suspicion attached to their use. The processed by which money is laundered through the purchase of cashier's and treasurer's checks is simple. An individual, referred to in the drug community as a "smurf" is assigned the task of taking large amounts of currency obtained in street drug transactions to numerous banks to purchase cashier's checks. At each institution, a cashier's check is purchased in an amount less than the current reporting requirement. The cashier's checks are then deposited at another institution without any reporting requirement. In many cases, they are deposited in an offshore financial institution. By reducing the threshold reporting requirement on these instruments to $2,000, these transactions will be much more difficult to use for money laundering purposes. Most legitimate purchases of cashier's checks by nonaccount holders will fall below the $2,000 reporting requirement. Most legitimate cashier check purchases by nonaccount holders are by poor people who need a check to pay their bills but do not maintain a checking account. This requirement will not affect them. By requiring the transaction to take more than one business day to complete, the potential money launderer will be required to make two trips to the financial institution. This, coupled with prompt notification of the suspected transaction to law enforcement authorities, will substantially deter money laundering transactions of this type and increase the likelihood of detection 4. Substantially increase the number of personnel available Despite the well recognized importance of money laundering investigations, it is clear that insufficient resources are being devoted to them. The Interim Report of the President's Commission on Organized Crime paints an abysmal picture of enforcement efforts in this area. The Bank Secrecy Act, as amended by the Currency and Foreign Transactions Reporting Act, is the principle tool available to law enforcement to detect and investigate money laundering. Under these statutes, the Department of the Treasury has the responsibility for prescribing both the types of transactions that must be reported and the specific information that must be reported. The Secretary of the Treasury also has responsibility for supervising compliance with the reporting requirements. The Secretary has delegated this authority to the following regulatory agencies: 1. 2. 3. 4. 5. 6. The Comptroller of the Currency for The Board of Governors of the Federal The Federal Home Loan Bank Board for insured The Administrator of the National Credit The Federal Deposit Insurance Corporation The Securities and Exchange Commission for 7. 8. 15 The Commissioner of Customs for transporta- The Commissioner of the Internal Revenue Despite the large number of agencies assigned to monitor compliance with the reporting requirements on the Bank Secrecy Act, it is doubtful that compliance with the reporting requirements is being enforced. According to the Interim Report: Figures on the number of referrals made to the Treasury Department were not available from all participating agencies. The FDIC reported that, as of August 1984, three referrals for civil monetary penalties had been forwarded to the Treasury Department; in 1983, six; in 1981, one; and prior to 1980, three. As of July 1984, the SEC had referred four cases recommending imposition of civil money penalties against broker/dealers, as well as information about patterns of suspect transactions just below the $10,000 reporting requirement in certain brokerage houses. The FDIC and the SEC both report that to the best of their knowledge no penalties had been imposed on the referred institutions. The Treasury Department has informed the Commission that since the enactment of the Bank Secrecy Act in 1970, it has assessed civil money penalties against four financial institutions. * * * No civil penalty has ever been levied against an individual bank employee for violations of the Act. Interim Report, pp. 24-25. The President's Commission on Organized Crime discusses a number of reasons for the low number of referrals and penalties. The federal regulatory agencies responsible for monitoring compliance and reporting violations are primarily concerned with other matters. The bank regulatory agencies are primarily concerned with determining the soundness of the institution under examination. Communication problems also appear to exist among agencies. However, one problem stands out far above the others: There simply is not enough personnel assigned to the task. See, Interim Report, pp. 18-20. My own personal experiences as a federal prosecutor confirms the conclusions of the President's Commission on Organized Crime. Problems with lack of sufficient investigative personnel also hamper investigations of suspected money launderers. When investigative resources are concentrated on money laundering investigations such as "Operation Greenback," an intense Treasury Department investigation into money laundering in Flordia, dramatic results are achieved. See, Interim Report, pp. 26-27. However, concentrated investigations of this type are the exception rather than the rule. All of the federal investigative agencies have substantial investigative duties in addition to money laundering. Their limited resources must be allocated among all their responsibilities. Consequently, there simply are not enough personnel assigned to investigate money laundering. Money laundering investigations are "labor intensive." Transactions must frequently be traced through voluminous and complex banking records; a very time consuming process. Federal law enforcement agencies simply do not have sufficient personnel to conduct this type of investigation and still discharge all of their other responsibilities. The President's Commission on Organized Crime has recommended that both the Secretary of the Treasury and the Attorney General be given substantial additional personnel to devote to money laundering investigations and Bank Secrecy Act compliance examinations. Increasing the number of personnel assigned to money laundering investigations is the single most effective step that can be taken to combat money laundering. 5. Require the financial institution regulatory agencies and The number of referrals of noncompliance with the Bank Secrecy Act to the Treasury Department belie the claims of the regulatory agencies that they are vigorously monitoring Bank Secrecy Act compliance by institutions under their supervision. Since enactment of the statute in 1970, the FDIC has referred 13 cases and the SEC has referred four. Granting additional investigative authority to the Secretary of the Treasury should assist somewhat in this problem. However, because of the large number of institutions involved, the Secretary of the Treasury will have to continue to rely on the financial institution regulatory agencies to monitor compliance. In order to improve the performance of the regulatory agencies, this Subcommittee should take an active oversight role in reviewing compliance examinations. Periodic reports should be required from each regulatory agency and when required, hearings should be held to insure that compliance with the Bank Secrecy Act is being effectively monitored. 6. Require that before an individual or business be placed A device that has been used to facilitate money laundering schemes is the so-called exemption list. The exemption list is a list of bank customers whose transactions have been determined by the bank do not exceed amounts commensurate with the customary conduct of the specific customer's business. See 31 C.F.R., Secs. 103.22 |