Statement of the Honorable Irving R. Kaufman Chairman President's Commission on Organized Crime Subcommittee on Crime United States House of Representatives I have testified before Congressional committees on numerous Occasions during my thirty-five years as a federal judge. Today, however, I offer this statement not in my role as a judge of the United States Court of Appeals, but rather as the Chairman of the President's Commission on Organized Crime. I welcome the opportunity to urge the Subcommittee on Crime to consider and act upon the recommendations contained in the interim report on money laundering released by the Commission. As you know, the Commission was established by President Reagan in July 1983 with a mandate to investigate the scope and extent of organized crime in the United States today, and to recommend new legislative and law enforcement strategies to confront the growing power of organized crime. In accepting the President's appointment to be Chairman of the Commission, ! described organized crime as a "parasitic and cancerous" institution that was continuing to flourish within the body politic. I noted that traditional strategies, directed solely at the prosecution of individual members of criminal syndicates, had been largely ineffective. To this end, I stated to the President and the Attorney General that this Commission would develop novel proposals designed to attack the lifeblood of organized crime--its ability freely to spend or invest the proceeds of its illegal activities. " The report on money laundering we released in October, 1984, "The Cash Connection, addresses this critical aspect of the organized crime threat--the ability of criminal enterprises to conceal the illegal nature of their profits and thereby to continue to thrive while masking themselves in a cloak of legitimacy. At a White House ceremony in which I presented the first copies of the report to the President and the Attorney General, I noted that this effort represented the culmination of months of in-depth work by the members and staff of the Commission. Our recommendations, I explained, were creative remedial measures that, when implemented, would make it substantially more difficult for criminal cartels to launder their illicitly obtained profits. At today's hearing, your Subcommittee will hear persuasive evidence that the sophistication and intricacy of criminal schemes to disguise the nature of illicitly earned funds is increasing at an accelerating rate. The Commission's investigation uncovered numerous instances in which profits from drug trafficking or other criminal activity were introduced into national and international capital markets and converted into accounts or instruments that effectively concealed the origins of the funds. The case studies in the report reveal how respected financial institutions either knowingly or unintentionally permit themselves to be utilized by money launderers. I would belabor the obvious if I were to aver that the money laundering problem imposes unacceptable social costs on our nation. As billions of dollars of illegally earned funds move through our economy, tax revenue is lost, law enforcement resources are burdened, and, most importantly, the continued existence of widespread organized crime activity is facilitated as these "businessmen" accumulate the capital needed to finance their activities. The recommendations in the Commission's report represent a multifaceted response to the problems of money laundering. Foremost among our proposals is the enactment of a new statute--the Financial Institutions Protection Act--that would prevent banks and other financial institutions from being used unwittingly as conduits for the transfer of illegally-acquired funds. In addition, the Commission's proposed legislation would for the first time make the activity of laundering a criminal offense enabling law enforcement authorities to confront this problem directly. Although the statutory recommendations included in our report are vitally important, in isolation they are an inadequate solution to the problems engendered by laundering schemes. Accordingly, our suggestions also include voluntary remedial measures that can be adopted by financial institutions, 88 well as administrative safeguards to be implemented by the Secretary of the Treasury. I believe the Commission's three-pronged strategy to confront money laundering will provide law enforcement officials and financial institutions with the tools necessary to detect and prevent laundering schemes. There has been widespread interest in the Commission's findings from the legal and the financial community. The staff of the Commission has received literally hundreds of requests for copies of the study, and the response to our proposals has been decidedly positive, I urge this Subcommittee to consider favorably the merits of the new legislation and other recommendations detailed in the interim report. the Recently, the Attorney General submitted Administration's money laundering bill to Congress. The Administration's legislation is similar to the Commission's legislative proposal, with some differences in scope and language. Because the legislation is not yet at the mark-up stage, I will refrain from discussing the variations in the different proposals other than to note that the Commission and the Administration are in complete agreement on the need for, and the essential elements of, a new federal money laundering statute. As the revelations from the Commission's hearings make clear, organized crime today is a поге pernicious and sophisticated force than ever before. Traditional criminal groups have entered into new areas of activity, and new organizations have become active in a wide variety of endeavors. The Commission's recommendations are designed to do no less than render unprofitable organized crime. I am confident that by attacking the lifeblood of organized crime, we may finally have dealt it a death blow. TO CONTROL "LAUNDERING" OF DRUG MONEY BY BANKS WASHINGTON DC A nation-wide organization of parents has today urged passage of pending legislation which would toughen the laws and penalties against banks and other businesses that launder money from illicit drug sales. Joyce Nalepka, president of the National Federation of Parents for Drug-Free Youth, said "Americans need to establish and enforce 'zero tolerance' for illicit drugs." She added that banks which participate in funneling funds from drug trafficking into legitimate channels need to "think how this will affect the children of America and other nations. ́ Nalepka made her comments in a letter to Representative William J. Hughes (D-NJ), Chairman of the House subcommittee on crime. (more) DRUG MONEY LAUNDERING -2 An interim report by the President's Commission on Organized Crime published last October estimates that illegal drug money earned in the U.S. amounts to between $50-$75 billion annually. Much of this money is laundered through various schemes, Nalepka says, some of it being transferred a number of times, often between the United States and foreign countries. "We know that not all banks are guilty," Nalepka told the committee, "and we encourage the banking industry to use peer pressure on their associates to clean up their act ́." Anyone who helps drug traffickers in any way must take responsibility for children who end up in drug treatment centers, mental institutions -- or dead, the NPF President says. "Those businesses that launder money ensure the success of drug traffickers and also insure the destruction of children by the drug culture." The National Federation of Parents is an umbrella organization for more than 8,000 parents groups working to educate youth about the hazards of drug use. END |