Hearing on the Administration's "National Money Laundering Strategy for 2001"


Prepared Testimony of the Honorable John F. Kerry (D-MA)
United States Senator

10:00 a.m., Wednesday, September 26, 2001 - Dirksen 538

Mr. Chairman, I want to take this opportunity to thank you for holding this important hearing on efforts to control the scourge of money laundering. I would also like to take this opportunity to express my appreciation to Senator Charles Grassley, who has been working with me to enact anti-money laundering legislation and Senator Carl Levin who, as Chairman of the Senate Governmental Affairs Subcommittee on Investigations, has held a series of important hearings which have clearly shown the need to update our money laundering laws.

On September 11, the tragic and dastardly attack on the United States could not have taken place without the movement of the terrorists' assets through the global financial system. These terrible events underscore the need for a concerted anti-terrorism offensive, both internationally and domestically.

Osama bin Laden's terrorist network, known as al-Qaida, which is believed to be responsible for the attacks on the Pentagon and World Trade Center, has for years obtained funding by taking advantage of an open system of international financial transactions. With the help of the Tailban in Afghanistan, the al-Qaida raises funding through the sale opium. They have stolen or diverted money intended to assist refugees or religious organization. They have raised money from wealthy Islamic donors. Finally, Osama Bin Laden himself has not only a substantial personal fortune but either owns or controls a vast number of businesses and investments in Saudi Arabia and around the world.

In many cases, the funds that fuel al-Qaida are moved through an underground system of brokers built on trust, called hawala, which allow enormous amounts of cash to be moved without any paper trail. Obviously, this method of moving money cannot be controlled by international restrictions. However, the profits that the al-Qaida receives from the sale of opium do move through the existing international financial systems

Because this terrorist network obtains funding through a broad number of sources, we must develop, in conjunction with our allies, a variety different initiatives to stop the flow of funds to the al-Qaida. The United States is currently administering sanctions against the Taliban regime for their part in the drug trade. However, these sanctions have not proven to be enough to stop the illegal activities of the al-Qaida.

If we are to lead the world in the fight against terror, we must insure that our own laws are worthy of the difficult task ahead. I strongly support the Bush Administration's decision to freeze the financial assets of 27 entities associated with terrorism and I support attempts to enhance the use of Federal criminal and civil asset forfeiture laws. However, if we are going to win this war on terrorism, there is much more that we need to do. This work has already begun in the European Union, where just last week, they approved stronger measures against money laundering.

Today, too many nations - some small, remote islands - have laws that provide for excessive bank secrecy, anonymous company incorporation, economic citizenship, and other provisions that directly conflict with well-established international anti-money laundering standards. These nations have become money laundering havens for international criminal organizations like the al-Qaida.

The United States and the European Union have made great strides in the fight against money laundering over the past 12 years. The Financial Action Task Force (FATF), an intergovernmental body, was established at the urging of the United States and President Bush in 1989 to develop and promote policies to combat financial crime. The Organization of Economic Cooperation and Development (OECD) began a new crackdown on tax havens by targeting 36 jurisdictions which it said participate in unfair tax competition and undermine other nations' tax bases. The OECD approach does not punish countries just for having low tax rates, instead, it looks for tax systems that have a lack of transparency, a lack of effective exchange of information and those countries that have different tax rules for foreign customers than for its own citizens. The United States and the European Union have been working together to force jurisdictions that fall short of international standards to update and improve their anti-money laundering laws and to lift the veil of secrecy around tax havens by threatening to limit their access to our financial systems.

Today, the FATF reports that nineteen jurisdictions -- including Lebanon, Hungary, Nigeria, Russia, and the Philippines -- have failed to take adequate measures to combat international money laundering. Since a report naming many of these countries was released last year, many of these countries have already begun to update their anti-money laundering laws.

However, I am concerned that the money laundering strategy recently released by the Bush Administration begins to step away from the bilateral efforts that have proven successful in fighting financial crime and contradict the tough stance rightly taken by President Bush in his recent Executive Order. The new strategy, combined with efforts previously announced by Treasury Secretary O'Neill related to tax havens, seems to support a more unilateral approach toward fighting financial crimes instead of the successful multilateral approach adopted by the OECD and the FATF. I believe this will make it more difficult to track and freeze the assets international terrorists like bin Laden and expand upon the recent progress we have achieved. I also believe that this is the wrong time to pull back our efforts to stop money laundering into the United States by increasing the amounts necessary to require a Suspicious Activity Report issued by a financial institution.

It is now time for the United States to do its part to stop international money laundering and stop international criminals from laundering the proceeds of their crimes into the United States financial system. First, I believe the Bush Administration should call an emergency meeting of the G-7 nations and the Financial Action Task Force to implement a more vigorous international strategy to cut off the blood money that these international criminal networks use. Second, the United States should immediately impose bilateral and multilateral sanctions against any country that has, through neglect or design, permitted its financial systems to be used by bin Laden or other terrorist groups.

Third, the Congress should pass the International Counter-Money Laundering and Foreign Anticorruption Act of 2001, which I introduced along with Senators Grassley, Sarbanes, Levin and Rockefeller. During the 106th Congress, the House Banking Committee passed this bill with a bipartisan 33-1 vote. The bill will give the Secretary of the Treasury the tools necessary to crack down on international money laundering havens and protect the integrity of the U.S. financial system. The bill provides for actions that will be graduated, discretionary, and targeted, in order to focus actions on international transactions involving criminal proceeds, while allowing legitimate international commerce to continue to flow unimpeded.

I believe that the Congress should enact this legislation this year to help stop the flow of assets and money that fund bin Laden and other terrorist groups. I look forward to working with the members of this Committee on this important issue. Thank you.



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