Congressional Documents
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 have 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 described 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 BSA. 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 ``Know 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 to 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 things, help identify a lifestyle that is not 
commensurate with an individual's known sources of legitimate 
income.
---------------------------------------------------------------------------
    \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>