showing such
        information to the United States Attorney for the
        jurisdiction in which such individual resides and the
        jurisdiction in which the specified criminal offense
        occurred.
          (5) Information to payors of bail.--Each clerk
        required to file a report under paragraph (1) shall
        furnish (at such time as the Secretary may by
        regulations prescribe) to each person whose name is
        required to be set forth in such report by reason of
        paragraph (2)(B)(i)(II) a written statement showing--
                  (A) the name and address of the clerk's
                office required to file the report; and
                  (B) the aggregate amount of coins and
                currency described in paragraph (1) received by
                such clerk.

           *       *       *       *       *       *       *

Sec. 5317. Search and forfeiture of monetary instruments

  (a) * * *

           *       *       *       *       *       *       *

  (c) If a report required under section 5316 with respect to
any monetary instrument is not filed (or if filed, contains a
material omission or misstatement of fact), the instrument and
any interest in property, including a deposit in a financial
institution, traceable to such instrument may be seized and
forfeited to the United States Government. Any property, real
or personal, involved in a transaction or attempted transaction
in violation of section [5324(b)] 5324(c), or any property
traceable to such property, may be seized and forfeited to the
United States Government. A monetary instrument transported by
mail or a common carrier, messenger, or bailee is being
transported under this subsection from the time the instrument
is delivered to the United States Postal Service, common
carrier, messenger, or bailee through the time it is delivered
to the addressee, intended recipient, or agent of the addressee
or intended recipient without being transported further in, or
taken out of, the United States.

           *       *       *       *       *       *       *

Sec. 5318. Compliance, exemptions, and summons authority

  (a) General Powers of Secretary.--The Secretary of the
Treasury may (except under section 5315 of this title and
regulations prescribed under section 5315)--
          (1) except as provided in subsection (b)(2), delegate
        duties and powers under this subchapter to an
        appropriate supervising agency and the United States
        Postal Service;
          (2) require a class of domestic financial
        institutions or nonfinancial trades or businesses to
        maintain appropriate procedures to ensure compliance
        with this subchapter and regulations prescribed under
        this subchapter or to guard against money laundering;
          (3) examine any books, papers, records, or other data
        of domestic financial institutions or nonfinancial
        trades or businesses relevant to the recordkeeping or
        reporting requirements of this subchapter;
          (4) summon a financial institution or nonfinancial
        trade or business, an officer or employee of a
        financial institution (including a former officer or
        employee), or any person having possession, custody, or
        care of the reports and records required under this
        subchapter, to appear before the Secretary of the
        Treasury or his delegate at a time and place named in
        the summons and to produce such books, papers, records,
        or other data, and to give testimony, under oath, as
        may be relevant or material to an investigation
        described in subsection (b);

           *       *       *       *       *       *       *

  (b) Limitations on Summons Power.--
          (1) Scope of power.--The Secretary of the Treasury
        may take any action described in paragraph (3) or (4)
        of subsection (a) only in connection with examinations
        to determine compliance with the requirements of this
        subchapter, section 21 of the Federal Deposit Insurance
        Act, and chapter 2 of Public Law 91-508 and regulations
        prescribed pursuant to such provisions, investigations
        relating to reports filed by financial institutions or
        other persons pursuant to any such provision or
        regulation, and investigations for the purpose of civil
        enforcement of violations of this subchapter, section
        21 of the Federal Deposit Insurance Act, section 411 of
        the National Housing Act, or chapter 2 of Public Law
        91-508 (12 U.S.C. 1951 et seq.) or any regulation under
        any such provision.
          (2) Authority to issue.--A summons may be issued
        under subsection (a)(4) only by, or with the approval
        of, the Secretary of the Treasury or a supervisory
        level delegate of the Secretary of the Treasury.
  (c) Administrative Aspects of Summons.--
          (1) Production at designated site.--A summons issued
        pursuant to this section may require that books,
        papers, records, or other data stored or maintained at
        any place be produced at any designated location in any
        State or in any territory or other place subject to the
        jurisdiction of the United States not more than 500
        miles distant from any place where the financial
        institution or nonfinancial trade or business operates
        or conducts business in the United States.

           *       *       *       *       *       *       *

  (f) Written and Signed Statement Required.--No person shall
qualify for an exemption under subsection (a)(5) unless the
relevant financial institution or nonfinancial trade or
business prepares and maintains a statement which--
          (1) describes in detail the reasons why such person
        is qualified for such exemption; and
          (2) contains the signature of such person.
  (g) Reporting of Suspicious Transactions.--
          (1) * * *
          [(2) Notification prohibited.--A financial
        institution, and a director, officer, employee, or
        agent of any financial institution, who voluntarily
        reports a suspicious transaction, or that reports a
        suspicious transaction pursuant to this section or any
        other authority, may not notify any person involved in
        the transaction that the transaction has been reported.
          [(3) Liability for disclosures.--Any financial
        institution that makes a disclosure of any possible
        violation of law or regulation or a disclosure pursuant
        to this subsection or any other authority, and any
        director, officer, employee, or agent of such
        institution, shall not be liable to any person under
        any law or regulation of the United States or any
        constitution, law, or regulation of any State or
        political subdivision thereof, for such disclosure or
        for any failure to notify the person involved in the
        transaction or any other person of such disclosure.]
          (2) Notification prohibited.--
                  (A) In general.--If a financial institution,
                any director, officer, employee, or agent of
                any financial institution, or any independent
                public accountant who audits any financial
                institution, voluntarily or pursuant to this
                section or any other authority, reports a
                suspicious transaction to an appropriate
                government agency--
                          (i) the financial institution,
                        director, officer, employee, agent, or
                        accountant may not notify any person
                        involved in the transaction that the
                        transaction has been reported and may
                        not disclose any information included
                        in the report to any such person; and
                          (ii) any other person, including any
                        officer or employee of any government,
                        who has any knowledge that such report
                        was made may not disclose to any person
                        involved in the transaction that the
                        transaction has been reported or any
                        information included in the report.
                  (B) Coordination with paragraph (5).--
                Subparagraph (A) shall not be construed as
                prohibiting any financial institution, or any
                director, officer, employee, or agent of such
                institution, from including, in a written
                employment reference that is provided in
                accordance with paragraph (5) in response to a
                request from another financial institution,
                information that was included in a report to
                which subparagraph (A) applies, but such
                written employment reference may not disclose
                that such information was also included in any
                such report or that such report was made.
          (3) Liability for disclosures.--
                  (A) In general.--Notwithstanding any other
                provision of law--
                          (i) any financial institution that--
                                  (I) makes a disclosure of any
                                possible violation of law or
                                regulation to an appropriate
                                government agency; or
                                  (II) makes a disclosure
                                pursuant to this subsection or
                                any other authority;
                          (ii) any director, officer, employee,
                        or agent of such institution who makes,
                        or requires another to make any such
                        disclosure; and
                          (iii) any independent public
                        accountant who audits any such
                        financial institution and makes a
                        disclosure described in clause (i),
                shall not be liable to any person under any law
                or regulation of the United States, any
                constitution, law, or regulation of any State
                or political subdivision thereof, or under any
                contract or other legally enforceable agreement
                (including any arbitration agreement), for such
                disclosure or for any failure to notify the
                person who is the subject of such disclosure or
                any other person identified in the disclosure.
                  (B) Exception.--Subparagraph (A) shall not
                apply to a disclosure or communication required
                under Federal securities law, other than
                provisions of law that specifically refer to
                the Currency and Foreign Transactions Reporting
                Act of 1970.

           *       *       *       *       *       *       *

          (5) Employment references may include suspicions of
        involvement in illegal activity.--
                  (A) In general.--Notwithstanding any other
                provision of law and subject to subparagraph
                (B) of this paragraphand paragraph (2)(C), any
financial institution, and any director, officer, employee, or agent of
such institution, may disclose, in any written employment reference
relating to a current or former institution-affiliated party of such
institution which is provided to another financial institution in
response to a request from such other institution, information
concerning the possible involvement of such institution-affiliated
party in any suspicious transaction relevant to a possible violation of
law or regulation.
                  (B) Limit on liability for disclosures.--A
                financial institution, and any director,
                officer, employee, or agent of such
                institution, shall not be liable to any person
                under any law or regulation of the United
                States, any constitution, law, or regulation of
                any State or political subdivision thereof, or
                under any contract or other legally enforceable
                agreement (including any arbitration
                agreement), for any disclosure under
                subparagraph (A), to the extent--
                          (i) the disclosure does not contain
                        information which the institution,
                        director, officer, employee, agent, or
                        accountant knows to be false; and
                          (ii) the institution, director,
                        officer, employee, agent, or accountant
                        has not acted with malice or with
                        reckless disregard for the truth in
                        making the disclosure.
                  (C) Institution-affiliated party defined.--
                For purposes of this paragraph, the term
                ``institution-affiliated party'' has the
                meaning given to such term in section 3(u) of
                the Federal Deposit Insurance Act, except such
                section 3(u) shall be applied by substituting
                ``financial institution'' for ``insured
                depository institution''.
  (h) Anti-Money Laundering Programs.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Availability of certain account information.--The
        Secretary of the Treasury shall prescribe regulations
        under this subsection which require financial
        institutions to maintain all accounts in such a way as
        to ensure that the name of an account holder and the
        number of the account are associated with all account
        activity of the account holder, and to ensure that all
        such information is available for purposes of account
        supervision and law enforcement.

Sec. 5319. Availability of reports

  The Secretary of the Treasury shall make information in a
report filed under section 5313, [5314, or 5316] 5313A, 5314,
5316, or 5318(g) of this title available to an agency,
including any State financial institutions supervisory agency,
on request of the head of the agency. The report shall be
available for a purpose consistent with those sections or a
regulation prescribed under those sections. The Secretary may
only require reports on the use of such information by any
State financial institutions supervisory agency for other than
supervisory purposes. However, a report and records of reports
under section 5313, 5313A, 5314, 5316, or 5318(g) are exempt
from disclosure under section 552 of title 5. The Secretary of
the Treasury may permit the dissemination of information in any
such reports to any self-regulatory organization (as defined in
section 3(a)(26) of the Securities Exchange Act of 1934), if
the Securities and Exchange Commission determines that such
dissemination is necessary or appropriate to permit such
organization to perform its function under the Securities
Exchange Act of 1934 and regulations prescribed under such Act.

           *       *       *       *       *       *       *

Sec. 5321. Civil penalties

  (a)(1) A domestic financial institution or nonfinancial trade
or business, and a partner, director, officer, or employee of a
domestic financial institution or nonfinancial trade or
business, willfully violating this subchapter or a regulation
prescribed or order issued under this subchapter (except
sections 5314 and 5315 of this title or a regulation prescribed
under sections 5314 and 5315), or willfully violating a
regulation prescribed under section 21 of the Federal Deposit
Insurance Act or under section 123 of Public Law 91-508, is
liable to the United States Government for a civil penalty of
not more than the greater of the amount (not to exceed
$100,000) involved in the transaction (if any) or $25,000. For
a violation of section 5318(a)(2) of this title or a regulation
prescribed under section 5318(a)(2), a separate violation
occurs for each day the violation continues and at each office,
branch, or place of business at which a violation occurs or
continues.

           *       *       *       *       *       *       *

      (6) Negligence.--
          (A) In general.--The Secretary of the Treasury may
        impose a civil money penalty of not more than $500 on
        any financial institution or nonfinancial trade or
        business which negligently violates any provision of
        this subchapter or any regulation prescribed under this
        subchapter.
          (B) Pattern of negligent activity.--If any financial
        institution or nonfinancial trade or business engages
        in a pattern of negligent violations of any provision
        of this subchapter or any regulation prescribed under
        this subchapter, the Secretary of the Treasury may, in
        addition to any penalty imposed under subparagraph (A)
        with respect to any such violation, impose a civil
        money penalty of not more than $50,000 on the financial
        institution or nonfinancial trade or business.

           *       *       *       *       *       *       *

Sec. 5322. Criminal penalties

  (a) A person willfully violating this subchapter or a
regulation prescribed or order issued under this subchapter
(except section 5315 or 5324 of this title or a regulation
prescribed under section 5315 or 5324), or willfully violating
a regulation prescribed under section 21 of the Federal Deposit
Insurance Act or under section 123 of Public Law 91-508, shall
be fined not more than $250,000, or imprisoned for not more
than five years, or both.
  (b) a person willfully violating this subchapter or a
regulation prescribed or order issued under this subchapter
(except section 5315 or 5324 of this title or a regulation
prescribed under section 5315 or 5324), or willfully violating
a regulation prescribed under section 21 of the Federal Deposit
Insurance Act or under section 123 of Public Law 91-508, while
violating another law of the United States or as part of a
pattern of any illegal activity involving more than $100,000 in
a 12-month period, shall be fined not more than $500,000,
imprisoned for not more than 10 years, or both.

           *       *       *       *       *       *       *

  (d) The court may double the sentence of fine or
imprisonment, or both, that would otherwise be imposed on a
person for a violation described in subsection (a) or (b) if
person commits the violation with respect to a transaction
involving a person in, a relationship maintained for a person
in, or a transport of a monetary instrument involving a foreign
country, knowing that the foreign country is designated under
section 5327(b) as a foreign high intensity money laundering
area.

           *       *       *       *       *       *       *

Sec. 5324. Structuring transactions to evade reporting requirement
                    prohibited

  (a) Domestic Coin and Currency Transactions Involving
Financial Institutions.--No person shall for the purpose of
evading the reporting requirements of section 5313(a) or 5325
or any regulation prescribed under any such section, the
reporting requirements imposed by any order issued under
section 5326, or the recordkeeping requirements imposed by any
regulation prescribed under section 21 of the Federal Deposit
Insurance Act or section 123 of Public Law 91-508--
          (1) cause or attempt to cause a domestic financial
        institution to fail to file a report required under
        section 5313(a) or 5325 or any regulation prescribed
        under any such section, to file a report required by
        any order issued under section 5326, or to maintain a
        record required pursuant to any regulation prescribed
        under section 21 of the Federal Deposit Insurance Act
        or section 123 of Public Law 91-508;
          (2) cause or attempt to cause a domestic financial
        institution to file a report required under section
        5313(a) or 5325 or any regulation prescribed under any
        such section, to file a report required by any order
        issued under section 5326, or to maintain a record
        required pursuant to any regulation prescribed under
        section 21 of the Federal Deposit Insurance Act or
        section 123 of Public Law 91-508 that contains a
        material omission or misstatement of fact; or

           *       *       *       *       *       *       *

  (b) Domestic Coin and Currency Transactions Involving
Nonfinancial Trades or Businesses.--No person shall for the
purpose of evading the report requirements of section 5313A or
any regulation prescribed under such section--
          (1) cause or attempt to cause a nonfinancial trade or
        business to fail to file a report required under
        section 5313A or any regulation prescribed under such
        section;
          (2) cause or attempt to cause a nonfinancial trade or
        business to file a report required under section 5313A
        or any regulation prescribed under such section that
        contains a material omission or misstatement of fact;
        or
          (3) structure or assist in structuring, or attempt to
        structure or assist in structuring, any transaction
        with 1 or more nonfinancial trades or businesses.
  [(b)] (c) International Monetary Instrument Transactions.--No
person shall, for the purpose of evading the reporting
requirements of section 5316--
          (1) fail to file a report required by section 5316,
        or cause or attempt to cause a person to fail to file
        such a report;
          (2) file or cause or attempt to cause a person to
        file a report required under section 5316 that contains
        a material omission or misstatement of fact; or
          (3) structure or assist in structuring, or attempt to
        structure or assist in structuring, any importation or
        exportation of monetary instruments.
  [(c)] (d) Criminal Penalty.--
          (1) In general.--Whoever violates this section shall
        be fined in accordance with title 18, United States
        Code, imprisoned for not more than 5 years, or both.
          (2) Enhanced penalty for aggravated cases.--Whoever
        violates this section while violating another law of
        the United States or as part of a pattern of any
        illegal activity involving more than $100,000 in a 12-
        month period shall be fined twice the amount provided
        in subsection (b)(3) or (c)(3) (as the case may be) of
        section 3571 of title 18, United States Code,
        imprisoned for not more than 10 years, or both.

           *       *       *       *       *       *       *

Sec. 5326. Records of certain domestic coin and currency transactions

  (a) In General.--If the Secretary of the Treasury finds, upon
the Secretary's own initiative or at the request of an
appropriate Federal or State law enforcement official, that
reasonable grounds exist for concluding that additional
recordkeeping and reporting requirements are necessary to carry
out the purposes of this subtitle and prevent evasions thereof,
the Secretary may issue an order requiring any domestic
financial institution or nonfinancial trade or business or
group of domestic financial institutions or nonfinancial trades
or businesses in a geographic area--
          (1) to obtain such information as the Secretary may
        describe in such order concerning--
                  (A) any transaction in which such financial
                institution or nonfinancial trade or business
                is involved for the payment, receipt, or
                transfer of United States coins or currency (or
                such other monetary instruments as the
                Secretary may describe in such order) the total
                amounts or denominations of which are equal to
                or greater than an amount which the Secretary
                may prescribe; and
                  (B) any other person participating in such
                transaction;
          (2) to maintain a record of such information for such
        period of time as the Secretary may require; and
          (3) to file a report with respect to any transaction
        described in paragraph (1)(A) in the manner and to the
        extent specified in the order.
  (b) Authority To Order Depository Institutions To Obtain
Reports From Customers.--
          (1) In general.--The Secretary of the Treasury may,
        by regulation or order, require any depository
        institution (as defined in section 3(c) of the Federal
        Deposit Insurance Act)--
                  (A) to request any financial institution or
                nonfinancial trade or business (other than a
                depository institution) which engages in any
                reportable transaction with the depository
                institution to provide the depository
                institution with a copy of any report filed by
                the financial institution or nonfinancial trade
                or business under this subtitle with respect to
                any prior transaction (between such financial
                institution or nonfinancial trade or business
                and any other person) which involved any
                portion of the coins or currency (or monetary
                instruments) which are involved in the
                reportable transaction with the depository
                institution; and
                  (B) if no copy of any report described in
                subparagraph (A) is received by the depository
                institution in connection with any reportable
                transaction to which such subparagraph applies,
                to submit (in addition to any report required
                under this subtitle with respect to the
                reportable transaction) a written notice to the
                Secretary that the financial institution or
                nonfinancial trade or business failed to
                provide any copy of such report.
          (2) Reportable transaction defined.--For purposes of
        this subsection, the term ``reportable transaction''
        means any transaction involving coins or currency (or
        such other monetary instruments as the Secretary may
        describe in the regulation or order) the total amounts
        or denominations of which are equal to or greater than
        an amount which the Secretary may prescribe.
  (c) Nondisclosure of Orders.--No financial institution or
nonfinancial trade or business or officer, director, employee
or agent of a financial institution or nonfinancial trade or
business subject to an order under this section may disclose
the existence of, or terms of, the order to any person except
as prescribed by the Secretary.
  (d) Maximum Effective Period for Order.--No order issued
under subsection (a) shall be effective for more than 60 days
unless renewed pursuant to the requirements of subsection (a).

Sec. 5327. Designation of foreign high intensity money laundering areas

  (a) Criteria.--The Secretary of the Treasury, in consultation
with appropriate Federal law enforcement agencies, shall
develop criteria by which to identify areas outside the United
States in which money laundering activities are concentrated.
  (b) Designation.--The Secretary of the Treasury shall
designate as a foreign high intensity money laundering area any
foreign country in which there is an area which is identified,
using the criteria developed under subsection (a), as an area
in which money laundering activities are concentrated.
  (c) Notice.--On the designation under subsection (b) of a
country as a foreign high intensity money laundering area, the
Secretary of the Treasury shall provide written notice to each
insured depository institution (as defined in section 3(c)(2)
of the Federal Deposit Insurance Act) and each depository
institution holding company (as defined in section 3(w)(1) of
such Act) that has control over an insured depository
institution of the identity of the foreign country and include
with the notice a written warning that there is a concentration
of money laundering activities in the foreign country.

Sec. 5328. Whistleblower protections

  (a) Prohibition Against Discrimination.--No financial
institution or nonfinancial trade or business may discharge or
otherwise discriminate against any employee with respect to
compensation, terms, conditions, or privileges of employment
because the employee (or any person acting pursuant to the
request of the employee) provided information to the Secretary
of the Treasury, the Attorney General, or any Federal
supervisory agency regarding a possible violation of any
provision of this subchapter or section 1956, 1957, or 1960 of
title 18, or any regulation under any such provision, by the
financial institution or nonfinancial trade or business or any
director, officer, or employee of the financial institution or
nonfinancial trade or business.
  (b) Enforcement.--Any employee or former employee who
believes that such employee has been discharged or
discriminated against in violation of subsection (a) may file a
civil action in the appropriate United States district court
before the end of the 2-year period beginning on the date of
such discharge or discrimination.
  (c) Remedies.--If the district court determines that a
violation has occurred, the court may order the financial
institution or nonfinancial trade or business which committed
the violation to--
          (1) reinstate the employee to the employee's former
        position;
          (2) pay compensatory damages; or
          (3) take other appropriate actions to remedy any past
        discrimination.

           *       *       *       *       *       *       *

  (e) Coordination With Other Provisions of Law.--This section
shall not apply with respect to any financial institution or
nonfinancial trade or business which is subject to section 33
of the Federal Deposit Insurance Act, section 213 of the
Federal Credit Union Act, or section 21A(q) of the Home Owners'
Loan Act (as added by section 251(c) of the Federal Deposit
Insurance Corporation Improvement Act of 1991).

           *       *       *       *       *       *       *

                              ----------

            SECTION 21 OF THE FEDERAL DEPOSIT INSURANCE ACT

  Sec. 21. (a) * * *

           *       *       *       *       *       *       *

  (j) Civil Penalties.--
          (1) Penalty imposed.--Any insured depository
        institution and any director, officer, or employee of
        an insured depository institution who willfully or
        through gross negligence violates, or any person who
        willfully causes such a violation, any regulation
        prescribed under subsection (b) shall be liable to the
        United States for a civil penalty of not more than
        [$10,000] the greater of the amount (not to exceed
        $100,000) involved in the transaction (if any) with
        respect to which the violation occurred or $25,000.

           *       *       *       *       *       *       *

                              ----------

                        ACT OF OCTOBER 26, 1970

 AN ACT To amend the Federal Deposit Insurance Act to require insured
banks to maintain certain records, to require that certain transactions
    in United States currency be reported to the Department of the
Treasury, and for other purposes.

           *       *       *       *       *       *       *

Sec. 125. Civil penalties

  (a) For each willful or grossly negligent violation of any
regulation under this chapter, the Secretary may assess upon
any person to which the regulation applies, or any person
willfully causing a violation of the regulation, and, if such
person is a partnership, corporation, or other entity, upon any
partner, director, officer, or employee thereof who willfully
or through gross negligence participates in the violation, a
civil penalty not exceeding [$10,000] the greater of the amount
(not to exceed $100,000) involved in the transaction (if any)
with respect to which the violation occurred or $25,000.

           *       *       *       *       *       *       *

[Sec. 126. Criminal penalty

  [Whoever willfully violates any regulation under this chapter
shall be fined not more than $1,000 or imprisoned not more than
one year, or both.

[Sec. 127. Additional criminal penalty in certain cases

  [Whoever willfully violates, or willfully causes a violation
of any regulation under this chapter, section 21 of the Federal
Deposit Insurance Act, or section 411 of the National Housing
Act, where the violation is committed in furtherance of the
commission of any violation of Federal law punishable by
imprisonment for more than one year, shall be fined not more
than $10,000 or imprisoned not more than five years, or both.]

Sec. 126. Criminal penalty

  A person willfully violating this chapter, section 21 of the
Federal Deposit Insurance Act, or a regulation prescribed under
this chapter or such section, shall be fined not more than
$250,000, or imprisoned for not more than five years, or both.

Sec. 127. Additional criminal penalty in certain cases

  A person willfully violating this chapter, section 21 of the
Federal Deposit Insurance Act, or a regulation prescribed under
this chapter or such section, while violating another law of
the United States or as part of a pattern of any illegal
activity involving more than $100,000 in a 12-month period,
shall be fined not more than $500,000, imprisoned for not more
than 10 years, or both.

           *       *       *       *       *       *       *

                              ----------

      SECTION 407 OF THE MONEY LAUNDERING SUPPRESSION ACT OF 1994

SEC. 407. UNIFORM STATE LICENSING AND REGULATION OF CHECK CASHING,
                    CURRENCY EXCHANGE, AND MONEY TRANSMITTING
                    BUSINESSES.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Report Required.--Not later than the end of the 3-year
period beginning on the date of enactment of this Act and not
later than the end of each of the first two 1-year periods
beginning after the end of such 3-year period, the Secretary of
the Treasury shall submit a report to the Congress containing
the findings and recommendations of the Secretary in connection
with the study under subsection [(c)] (c)(2), together with
such recommendations for legislative and administrative action
as the Secretary may determine to be appropriate.

           *       *       *       *       *       *       *

                              ----------

              SECTION 3518 OF TITLE 44, UNITED STATES CODE

Sec. 3518. Effect on existing laws and regulations

  (a) * * *

           *       *       *       *       *       *       *

  (c)(1) Except as provided in paragraph (2), this chapter
shall not apply to the collection of information--
          (A) * * *

           *       *       *       *       *       *       *

          (C) pursuant to regulations prescribed or orders
        issued by the Secretary of the Treasury under section
        5318(h) or 5326 of title 31;
          [(C)] (D) by compulsory process pursuant to the
        Antitrust Civil Process Act and section 13 of the
        Federal Trade Commission Improvements Act of 1980; or
          [(D)] (E) during the conduct of intelligence
        activities as defined in section 3.4(e) of Executive
        Order No. 12333, issued December 4, 1981, or successor
        orders, or during the conduct of cryptologic activities
        that are communications security activities.

           *       *       *       *       *       *       *

                              ----------

TITLE 18, UNITED STATES CODE

           *       *       *       *       *       *       *

PART I--CRIMES

           *       *       *       *       *       *       *

CHAPTER 46--FORFEITURE

           *       *       *       *       *       *       *

Sec. 981. Civil forfeiture

  (a)(1) Except as provided in paragraph (2), the following
property is subject to forfeiture to the United States:
          (A) Any property, real or personal, involved in a
        transaction or attempted transaction in violation of
        section [5313(a) or 5324(a) of title 31,] 5313(a) or
        5313A of title 31, or subsection (a) or (b) of section
        5324 of such title, or of section 1956 or 1957 of this
        title, or any property traceable to such property.
        However, no property shall be seized or forfeited in
        the case of a violation of section 5313(a) of title 31
        by a domestic financial institution examined by a
        Federal bank supervisory agency or a financial
        institution regulated by the Securities and Exchange
        Commission or a partner, director, or employee thereof.

           *       *       *       *       *       *       *

Sec. 982. Criminal forfeiture

  (a)(1) The court, in imposing sentence on a person convicted
of an offense in violation of section 5313(a), 5313A, 5316, or
5324 of title 31, or of section 1956, 1957, or 1960 of this
title, shall order that the person forfeit to the United States
any property, real or personal, involved in such offense, or
any property traceable to such property. However, no property
shall be seized or forfeited in the case of a violation of
section 5313(a) of title 31 by a domestic financial institution
examined by a Federal bank supervisory agency or a financial
institution regulated by the Securities and Exchange Commission
or a partner, director, or employee thereof.

           *       *       *       *       *       *       *

Sec. 984. Civil forfeiture of fungible property

  [(a) This section shall apply to any action for forfeiture
brought by the Government in connection with any offense under
section 1956, 1957, or 1960 of this title or section 5322 or
5324 of title 31, United States Code.]
  (a) This section applies only if the action for forfeiture
was commenced by a seizure or an arrest in rem not later than 2
years after the offense that is the basis for the forfeiture.

           *       *       *       *       *       *       *

  [(c) No action pursuant to this section to forfeit property
not traceable directly to the offense that is the basis for the
forfeiture may be commenced more than 1 year from the date of
the offense.
  [(d)(1) No action pursuant to this section to forfeit
property not traceable directly to the offense that is the
basis for the forfeiture may be taken against funds held by a
financial institution in an interbank account, unless the
financial institution holding the account knowingly engaged in
the offense.]
  (c)(1) Subsection (b) does not apply to an action against
funds held by a financial institution in an interbank account
unless the account holder knowingly engaged in the offense that
is the basis for the forfeiture.
  (2) As used in this section, the term ``interbank account''
means an account held by one financial institution at another
financial institution primarily for the purpose of facilitating
customer transactions.
  (3) As used in this subsection, a ``financial institution''
includes a foreign bank, as defined in paragraph (7) of section
1(b) of the International Banking Act of 1978.
  (d) Nothing in this section is intended to limit the ability
of the Government to obtain the forfeiture of property under
any statute where the property involved in the offense giving
rise to the forfeiture or property traceable thereto is
available for forfeiture.

           *       *       *       *       *       *       *

                              ----------

INTERNAL REVENUE CODE OF 1986

           *       *       *       *       *       *       *

Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *

CHAPTER 61--INFORMATION AND RETURNS

           *       *       *       *       *       *       *

Subchapter A--Returns and Records

           *       *       *       *       *       *       *

PART III--INFORMATION RETURNS

           *       *       *       *       *       *       *

   Subpart B--Information Concerning Transactions with Other Persons

        Sec. 6041. Information at source.
     * * * * * * *
        [Sec. 6050I. Returns relating to cash received in trade or
                  business, etc.]
     * * * * * * *

[SEC. 6050I. RETURNS RELATING TO CASH RECEIVED IN TRADE OR BUSINESS,
                    ETC.

  [(a) Cash Receipts of More Than $10,000.--Any person--
          [(1) who is engaged in a trade or business, and
          [(2) who, in the course of such trade or business,
        receives more than $10,000 in cash in 1 transaction (or
        2 or more related transactions),
shall make the return described in subsection (b) with respect
to such transaction (or related transactions) at such time as
the Secretary may by regulations prescribe.
  [(b) Form and Manner of Returns.--A return is described in
this subsection if such return--
          [(1) is in such form as the Secretary may prescribe,
          [(2) contains--
                  [(A) the name, address, and TIN of the person
                from whom the cash was received,
                  [(B) the amount of cash received,
                  [(C) the date and nature of the transaction,
                and
                  [(D) such other information as the Secretary
                may prescribe.
  [(c) Exceptions.--
          [(1) Cash received by financial institutions.--
        Subsection (a) shall not apply to--
                  [(A) cash received in a transaction reported
                under title 31, United States Code, if the
                Secretary determines that reporting under this
                section would duplicate the reporting to the
                Treasury under title 31, United States Code, or
                  [(B) cash received by any financial
                institution (as defined in subparagraphs (A),
                (B), (C), (D), (E), (F), (G), (J), (K), (R),
                and (S) of section 5312(a)(2) of title 31,
                United States Code).
          [(2) Transactions occurring outside the united
        states.--Except to the extent provided in regulations
        prescribed by the Secretary, subsection (a) shall not
        apply to any transaction if the entire transaction
        occurs outside the United States.
  [(d) Cash Includes Foreign Currency and Certain Monetary
Instruments.--For purposes of this section, the term ``cash''
includes--
          [(1) foreign currency, and
          [(2) to the extent provided in regulations prescribed
        by the Secretary, any monetary instrument (whether or
        not in bearer form) with a face amount of not more than
        $10,000.
Paragraph (2) shall not apply to any check drawn on the account
of the writer in a financial institution referred to in
subsection (c)(1)(B).
  [(e) Statements To Be Furnished to Persons with Respect to
Whom Information is Required.--Every person required to make a
return under subsection (a) shall furnish to each person whose
name is required to be set forth in such return a written
statement showing--
          [(1) the name, address, and phone number of the
        information contact of the person required to make such
        return, and
          [(2) the aggregate amount of cash described in
        subsection (a) received by the person required to make
        such return.
The written statement required under the preceding sentence
shall be furnished to the person on or before January 31 of the
year following the calendar year for which the return under
subsection (a) was required to be made.
  [(f) Structuring Transactions to Evade Reporting Requirements
Prohibited.--
          [(1) In general.--No person shall for the purpose of
        evading the return requirements of this section--
                  [(A) cause or attempt to cause a trade or
                business to fail to file a return required
                under this section,
                  [(B) cause or attempt to cause a trade or
                business to file a return required under this
                section that contains a material omission or
                misstatement of fact, or
                  [(C) structure or assist in structuring, or
                attempt to structure or assist in structuring,
                any transaction with one or more trades or
                businesses.
          [(2) Penalties.--A person violating paragraph (1) of
        this subsection shall be subject to the same civil and
        criminal sanctions applicable to a person which fails
        to file or completes a false or incorrect return under
        this section.
  [(g) Cash Received by Criminal Court Clerks.--
          [(1) In general.--Every clerk of a Federal or State
        criminal court who receives more than $10,000 in cash
        as bail for any individual charged with a specified
        criminal offense shall make a return described in
        paragraph (2) (at such time as the Secretary may by
        regulations prescribe) with respect to the receipt of
        such bail.
          [(2) Return.--A return is described in this paragraph
        if such return--
                  [(A) is in such form as the Secretary may
                prescribe, and
                  [(B) contains--
                          [(i) the name, address and TIN of--
                                  [(I) the individual charged
                                with the specified criminal
                                offense, and
                                  [(II) each person posting the
                                bail (other than a person
                                licensed as a bail bondsman),
                          [(ii) the amount of cash received,
                          [(iii) the date the cash was
                        received, and
                          [(iv) such other information as the
                        Secretary may prescribe.
          [(3) Specified criminal offense.--For purposes of
        this subsection, the term ``specified criminal
        offense'' means--
                  [(A) any Federal criminal offense involving a
                controlled substance,
                  [(B) racketeering (as defined in section
                1951, 1952, or 1955 of title 18, United States
                Code),
                  [(C) money laundering (as defined in section
                1956 or 1957 of such title), and
                  [(D) any State criminal offense substantially
                similar to an offense described in
                subparagraph(A), (B), or (C).
          [(4) Information to Federal prosecutors.--Each clerk
        required to include on a return under paragraph (1) the
        information described in paragraph (2)(B) with respect
        to an individual described in paragraph (2)(B)(i)(I)
        shall furnish (at such time as the Secretary may by
        regulations prescribe) a written statement showing such
        information to the United States Attorney for the
        jurisdiction in which such individual resides and the
        jurisdiction in which the specified criminal offense
        occurred.
          [(5) Information to Payors of Bail.--Each clerk
        required to make a return under paragraph (1) shall
        furnish (at such time as the Secretary may by
        regulations prescribe) to each person whose name is
        required to be set forth in such return by reason of
        paragraph (2)(B)(i)(II) a written statement showing--
                  [(A) the name and address of the clerk's
                office required to make the return, and
                  [(B) the aggregate amount of cash described
                in paragraph (1) received by such clerk.]

           *       *       *       *       *       *       *

Subchapter B--Miscellaneous Provisions

           *       *       *       *       *       *       *

SEC. 6103. CONFIDENTIALITY AND DISCLOSURE OF RETURNS AND RETURN
                    INFORMATION.

  (a)  * * *

           *       *       *       *       *       *       *

  (l) Disclosure of Returns and Return Information for Purposes
Other Than Tax Administration.--
          (1)  * * *

           *       *       *       *       *       *       *

          [(15) Disclosure of returns filed under section
        6050i.--The Secretary may, upon written request,
        disclose to officers and employees of--
                  [(A) any Federal agency,
                  [(B) any agency of a State or local
                government, or
                  [(C) any agency of the government of a
                foreign country,
        information contained on returns filed under section
        6050I. Any such disclosure shall be made on the same
        basis, and subject to the same conditions, as apply to
        disclosures of information on reports filed under
        section 5313 of title 31, United States Code; except
        that no disclosure under this paragraph shall be made
        for purposes of the administration of any tax law.]

           *       *       *       *       *       *       *

  (p) Procedure and Recordkeeping.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Records of inspection and disclosure.--
                  (A) System of recordkeeping.--Except as
                otherwise provided by this paragraph, the
                Secretary shall maintain a permanent system of
                standardized records or accountings of all
                requests for inspection or disclosure of
                returns and return information (including the
                reasons for and dates of such requests) and of
                returns and return information inspected or
                disclosed under this section. Notwithstanding
                the provisions of section 552a(c) of title 5,
                United States Code, the Secretary shall not be
                required to maintain a record or accounting of
                requests for inspection or disclosure of
                returns and return information, or of returns
                and return information inspected or disclosed,
                under the authority of subsections (c), (e),
                (h)(1), (3)(A), or (4), (i)(4), or (7)(A)(ii),
                (k)(1), (2), (6), or (8), (l)(1), (4)(B), (5),
                (7), (8), (9), (10), (11), (12), (13), (14), or
                [(15),] (m) or (n). The records or accountings
                required to be maintained under this paragraph
                shall be available for examination by the Joint
                Committee on Taxation or the Chief of Staff of
                such joint committee. Such record or accounting
                shall also be available for examination by such
                person or persons as may be, but only to the
                extent, authorized to make such examination
                under section 552a(c)(3) of title 5, United
                States Code.

           *       *       *       *       *       *       *

          (4) Safeguards.--Any Federal agency described in
        subsection (h)(2), (h)(5), (i)(1), (2), (3), or (5),
        (j)(1) or (2), (k)(8), (l)(1), (2), (3), (5), (10),
        (11), (13), or (14) or (o)(1), the General Accounting
        Office, or any agency, body, or commission described in
        subsection (d), (i)(3)(B)(i) or (l)(6), (7), (8), (9),
        (10), [(12) or (15), or (16)] (12), or (16), or any
        other person described in subsection (l)(16) shall, as
        a condition for receiving returns or return
        information--
                  (A) * * *

           *       *       *       *       *       *       *

                  (F) upon completion of use of such returns or
                return information--
                          (i) * * *
                          (ii) in the case of an agency
                        described in subsections (h)(2),
                        (h)(5), (i)(1), (2), (3), or (5),
                        (j)(1) or (2), (k)(8), (l)(1), (2),
                        (3), (5), (10), (11), (12), (13),
                        [(14), or (15)] or (14) or (o)(1), or
                        the General Accounting Office, either--
                                  (I) * * *

           *       *       *       *       *       *       *

 CHAPTER 68--ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE
PENALTIES

           *       *       *       *       *       *       *

Subchapter B--Assessable Penalties

           *       *       *       *       *       *       *

PART II--FAILURE TO COMPLY WITH CERTAIN INFORMATION REQUIREMENTS

           *       *       *       *       *       *       *

SEC. 6721. FAILURE TO FILE CORRECT INFORMATION RETURNS.

  (a) * * *

           *       *       *       *       *       *       *

  (e) Penalty in Case of Intentional Disregard.--If 1 or more
failures described in subsection (a)(2) are due to intentional
disregard of the filing requirement (or the correct information
reporting requirement), then, with respect to each such
failure--
          (1) subsections (b), (c), and (d) shall not apply,
          (2) the penalty imposed under subsection (a) shall be
        $100, or, if greater--
                  (A) in the case of a return other than a
                return required under section 6045(a),
                6041A(b), 6050H, [6050I,] 6050J, 6050K, or
                6050L, 10 percent of the aggregate amount of
                the items required to be reported correctly, or
                  (B) in the case of a return required to be
                filed by section 6045(a), 6050K, or 6050L, 5
                percent of the aggregate amount of the items
                required to be reported correctly, [or] and
                  [(C) in the case of a return required to be
                filed under section 6050I(a) with respect to
                any transaction (or related transactions), the
                greater of
                          [(i) $25,000, or
                          [(ii) the amount of cash (within the
                        meaning of section 6050I(d)) received
                        in such transaction (or related
                        transactions) to the extent the amount
                        of such cash does not exceed $100,000,
                        and]

           *       *       *       *       *       *       *

CHAPTER 75--CRIMES, OTHER OFFENSES, AND FORFEITURES

           *       *       *       *       *       *       *

Subchapter A--Crimes

           *       *       *       *       *       *       *

PART I--GENERAL PROVISIONS

           *       *       *       *       *       *       *

SEC. 6724. WAIVER; DEFINITIONS AND SPECIAL RULES.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Definitions.--For purposes of this part--
          (1) Information return.--The term ``information
        return'' means--
                  (A) * * *
                  (B) any return required by--
                          (i) * * *

           *       *       *       *       *       *       *

                          [(iv) section 6050I(a) or (g)(1)
                        (relating to cash received in trade or
                        business, etc.),]
                          [(v)] (iv) section 6050J(a) (relating
                        to foreclosures and abandonments of
                        security),
                          [(vi)] (v) section 6050K(a) (relating
                        to exchanges of certain partnership
                        interests),
                          [(vii)] (vi) section 6050L(a)
                        (relating to returns relating to
                        certain dispositions of donated
                        property),
                          [(viii)] (vii) section 6050P
                        (relating to returns relating to the
                        cancellation of indebtedness by certain
                        financial entities),
                          [(ix)] (viii) section 6050S (relating
                        to returns relating to payments for
                        qualified tuition and related
                        expenses),
                          [(x)] (ix) section 6052(a) (relating
                        to reporting payment of wages in the
                        form of term-life insurance),
                          [(xi)] (x) section 6053(c)(1)
                        (relating to reporting with respect to
                        certain tips),
                          [(xii)] (xi) subsection (b) or (e) of
                        section 1060 (relating to reporting
                        requirements of transferors and
                        transferees in certain asset
                        acquisitions),
                          [(xiii)] (xii) subparagraph (A) or
                        (C) of subsection (c)(4), of section
                        4093 (relating to information reporting
                        with respect to tax on diesel and
                        aviation fuels)
                          [(xiv)] (xiii) section 4101(d)
                        (relating to information reporting with
                        respect to fuels taxes)
                          [(xv)] (xiv) subparagraph (C) of
                        section 338(h)(10)(relating to
                        information required to be furnished to
                        the Secretary in case of elective
                        recognition of gain or loss).

           *       *       *       *       *       *       *

          (2) Payee statement.--The term ``payee statement''
        means any statement required to be furnished under--
                  (A) * * *

           *       *       *       *       *       *       *

                  [(K) section 6050I(e) or paragraph (4) or (5)
                of section 6050I(g) (relating to cash received
                in trade or business, etc.),]
                  [(L)] (K) section 6050J(e) (relating to
                returns relating to foreclosures and
                abandonments of security),
                  [(M)] (L) section 6050K(b) (relating to
                returns relating to exchanges of certain
                partnership interests),
                  [(N)] (M) section 6050L(c) (relating to
                returns relating to certain dispositions of
                donated property),

           *       *       *       *       *       *       *

SEC. 7203. WILLFUL FAILURE TO FILE RETURN, SUPPLY INFORMATION, OR PAY
                    TAX.

  Any person required under this title to pay any estimated tax
or tax, or required by this title or by regulations made under
authority thereof to make a return, keep any records, or supply
any information, who willfully fails to pay such estimated tax
or tax, make such return, keep such records, or supply such
information, at the time or times required by law or
regulations, shall, in addition to other penalties provided by
law, be guilty of a misdemeanor and, upon conviction thereof,
shall be fined not more than $25,000 ($100,000 in the case of a
corporation), or imprisoned not more than 1 year, or both,
together with the costs of prosecution. In the case of any
person with respect to whom there is a failure to pay any
estimated tax, this section shall not apply to such person with
respect to such failure if there is no addition to tax under
section 6654 or 6655 with respect to such failure. [In the case
of a willful violation of any provision of section 6050I, the
first sentence of this section shall be applied by substituting
``felony'' for ``misdemeanor'' and ``5 years'' for ``1 year''.]

           *       *       *       *       *       *       *

         ADDITIONAL VIEWS OF MAXINE WATERS AND MAURICE HINCHEY

    We are pleased that the Committee on Banking and Financial
Services took up the issue of money laundering and reported The
Money Laundering Deterrence Act out of committee. The primary
purpose of this bill is to ``provide the law enforcement
community with the necessary legal authority to combat money
laundering.'' This is a laudable goal, which we fully support.
We are especially pleased that the Committee accepted a number
of amendments that, in our view, strengthen the bill and help
it achieve its purposes.

                     know your customer regulations

    ``Know Your Customer'' procedures are perhaps the most
critical component of a successful anti-money laundering
strategy. The creation and maintenance of a customer profile is
key to determining banking activities that are suspicious in
nature. Unfortunately, regulations that would give banks more
instruction on how to implement their policies and provide for
more oversight of these practices have yet to be put in place.
We are pleased that the Committee accepted our amendment to
require that the ``Know Your Customer'' regulations be
completed within 120 days of the date of enactment.

                          increased penalties

    Perhaps the most important aspect of the Money Laundering
Deterrence Act is that it increases the penalties for money
laundering violations. In our view, banks and their employees
will not be deterred from laundering the proceeds of organized
crime and drugs unless the consequences reflect the seriousness
of the crime. Money laundering is extremely lucrative--the
bill's findings indicate that more than $500 billion of dirty
money washes through the financial system every year. With this
kind of money at stake, the current fines and other sanctions
for civil and criminal violations are far to low to be taken
seriously by criminals.
    Section 5 of the bill increases the penalties for most
civil violations of the anti-money laundering laws to a maximum
of $100,000 per violation. It also increases the fines and
prison sentences for criminal violations, and cracks down on
people who willfully evade the currency transaction reporting
requirements to hide the proceeds of their crimes. These
increases are a good start toward making the punishment fit the
crime, but still fall far short of being strong enough to
discourage a half-trillion dollar banking enterprise.
    For this reason, we offered two amendments at the mark up
that attempt to deter money laundering activities by increasing
the penalties for engaging in these illegal practices.
High intensity money laundering areas amendment
    One of the obstacles that law enforcement faces in
implementing an effective anti-money laundering strategy is the
difficulty in regulating the activities that take place in
overseas banks. In some countries, laws protecting the privacy
of banking clients completely thwart any efforts to combat
money laundering. In fact, some of these countries package
themselves as havens for those who wish to avoid the scrutiny
of law enforcement and regulation. United States financial
institutions must carefully review and monitor activities in
these countries and understand the increased risk of doing
business in countries where money laundering activities are
concentrated.
    We are pleased that the Committee accepted our amendment to
address this which:
          1. Designates certain foreign countries as ``High
        Intensity Money Laundering Areas,''
          2. Gives notice to those banks with affiliates or
        branches in those countries that they are conducting
        banking operations in a high risk area, and
          3. Increases the penalties for those financial
        institutions that violate federal money laundering laws
        associated with transactions in countries with this
        designation.
    We look forward to working with the Chairman to address
some of the concerns that were raised about the designation
procedure and notice provision before the bill reaches the
House floor.
Revocation of deposit insurance amendment
    We addressed the issue of punishment for serial money
launderers at the markup with an amendment that would have
revoked the deposit insurance of banks that are convicted of
three violations of criminal anti-money laundering laws in a
10-year period. Such a measure would have shown financial
institutions that we mean business--a bank is not viable as a
depository institution without access to the federal safety
net.
    We withdrew the amendment at the request of the Chairman
after concerns were voiced about its effect. The Chairman
indicated his willingness to work with us to rewrite this
amendment so it punishes the institutions that egregiously and
willfully violate the laws, without doing undue harm to those
whose violations may be technical or inadvertent. We look
forward to working with the Chairman on such a provision before
the bill goes to the House floor.

                                   Maxine Waters.
                                   Maurice Hinchey.

                      DISSENTING VIEW OF RON PAUL

    The support for the passage of these bills is a recognition
that the current policy has failed. These two bills, H.R. 4005,
the Money Laundering Deterrence Act of 1998, and H.R. 1756, the
Money Laundering and Financial Crimes Strategy Act of 1998,
should be rejected. Despite the desire to appear to be ``doing
something'' to thwart personal behavior that some find
objectionable, the more justifiable position is to stand for
and respect the U.S. Constitution, good economic sense,
individuals rights and privacy. Ours is a federal government of
limited powers, restricted by the United States Constitution
and the too-often-forgotten Bill of Rights preserving
individual liberty and reserving certain powers to the states.
Constitutional concerns
    Constitutionally there are only three federal crimes. These
are treason, piracy on the high seas, and counterfeiting. The
federal government's role in law enforcement ought to be
limited to these constitutionally federal crimes. As such, the
criminal laws concerning issues other than these must,
according to the ninth and tenth amendments be reserved to
state and local governments. The eighteenth and twenty-first
amendments are testaments to the constitutional restrictions
placed upon police power at the federal level of government.
    This interventionist approach (further expanded by these
two bills) has not only failed to stem the flow of drugs into
this country, substantially reduce the illegal drug trades'
profitability or reduce consumption of publicly disapproved-of-
substances, but it has introduced a new, violent element into
the mix. As a result of government coercion attempting to
stifle individual choice and voluntary exchange, profits on the
trade of now-illegal substances are artificially high which
induces some individuals to risk official retribution. Before
drug prohibition and the so-called war on drugs, some
individuals chose to use some drugs--just as some do today.
However, the violence associated with the drug trade is a
result of the failed federal government's attempt to restrict
individual liberty.
    It is an irrational policy: what is the rationale behind a
policy whereby morphine is legal but marijuana is not? Perhaps,
following the logic of the prohibitionists, we should, but
federal governmental intervention, outlaw fatty foods that
allegedly harm one's health.
Unfunded mandate and great regulatory cost
    These bills will join the misnamed Bank Secrecy Act and
other measures that amount to an unfunded mandate on private
bankers whose only crime is to meet the need of their
customers. Such a federal government intervention in this
voluntary exchange is obviously wrong and unjustified by our
constitutional rights.
    The cost of showing that one complies with the current
forms far exceed any alleged benefit. These bills will only add
to that burden. Calculations using statistics provided by the
Financial Crime Enforcement Network (FinCEN) put cost of
compliance at $83,454,000 in 1996 for just one law, the Ban
Secrecy Act. This estimate was made by totalling only the
number of forms required by the Bank Secrecy Act (multiplied by
the cost of compliance of each type of form) to the respondent
financial institution, according to numbers supplied in
response to a September 1997 request by my office to FinCEN.
Two forms were not included in the total which undoubtably
would push the current total compliance cost higher: IRS 8852
had been required for less than one year, and TDF 90-2249 was
not yet active.
Regulatory burdens contribute to bank mergers
    Compliance costs for smaller banks are disproportionately
high. According to a study prepared for the Independent Bankers
Association of America by Grant Thorton in 1993, annual
compliance cost for the Bank Secrecy Act in 1992 were estimated
at 2,083,003 hours and $59,660,479 just for community banks. It
noted that ``smaller banks face the highest compliance cost in
relation to total assets, equity capital and net income before
taxes. For each $1 million in assets, bank less than $30
million in assets incur almost three time the compliance cost
of banks between $30-65 million in assets. These findings are
consistent for both equity capital and net income
measurements.'' In short, these regulations impose a marginal
advantage to larger institutions and are a contributing factor
to the rise in mergers into ever-larger institutions. These
bills will only exacerbate this factor.
    The Cost of Banking Regulations: A Review of the Evidence,
(Gregory Elliehausen, Board of Governors of the Federal Reserve
System Staff Study 171, April 1998), concurs that the new
regulations will impose a disproportionately large cost on
smaller institutions. The estimated, aggregate cost of bank
regulation (noninterest expenses) on commercial banks was
$125.9 billion in 1991, according to the Fed Staff Study. As
the introduction of new entrants into the market becomes more
costly, smaller institutions will face a marginally increased
burden and will be more likely to consolidate. ``The basic
conclusion is similar for all of the studies of economies of
scale: Average compliance costs for regulations are
substantially greater for banks at low levels of output than
for banks at moderate or high levels of output,'' the Staff
study concludes.
    In addition to all of the problems associated with the
obligations and requirements that the government regulations
impose on the productive, private sectors of the economy, the
regulatory burdens amount to a government credit allocation
scheme. As Ludwig von Mises explained well in The Theory of
Money and Credit (originally) in 1912, governmental credit
allocation is a misdirection of credit which leads to
malinvestment and contributes to an artificial boom and bust
cycle. Nobel laureate Frederick A. Hayek and Mises' other
brilliant student Murray Rothbard expounded on this idea.
    The unintended consequences of the passage of this bill, as
written, will be to stifle the formation of new financial
institutions, to consolidate current financial institutions
into larger ones better able to internalize the cost of the
additional regulations, and to lower productivity and economic
growth due to the misallocation of credit. This increased
burden must ultimately be passed on to the consumer. The
increased cost on financial institutions these bills impose
will lead to a reduction of access to financial institutions,
higher fees and higher rates. These provisions are anti-
consumer. The marginal consumers are the ones who will suffer
most under these bills.
Little benefit for great cost
    Despite the great costs this interventionist approach
imposes on the economy, the alleged benefits are poor. Let all
of those who believe that the current anti-money laundering
laws work stand up and take credit for the success of their
approach: drugs are still readily available on the streets. The
proponents of these bills need to explain how the additional
burden that these bills will impose will meet their objectives.
They have failed to justify the costs.
    ``The drive to stem these flows has imposed an enormous
paperwork burden on banks. According to the American Bankers
Association, the cost of meeting all the regulations required
by the U.S. government may total $10 billion a year. That might
be acceptable if convictions for money laundering kept pace
with the millions of documents banks must file each year. But
the scorecard has been disappointing,'' reads the Journal of
Commerce (December 10, 1996).
    Referring to the same Justice Department figures cited in
the Journal of Commerce article, Richard Rahn, president and
CEO of Novecon, LTD, writes, ``In the ten year period from
1987-1996, banks filed more than 77 million Currency
Transaction Reports (CTRs) with the U.S. Treasury. This amounts
to approximately 308,000 pounds of paper * * * 7,300 defendants
were charged but only 580 people were convicted, according to
the Justice Department. Environmentalists take note: this works
out to about 531 pounds of paper per conviction [America the
Financial Imperialist, to be presented at the Cato Institute
Conference, Collateral Damage: The Economic Cost of U.S.
Foreign Policy, June 23, 1998].''
    Mr. Rahn cites arguments by former Federal Reserve Board
Governor Lawrence Lindsey who explains that money laundering
laws discriminate against the poor. Mr. Rahn's paper
elaborates, ``[The poor] are the least likely to have
established relationships with banks and the most likely to
operate primarily with cash. Hence, they are the first to be
targeted, and this even further discourages bankers from
wanting their business.''

Legal liability questions not adequately addressed

    These laws open the financial institutions up to a new area
of legal liability. These bills do not adequately address these
concerns. Responding to the Treasury Department money
laundering proposal, John J. Byrne, the American Bankers
Association's money laundering expert, said the industry
opposes plans that impose onerous record-keeping requirements
and banks fear being sued by the government or another company
if they incorrectly certify that a customer has not committed
any illegal acts (American Banker, November 11, 1997). These
regulations effectively deputize bank tellers as law
enforcement officers.
    The Independent Bankers Association of America (IBAA) has
called for FinCEN to establish a ``safe harbor'' in these
regulations. In nearly all cases, the bank has acted in good
faith and should not risk being punished. Says a January 1998
IBAA letter to FinCEN, ``If a bank has acted in good faith,
knowing that there is some protection from liability will
encourage banks to use the exemption process. For many banks,
especially smaller banks which do not experience as many large
currency transactions, it is much simpler to file a CTR. Many
are concerned about the possible liability attached to
incorrect usage of the exemption list. To avoid any hint of
liability, and to avoid criticism from examiners, bankers avoid
using the exemption process. A safe harbor from liability would
go a long way to encourage them to use exemptions, and to cut
down on the number of CTRs.'' Banks filed 12.75 million
currency transaction reports in 1996, nearly double the number
only six years earlier without any appreciable reduction in the
drug trade.

Infringes on right to privacy

          Subtler and more far-reaching means of invading
        privacy have become available to the government.
        Discovery and invention have made it possible for the
        government, by means far more effective than stretching
        upon the rack, to obtain disclosure in court of what is
        whispered in the closet.--U.S. Supreme Court Justice
        Louis Brandeis (1928).

    A Winston Smith, or any other average citizen, would have
good reason to be even more concerned with the technological
reach of a not so fraternal, big government agency. In his
opening statement before the Subcommittee on General Oversight
and Investigations, House Banking and Financial Services
Committee, Hearing to Review the Department of the Treasury's
Proposed Rules for Money Service Businesses, Chairman Spencer
Bachus championed privacy rights saying, ``We have to be
cognizant that rules often have unintended consequences * * *
These rules will require a huge increase in the amount of
information on private citizens that will be provided to
federal law enforcement. We need to know whether this creates a
potential for abuse, either by those in the industries that do
the reporting or by those in government that receive the
information * * * this is not an insignificant concern.''
    At the same hearing, John Bryne of the American Bankers
Association trumpeted our tradition of common law rights of
privacy and supported ``meaningful, consumer-friendly''
frameworks based on self-regulating privacy regimes. That is a
much preferred approach.
    It is proposed that some banks like the Bank Secrecy Act
because of the safety and soundness concerns associated with
``illicit'' funds. The problem lies with the government's
interventionist drug policies. Would those same proponents of
the money-laundering laws still argue about safety and
soundness of deposits from beer and wine wholesalers and
distributors?

FinCEN's blemished record safeguarding our privacy

    The mere existence of the databases holding confidential
information on private individuals opens up the possibility of
abuse. Unfortunately, it is not just an unfounded fear based on
hypotheticals. In fact, the employees of FinCEN itself cannot
always be trusted. In 1993, one employee took the liberty of
using the resources at his disposal to do a digging into the
(assumed to be) private records of the mother of his
girlfriend. In the same year, another employee of FinCEN left
her desk unattended with the opportunity available for others
to access privileged information--and someone else used the
opportunity to pursue personally-motivated independent
research.
    FinCEN defends itself in a fax to our office in response to
our inquiries saying ``our system of security controls is * * *
obviously working. Because of the controls we have in place,
the twoviolations which occurred were picked up right away and
dealt with immediately.'' Neither employee was prosecuted nor fired. No
systemic changes were made to safeguard privacy.
    The General Accounting Office has criticized FinCEN for
failing to keep Congress adequately informed. The agency has
missed congressionally-mandated deadlines and sometimes
implemented fewer than one-half of the provisions of
congressional acts, according to one recent GAO report (Money
Laundering: FinCEN Needs to Better Manage Bank Secrecy Act
Civil Penalty Cases, June 1998).
    Computer vulnerability to hackers is another concern
expressed by a major trade group. ``The Independent Bankers of
America said the Treasury Department's Financial Crimes
Enforcement Network needs to do more to make sure that reports
on questionable bank transactions are not vulnerable to anyone
with a computer, a modem and some spare time,'' reports The
American Banker (November 30, 1995).
    ``By requiring the disclosure of detailed information on
customers and their transactions, the proposed regulations
would conflict with the confidentiality inherent in encrypted
communications in electronic banking and commerce,'' writes
Thomas E. Crocker (The American Banker, September 23, 1997) in
an editorial entitled ``Broadening Bank Secrecy Act Is Risky.''
He wrote opposing Treasury Department's proposal to expand the
BSA's reach into electronic commerce, but the comments are
valid in a broader context as well.
    No government agency can be trusted to safeguard adequately
our privacy.

Barr amendment would reduce privacy safeguards

    The sense of Congress amendment offered by Mr. Barr would
make a bad situation worse. Since current safeguards have
proved insufficient, we must not reduce what little protection
our constituents have. ``The government has tremendous
information resources at its disposal in data base centers,
like the Financial Crimes Enforcement Network (FinCEN) * * *
FinCEN has literally everything there is to know about you--tax
records, postal addresses, credit records, banking information,
you name it--and if more taxpayers knew about it, they would be
outrated [emphasis added]'' claimed Grover G. Norquist,
president, Americans for Tax Reform, in a statement to the
House Judiciary Committee at the hearing on ``Security and
Freedom Through Encryption.''
    FinCEN, in a written response to questions concerning his
testimony, said ``FinCEN has no access to income tax data of
any kind * * * The only tax records to which FinCEN has access
are property tax records of the kind that any citizen may view
in any courthouse * * * FinCEN does obtain from credit agencies
certain basic identifying information for individuals as
permitted by the Fair Credit Reporting Act. Finally, it has no
general access to banking records but only to reports of large
currency transactions and suspicious activity.''
    Mr. Norquist was ahead of his time. This bill gives FinCEN
access to income tax records. In addition, the Treasury
Department has tried to lower the threshold for ``large
currency transactions'' to only $750. Of course, if you look
``suspicious,'' let's make it only $500, they say.
    ``Suspicious activities'' by customers is inherently
subjective and open to abuse. Mr. Norquist is right to point
out that taxpayers should be outraged. In addition, the so-
called ``know your customer'' amendment adopted by the
committee further infringes on the right to privacy.

Not every citizen is a crook

    In Supreme Court Justice William O. Douglas dissented in
California Bankers Assn v. Shultz, 416 U.S. 21 (1974),
questioning the Constitutionality of the Bank Secrecy Act,
writing:

          First, as to the recordkeeping requirements, their
        announced purpose is that they will have ``a high
        degree of usefulness in criminal, tax, or regulatory
        investigations or proceedings,'' 12 U.S.C. 1829b * * *
        It is estimated that a minimum of 20 billion checks--
        and perhaps 30 billion--will have to be photocopied and
        that the weight of these little pieces of paper will
        approximate 166 million pounds a year * * * It would be
        highly useful to governmental espionage to have like
        reports from all our bookstores, all our hardware [416
        U.S. 21, 85] and retail stores, all our drugstores.
        These records too might be ``useful'' in criminal
        investigations.
          One's reading habits furnish telltale clues to those
        who are bent on bending us to one point of view. What
        one buys at the hardware and retail stores may furnish
        clues to potential uses of wires, soap powders, and the
        like used by criminals. A mandatory recording of all
        telephone conversations would be better than the
        recording of checks under the Bank Secrecy Act, if Big
        Brother is to have his way [emphasis added]. The
        records of checks--now available to the investigators--
        are highly useful. In a sense a person is defined by
        the checks he writes. By examining them the agents get
        to know his doctors, lawyers, creditors, political
        allies, social connections, religious affiliation,
        educational interests, the paper and magazines he
        reads, and so on ad infinitum. These are all tied to
        one's social security number; and now that we have the
        data banks, these other items will enrich that
        storehouse and make it possible for a bureaucrat--by
        pushing one button--to get in an instant the names of
        the 190 million Americans who are subversives or
        potential and likely candidates.
          It is, I submit, sheer nonsense to agree with the
        Secretary that all bank records of every citizen ``have
        a high degree of usefulness in criminal, tax, or
        regulatory investigations or proceedings.'' That is
        unadulterated nonsense unless we are to assume that
        every citizen is a crook, an assumption I cannot make,

Justice Douglas concluded.

Operation Casablanca worsens situation

    The police ``sting'' operation has caused international
problems since such operations are illegal in Mexico with some
referring to it as ``a debacle for U.S. diplomacy.'' Rosario
Green, Mexico's foreign minister, says, ``This has been a very
strong blow to binational cooperation, especially on matters of
drug trafficking.'' (Wall Street Journal, May 28, 1998) U.S.
banks named in the investigation were left untouched. She
claims to have evidence that U.S. agents broke Mexican law and
Mexico may demand their extradition; she termed the operation a
``violation of national sovereignty.''
    The illegal sting operation will make only a paltry dent in
money laundering activities. Sinceit is estimated that $300
billion to $500 billion is cycled through the U.S. financial system on
an annual basis, the operation will have little real effect. Federal
officials expect to seize as much as $152 million in more than than 100
accounts in the United States, Europe and the Caribbean (Washington
Post, May 20, 1998).
    ``In general, U.S. government sting operations have failed
to produce convictions. Of 142 cases filed and 290 defendants
charged as the result of bank stings between 1990 and 1995,
only 29 were found guilty,'' the Journal of Commerce (December
10, 1996) article continues. And drugs are still available on
the schoolyard.

Oppose regulations of gold as money

    The Financial Action Task Force (FATF) on Money Laundering
(based at the Organization for Economic Cooperation and
Development), 1997-1998 Report on Money Laundering Topologies
(12 February 1998), suggested expanding still further the reach
of governmental police intenvetion--this time in the gold
market. ``The FATF experts considered for the first time the
possibilities of laundering in the gold market. The scale of
laundering in this sector, which is not a recent development,
constitutes a real threat.
    ``Gold is a very popular recourse of launderers because of
the following characteristics:
          a universally accepted medium of exchange;
          a hedge in times of uncertainly;
          prices set daily, hence a reasonably foreseeable
        value;
          a material traded on world markets;
          anonymity;
          easy changeability of its forms;
          possibility of dealers of layering transactions in
        order to blur the audit trail;
          possibilities of double invoicing, false shipments
        and other fraudulent practices.''
    The FATF report continued, ``Gold is the only raw material
comparable to money.'' While the FATF experts are clearly right
in concluding that gold is money, we should steadfastly oppose
the report's consideration of an expanded governmental reach to
control gold.
    ``It is possible to grasp the meaning of the idea of sound
money if one does not realize that it was devised as an
instrument for the protection of civil liberties against
depositic inroads on the part of governments. Ideologically it
belongs in the same class with political constitutions and
bills of rights,'' Ludwig von Mises wrote in the Theory of
Money and Credit.

Congress should safeguard our freedoms and privacy

    In Supreme Court Justice Thurgood Marshall's dissent in
California Bankers Assn v. Shultz, 416 U.S. 21 (1974), he
wrote:

    As this Court settled long ago in Boyd v. United States,
116 U.S. 616, 622 (1886), ``a compulsory production of a man's
private papers to establish a criminal charge against him * * *
is within the scope of the Fourth Amendment to the Constitution
* * * The acquisition of records in this case, as we said of
the order to produce an invoice in Boyd, may lack the
``aggravating incidents of actual search and seizure, such as
forcible entry into a man's house and searching amongst his
papers * * *,'' ibid, but this cannot change its intrinsic
characters as a search and seizure. We do well to recall the
admonishment in Boyd, id, at 635:

          It may be that it is the obnoxious thing in its
        mildest and least repulsive form; but illegitimate and
        unconstitutional practices get their first footing in
        that way, namely, by silent approaches and slight
        deviations from legal modes of procedure.

    First Amendment freedoms are ``delicate and vulnerable.''
They need breathing space to survive * * * More importantly,
however slight may be the inhibition of First Amendment rights
caused by the bank's maintenance of the list of contributors,
the crucial factor is that the Government has shown no need,
compelling or otherwise, for the maintenance of such records.
Surely the fact that some may use negotiable instrument for
illegal purposes cannot justify the Government's running
roughshod over the First Amendment rights of the hundreds of
lawful yet controversial organizations like the ACLU. Congress
may well have been correct in concluding that law enforcement
would be facilitated by the dragnet requirements of this Act.
Those who wrote our Constitution, however, recognized more
important values [emphasis added],

    Justice Marshall explained.
    ``Congress should block the proposed regulations and repeal
the Bank Secrecy Act, under which rules are possible,'' wrote
Richard Rahn, president of Novecon Corp, and an adjunct scholar
at the Cato Institute (Investor's Business Daily, August 12,
1997). ``Our freedoms and our privacy are must too important to
be compromised merely to make money-laundering more costly and
inconvenient for criminals.''
    I agree.

                                <greek-d>

