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Mr. HUGHES. That's our challenge.
I thank you very much. Your testimony has been very helpful.
The gentleman from Florida has 5 minutes.
Mr. McCOLLUM. Thank you, Mr. Chairman.

You have given us some detailed suggestions, and I appreciate the number of items you point to as the type of information that this committee could well use. I do have one thing that I just can't agree with you on, I want to state up front, and that is in regard to this whole question of attorneys' fees coming out of the forfeited funds or whatever. It seems to me that we would only be rewarding those clients, or would-be clients, who are accused of having pro ceeds. And there are many, many poor criminals out there or people who commit crimes that don't happen to benefit from the fruits of drug trafficking and other major money crimes, that don't have the benefit of good counsel like yourself because they don't have the proceeds, and it just doesn't seem to me that we ought to let those proceeds go to them in the name of right to counsel. But all that aside, the rest of your testimony, I don't concur in every bit of it, but I don't take strong issue.

I have a question I want to ask about the question of exemptions. I've been concerned for some time about the whole issue of exempt lists, because I'm also on the Banking Committee where that has come up a lot. And it has come to my attention that the persons who are given the exemptions don't have to, currently, in most banking institutions, sign any kind of a request for that exemption, it just is given. It also has occurred to me and I've heard a couple of people comment on it—that it might be helpful to have a requirement that anyone who is given an exemption, any business or person, sign a form, and in that form that they attest under oath that they, in fact, have not derived the moneys that they are about to deposit from illegal sources, or maybe make it much more specific, or whatever, but maybe make a statement that, later, could be used in prosecuting them if, in fact, it turns out that they are abusing this exemption of the Bank Secrecy Act.

What do you think of that idea?

Mr. BAILOR. I agree that that would improve the situation. Even currently, all that happens in an exemption list is that it is maintained in the bank, and, in many cases, people are put on there informally. It isn't even an incentive to the Government, it is looked at by a banking examiner or perhaps an Internal Revenue Service agent from time to time as they come into the bank.

I would agree that, short of requiring the Secretary to actually approve the exemption, that the next best step would be to have the people certify. And I would do that periodically, because businesses change, owners change; and, frankly, I think a real problem that happens is when organized crime and narcotics figures take over legitimate businesses that are already on the exemption list.

So, I would recommend that if you go that route that there be a periodic recertification, perhaps annual, semiannual, along that line. That would certainly create a device by which law enforcement could prosecute people by making a false statement on the exemption list, and I think that is an excellent idea.

Mr. McCOLLUM. Mr. Chairman, we have a number of our colleagues here today, and a number of witnesses, so I'm going to yield back at this point.

Mr. HUGHES. I thank the gentleman.
The gentleman from Florida, Mr. Smith.

Mr. ŠMITH. Thank you, Mr. Chairman. Mr. Bailor, I also appreciate your comments. And all of us on this committee are attorneys. Some of us did defense work for many years and are sympathetic to the problems that you have pointed out with reference to the Justice Department's interpretation of last year's Comprehensive Crime Control Act.

I feel that while I understand the comments of my good friend from Florida, Mr. McCollum, there needs to be some tempering of that based upon, at least from our point of view, the balance that should be achieved in terms of an attorney who may be innocent, totally innocent, and doesn't receive any fee prior to any knowledge, or trying to cloak him with a reasonable assumption that he should have the knowledge in cases where that knowledge may not be ever ascertainable prior to the time the money is brought to him or his fee is paid. So, we have to be very careful that we don't set up attorneys as a different class entirely. I feel sympathetic with the arguments brought; at the same time, I understand where Mr. McCollum is coming from; and there are a lot of people who feel that way and it is not an improper way to approach the problem.

So, we will be looking at that with some concern. It is not the first piece of legislation that, in its implementation, has been carried off in a different direction than we wanted it to go.

Referring to your comments with regard to the cop on the street who is going to stop money laundering, let me say yes and no.

I am the chairman of the International Narcotics Task Force and a member of this committee as well, and I sit and listen to whole groups of people. I've had a delegation of the Cayman Islanders come here, and we are very pleased with the progress made with the agreement between Cayman and the United States with reference to obtaining voluntarily information from their banks, and it has been most helpful to the Justice Department. We are trying to get that negotiated agreement expanded to the Internal Revenue Service matters as opposed to just narcotics matters. But the reality is, I think, that if you look further along-and maybe I'm just using your cop-on-the-street analogy to mean the cop as opposed to the whole law enforcement system, but-you know, a lot of money laundering took place in the recent past, as revelations have just revealed, with, frankly, knowledge and consent of a large number of very high-up corporate officials in this country. The First Bank of Boston admitted that it had made, or allowed to have been made, thousands of transactions. A big bank in California allowed billions of dollars of illegal transactions. Law enforcement isn't going to stop that.

What would stop the upper-level-corporate toleration of the avoidance of the act which is already in place—and you're right, we can't be passing laws, that won't help; we could prosecute now-is the fear, the real fear, that they're going to be caught, and prosecuted, and punished. That's the difference. That's what deters the upper-level-corporate criminal. The mule that carries the drugs doesn't know the laws of the United States, and their employers don't give them a course in that; believe me, they don't. What they need is to be paid and they'll do what you want, swallowing into body cavities up to 36 balloons full of cocaine.

Mr. BAILOR. Well, Congressman, the reason I did not specifically address that is that the act, last year, substantially increased the penalties for money laundering, and I think the Department has the resources now to adequately prosecute high-level bank executives who do intentionally not report. However, again, I would have to emphasize I think the real problem there is finding them, detecting them.

I agree with you that that bill was necessary, but until you have agents actually checking the banks and looking hard at moneylaundering transactions, that legislation isn't worth the paper it is written on. And I really think that if there is one message I can leave with this subcommittee today, based on all of my experience, you have got to get the agents out there.

Mr. SMITH. Well, let me tell you, first of all, we agree; there is no question about that. All of the laws in the world are not worth anything if there's nobody out there enforcing them. More importantly, we have tried, over the last number of years, and I can tell you that the subcommittee chairman, Mr. Hughes, has done a great job over and above his frustration level, trying to get, as all of the members of the Judiciary have to get, all of the various federal agencies to put more people on board, not less. We have seen cuts in every agency over the last few years—IRS, Customs, INS, DEA; I mean, the record is legion with protestations, one after the other, of the committees of jurisdiction.

So, we agree with you and we have tried to prod this administration to provide the kind of people necessary to enforce the laws that we are passing. And certainly, your testimony can be most helpful to us as somebody who has sat on that side as well.

I yield back the balance of my time, Mr. Chairman.
Mr. HUGHES. Thank you.
We'll recess for just about 10 minutes, so that we can vote on
what is pending before the House. We'll return in 10 minutes.

The subcommittee stands in recess.
Mr. HUGHES. The subcommittee will come to order.

I wonder if, before we can go to questions-I know that Mr. Gekas of Pennsylvania and Mr. Lungren of California have questions—we have a most distinguished delegation from the Spanish Congress with us, as we indicated previously, and I would like to welcome them.

I understand that we do have an interpreter from the State Department with us. Before I inform our guests on what the hearing is about, I would first of all, like to welcome our guests, Senor Vice Presidente Torres, Mr. Cuesta, Mr. Marcet, Mr. Gil-Robles, Mr. Garcia, Mr. Pillado, Mr. Pol, Mr. Vizcaya, Mr. Bandres.

Bien venidos visitentés, a nuestra conimitté subaoterno de Crimen. That's my best south Jersey Spanish. [Laughter and applause.]

Now, I want to tell you that we do have, as a matter of fact, a resident linguist in the person of Mr. Gekas, who wants to extend his greeting.

Mr. GEKAS. Muchas gracias, Senor sera (phonetic). [Greeting in Spanish.]

What I said was, in translation, “I will meet you all for lunch.” [Laughter.]

No. What I said was, that the members of this committee, who are, of course, an element of the Congress as a whole, are engaged in the subject here of money laundering, particularly money laundering that is connected with the purveying of drugs and narcotics. And I had engaged in conversation with these gentlemen at a breakfast meeting, and told them what was going to happen, and I was repeating that for their reference.

Mr. HUGHES. Do they understand

Mr. GEKAS. Yes, I said we were listening to various witnesses who are giving us their testimony on that subject.

Mr. HUGHES. Let me, if I might, introduce the members of the committee and staff to our most distinguished delegation.

First of all, I am Bill Hughes of New Jersey. To my immediate left is Congressman Bill McCollum of Florida. To his immediate left is one of the staff members on the Republican side-this is the Republican and this is the Democratic side of the committee-Mr. Ray Smietanka. To his left is Mr. George Gekas. He is, as I indicated our resident linguist. To his immediate left is Congressman Clay Shaw from the State of Florida, and to his immediate left, the last member all the way to the left, is Congressman Dan Lungren of the State of California.

To my immediate right is the one of the majority staff members, Eric Sterling, of the Subcommittee on Crime, and Congressman Larry Smith

is to his immediate right. I wonder if the interpreter would indicate once again that we are just delighted to have this distinguished delegation with us today. We enjoyed having breakfast with them this morning and we hope that their stay in our country is a most enjoyable one.

A number of us were in Madrid just a few weeks ago. Unfortunately, it was only a very short visit and it was a refueling stop, but we loved the stop and we're going to go back, we hope, sometime soon.

Mr. HUGHES. Thank you very much.
And, Mr. Bailor, we apologize for the interruption.
Mr. BAILOR. Thank you.

Mr. HUGHES. The gentleman from Pennsylvania, Mr. Gekas, is recognized for 5 minutes.

Mr. GEKAS. Yes, thank you, Mr. Chairman.

The basic theme that I was able to infer from your testimony was a kind of hopelessness in attempting to deter money laundering. It seems, rather, that a statute that would compel more training and more education of the tellers and the people who work in financial institutions, and the populous as a whole, would be more beneficial than passing a criminal statute, because you do not think that that would really prevent anyone from engaging in money laundering.

Mr. BAILOR. That is absolutely correct. People engage in money laundering because of basic greed, and another statute is simply not going to change that. There is simply too much money involved in narcotics transactions and certain other types of racketeering enterprises to hope that you're really going to deter people that would engage in very nefarious conduct in the first instance. I mean, there is nothing lower, and no one is showing more disrespect and disregard for society and law than the drug trafficker, and this Congress' enactment of another statute isn't going to phase him in the least.

Mr. GEKAS. By the same token, then, your $2,000 proposed limitation or cap on those kinds of transactions which can be handled at the teller's station is of no value either, because, as the chairman quite well pointed out, Mario and his cohorts would be willing to go to 40 banks and do it for $200 a transaction, because they are the desperados about which we are having these hearings.

Mr. BAILOR. Well, no, I would disagree with you, Congressman, for this reason, I think you've got to take that recommendation as a whole. No. 1, you're going to require more than one business day to complete the transaction, you're going to increase his exposure.

Now, I admit that is not going to deter most individuals, although I do think most of those money-laundering transactions by "smurfs" are usually above $2,000. The object isn't to deter, the object is to increase his exposure and to make it riskier for him. I think the bottomline on this business is, enforcement has to become more effective. And I am trying to come up and design steps that will make enforcement more effective, and by requiring that guy to go to the bank more often, and more banks, he is going to expose himself some more.

Mr. GEKAS. I see. That may have some validity.

I happen to join with you in a feeling of hopelessness, though, that another statute is going to deter the criminality that we're trying to stem here. I share that pessimism. I thank the chairman. I yield back the balance of my time. Mr. HUGHES. I thank the gentleman. I'm going to recognize the gentleman from Florida, Mr. Shaw.

Traveling with the congressional delegation, I see now, in the back of the room, is Bill Harris, who is an attaché with the Embassy in Spain, a most distinguished member of the Department of State.

We're just delighted to have you with us, too, Bill. I understand you're traveling with the delegation today. Welcome.

The gentleman from Florida, Mr. Shaw.
Mr. Shaw. Thank you, Mr. Chairman.

After your lengthy and, I think, very enlightened testimony with regard to laundering, it seems that there's an extraordinary amount of interest on your closing comments with regard to attorneys' fees and the possibility of exception of that. I would like to pursue that just a little further, if I may.

You are faced now with a situation, under your testimony, where your client's assets, I guess, are all tied up.

Mr. BAILOR. That is correct.

Mr. Shaw. So, I would assume that there was a finding that they were all, in some way, tainted by the drug trafficking?


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