Congress Poised to OK Money Laundering Bill

Answering President Bush’s call for new tools to fight terrorism, Congress is moving to help U.S. authorities choke off the flow of illicit money through domestic and international financial systems.

The money laundering legislation on the verge of approval this week enjoys overwhelming bipartisan support in the House and the Senate.

And banking industry lobbyists, who had quietly expressed concern about the impact on their privacy-conscious customers, may finally be ready to acquiesce to new rules.

If so, that is good news for the Bush administration as it tackles the exceptionally complex challenge of detecting, blocking and seizing money that finances global terrorist networks such as the Al Qaeda group believed to be responsible for the Sept. 11 attacks on the United States.

The administration’s point man on money laundering, Jimmy Gurule, undersecretary for enforcement at the Treasury Department, pleaded for help Monday at a conference on the subject in Arlington, Va., organized by the American Bankers Assn. and American Bar Assn.

“Without your support, we are not going to realize the kind of success we need,” Gurule said. “We have to work together in unprecedented ways.”

Gurule said the legislation before Congress, if enacted, would represent the most significant milestone in the fight against money laundering since it was made a federal crime in 1986.

The Republican-led House last week passed its version of a money laundering bill on a 412-1 vote. The Democratic-controlled Senate included largely similar provisions in a broader counter-terror bill that was approved Oct. 12 on a 96-1 vote.

Originally, the House insisted on keeping the money laundering bill separate from the counter-terror measure, which includes an array of other provisions to expand police surveillance powers. But House and Senate leaders, spurred by the urgency of the campaign against terrorism, have agreed to meld the two bills. Terry Holt, a spokesman for House Majority Leader Dick Armey (R-Texas), said a final package was scheduled to come to a vote as early as today.

The legislation builds on executive actions by Bush, who already has frozen the assets of dozens of groups and individuals with reported ties to terrorist networks. As drafted, the legislation would ban the unreported transfer of more than $10,000 across U.S. borders. It also would give the Treasury Department special power to slap sanctions on foreign countries or financial institutions deemed to be prone to money laundering.

Securities brokers and dealers would face new requirements to report suspicious transactions. U.S. banks would be prohibited from offering services to so-called “shell” banks that have no physical headquarters in any country. And significantly, bankers would be required to give greater scrutiny to wealthy clients who open so-called “private banking” or “correspondent” accounts.

The legislation also has ramifications for foreign policy. The president would be empowered to limit access to U.S. capital markets for foreign governments that refuse to cooperate in the global campaign against terrorism.

Exactly how these and other measures in the legislation could affect the funding of Al Qaeda, Osama bin Laden’s terrorist organization, is unclear. While some of the organization’s funding is thought to move through conventional financial channels, some of it also may pass through informal systems using only cash.

But in remarks prepared for delivery Monday night, Treasury Deputy Secretary Kenneth Dam said, “I believe we have made significant progress in limiting Bin Laden’s and Al Qaeda’s ability to finance terrorism.”

While public opposition to the money laundering legislation is scant, the provisions have been closely scrutinized by the financial services industry. Some advocates of legislation have asserted that the industry, a powerful force on Capitol Hill, could attempt to scuttle the bill behind the scenes.

But John J. Byrne, senior counsel and compliance manager for the bankers association, said his group expected that some legislation would pass in the aftermath of the Sept. 11 attacks on the World Trade Center and the Pentagon. “We don’t have any concerns” about the legislation, Byrne said in a brief interview after Gurule’s address. “We’re fine.”

Byrne said the industry was pleased with a provision that would allow bankers to give the government feedback concerning certain portions of the legislation for as long as six months while the Treasury Department writes implementing regulations.

The legislation is not without critics. Paul M. Weyrich of the conservative policy group Free Congress Foundation, said in a statement that the legislation could add to the regulatory burdens banks face without giving the government any more insight into “what terrorists are thinking and doing.”

And Rep. Ron Paul (R-Texas), the lone House dissenter, said the legislation would lead government to “waste time snooping through the financial records of innocent Americans.”

While law enforcement authorities acknowledge they are searching for more data about suspicious financial transactions, they say they are more interested in quality than quantity.

Gurule, the Treasury official, noted that financial authorities each year receive 13 million reports about currency transactions of more than $10,000. Many of those, he said, are unneeded and actually hinder investigators at a time when they are being “inundated by more information than they can sometimes process.” Banks and government officials soon may take steps to pare those reports.

The government also is moving to streamline the reporting of suspicious transactions. Currently, banks report about 130,000 such transactions each year under a system that began five years ago. But many of the reports are submitted on paper, and authorities complain that they arrive too late to help prevent crime. After the Sept. 11 attacks, Gurule said, the government set up a toll-free hotline for banks to report suspicious activity: (866) 556-3974.