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


Prepared Testimony of the Honorable John LaFalce (D-NY)
Member of Congress

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

The campaign to prevent future terrorist acts against our Nation will not be successful unless we cut off the funds that fuel terrorism. The horrendous attacks of September 11th could not have taken place without the movement of the terrorists' assets through the global financial system. The events of last week underscore the need for a concerted anti-money laundering offensive, both internationally and domestically. The hearing that the Senate Banking Committee is holding today would be important, if the tragic events of September 11th had never occurred. But, our National crisis brings a new sense of urgency to Congress' consideration of money laundering issues and the National Money Laundering Strategy.

I have been for many years concerned that our counter money laundering laws are not sufficiently nimble to permit the United States law enforcement community to respond to the malicious inventiveness of a fast-moving and remarkably adaptable class of criminals and murderous terrorists. I believe that our laws need to be changed to provide more flexibility for the law enforcement community, including the Treasury, to combat money laundering, and provide meaningful criminal penalties for all significant money laundering violations.

Before I turn to a discussion of the Administration's new money laundering strategy and new legislation, I want to say that I am encouraged by the actions that the Administration has taken to trace the "financial finger prints" of bin Laden, his Al Qadea terrorist network and the entities that support them.

First, the Department of the Treasury announced the creation of an inter-agency team dedicated to the disruption of terrorist fund raising and the proposed creation of a Foreign Terrorist Asset Tracking Center within the Treasury. Second, on Monday, the President issued an Executive Order that identified international terrorist groups, individuals, and their operatives connected to the attack and froze the assets of these groups in the United States. The Order expands on a previous order of President Clinton's. The new order identifies three charities and one business which supply financial support to bin Laden and Al Queda. . It also permits the Secretary of the Treasury to block any non-cooperating foreign financial institution from doing business with U.S. financial institutions and other U.S. firms. This will help the United States Government uproot the financial underpinnings of a network that would seek to do grave harm to the United States and its citizens. The Bush Administration appears to be off to a very sound start in its efforts to cut off bin Laden from his funds.

The National Money Laundering Strategy was developed before the September 11th attack, and I believe that parts of it should be reevaluated in light of those tragic events and what our intelligence and law enforcement agencies have learned about the funding of the attack.

While the Strategy sets out strong enforcement goals, including calling for more vigorous enforcement of asset forfeiture statutes in connection with money laundering offenses, the focus of some of the regulatory goals in the Strategy seems somewhat inconsistent with the strong world leadership position that the United States has taken over the past decade in raising international money laundering standards. I am particularly concerned that the Strategy calls for a cost-benefit analysis of compliance with the Bank Secrecy Act and a survey of financial institutions for the purposes of possibly expanding the types of currency transactions that are exempt from current BSA reporting requirements.

I am concerned that these activities could result in a relaxation of current Bank Secrecy Act reporting requirements and raise questions about our own resolve in the fight against international money laundering. I want to work cooperatively with the Administration to develop a new strategy that addresses the concerns that I have raised.

There are indications that the Administration has begun to rethink the Strategy. I was pleased that Under Secretary Gurule announced that Treasury has scrapped its plan to delay implementation of regulations requiring money service businesses (for example, money transmitters) to register with the Treasury and to file suspicious activity reports with the Treasury. I believe that these regulations will over time give our law enforcement and intelligence agency important investigative and prosecutorial tools that are needed to control the halawa system of international money exchange. Many believe the halawa system to be one of primary channels for the global funding of terrorist activities, including the activities of al Qadea.

If we are to lead the worldwide effort to cut off Bin Laden and other terrorist groups from the funds needed to carry out their deadly missions, we must insure that our own laws are adequate for the difficult task at hand. Several members in the House and Senate have introduced money laundering legislation that deserve serious consideration not only as a part of our response to acts of terrorism, but also as a part of our overall money laundering strategy.

I, along with Senator Kerry, have introduced legislation that strengthens the arsenal of the government in the fight against money laundering. Senator Sarbanes, Senator Levin, Senator Grassley and other Senate Colleagues are cosponsors of the legislation. Our bill, the International Counter-Money Laundering Act of 2001, provides the Treasury Secretary with the authority and discretion to address a specific money laundering problem with precision - which cannot be done under current law. This legislation would give the United States increased leverage in dealing with foreign jurisdictions and foreign financial institutions that aid drug kingpins, money launderers and terrorists.

The existing laws against bulk cash smuggling are inadequate. Currently, the couriers of illicit cash are subject to only minimal jail sentences for failing to file currency reports. I am an original cosponsor of legislation that will make the smuggling of currency for unlawful purposes a serious criminal offense under Federal law.

Given the events of September 11, I believe that the Administration will want to move quickly to acquire the necessary legislative authority to combat international terrorism and international money laundering. I look forward to working cooperatively with the Administration in the development of sound and effective anti-money laundering legislation.



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