13 June 1998
Source: http://www.access.gpo.gov/su_docs/aces/aaces002.html

See amendments notice: http://jya.com/hr4005-hv.htm

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[DOCID: f:h4005ih.txt]

105th CONGRESS
  2d Session
                                H. R. 4005

  To amend title 31 of the United States Code to improve methods for
          preventing financial crimes, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                              June 5, 1998

  Mr. Leach (for himself, Mr. Bereuter, Mr. Castle, Mr. Bachus, Mrs.
   Roukema, Mr. Baker, Mr. LaFalce, Mr. Kanjorski, Mr. Hinchey, Ms.
  Waters, and Ms. Velazquez) introduced the following bill; which was
  referred to the Committee on Banking and Financial Services, and in
    addition to the Committee on Ways and Means, for a period to be
subsequently determined by the Speaker, in each case for consideration
  of such provisions as fall within the jurisdiction of the committee
                               concerned

_______________________________________________________________________

                                 A BILL


  To amend title 31 of the United States Code to improve methods for
          preventing financial crimes, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,

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.
    (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 express the sense of the Congress that the Secretary
        of the Treasury should expedite the development and
        implementation of controls 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.--Notwithstanding any other
        provision of law--
                    ``(A) 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; or
                    ``(B) any director, officer, employee, or agent of
                such institution who makes, or requires another to make
                any such disclosure; and
                    ``(C) any independent public accountant who audits
                any such financial institution and makes a disclosure
                described in subparagraph (A),
        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) 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 such 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 other
person or government agency the fact that such report was made.
                    ``(B) Exception for use by government officers in
                official capacity.--Paragraph (1) shall not apply to
                the use or disclosure by an officer or employee of an
                appropriate government agency of any report under this
                subsection, or information included in such report, to
                the extent the use is made solely in conjunction with
                the performance of the official duties of such officer
                or employee to conduct or assist in the conduct of a
                law enforcement or regulatory inquiry, investigation,
                or proceeding.
                    ``(C) 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.--Section
5321(a)(1) of title 31, United States Code, is amended by inserting
``or order issued'' after ``regulation prescribed''.
    (b) Criminal Penalties for Violation of Targeting Order.--
Subsections (a) and (b) of section 5322 of title 31, United States
Code, are each amended by inserting ``or order issued'' after
``regulation prescribed''.
    (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'';
            (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 of Public Law 91-508
        (12 U.S.C. 1955) 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 2 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 clause 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 5326 and
                5328 of such title are each amended by inserting ``or
                nonfinancial trade or business'' after ``financial
                institution'' 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, of 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. SENSE OF THE CONGRESS.

    It is the sense of the Congress that the Secretary of the Treasury
should, in conjunction with the Board of Governors of the Federal
Reserve System, expedite the promulgation of ``know your customer''
regulations for financial institutions.
                                 <all>
