The Committee meets today in its oversight capacity. It will hear testimony about the financial aspects of the ongoing war on terrorism and about the Administration's implementation of the anti-money laundering provisions of Title III of the USA Patriot Act, which was signed into law by the President on October 26, 2001.
I am especially pleased to turn first to Senators Levin and Grassley. Along with Senator Kerry, they were the first witnesses to appear before this Committee, two weeks after the September 11 tragedy, to make the case forcefully and persuasively for tougher anti-money laundering rules and enforcement. Senator Kerry is chairing another hearing this morning, but he has submitted a statement for the record. I am also pleased to welcome Chairman Oxley and Ranking Member LaFalce of the House Financial Services Committee, who led the effort in the House last October; we worked closely together to craft the final version of Title III.
After our Congressional colleagues, our witnesses are Kenneth Dam, the Deputy Secretary of the Treasury; Michael Chertoff, the Assistant Attorney General in charge of the Criminal Division of the Department of Justice; Richard Spillenkothen, Director of the Division of Banking Supervision and Regulation, Federal Reserve Board; and Annette Nazareth, who is Director of the Division of Market Regulation of the Securities and Exchange Commission.
The United States and many other countries have been engaged for the last five months in what must surely be the most intensive financial investigations in history. To date, the U.S. has seized or frozen more than $34 million in terrorist-related assets, and our allies have frozen almost $46 million more. More than 165 persons have been identified as involved in the financing of terrorist activities. Although the details of the investigations and their methods are classified, each of the witnesses can describe to the Committee how specific approaches or resources have been coordinated and targeted - using the expanded information access granted by the Patriot Act, and how our experience thus far will contribute to shaping our continuing effort to end money laundering.
A broad strategy for this effort is essential. The U.S. must lead both by example and by promoting concerted international action. Our goal must be not only to apprehend particular individuals, but to cut off the pathways in the international financial system along which terrorist and other criminal money moves. We must act to make it impossible to create the chains of obscure corporations, trusts, or partnerships so tangled that not even experienced and dedicated investigators can figure out with certainty who owns what, or where the money trail begins and ends. This effort depends crucially on concerted international action. Even as we build stronger, more effective anti-money laundering programs at home, we must press for comparable programs and for an end to unreasonable "bank secrecy" around the world, offering technical assistance wherever possible, but employing stronger measures where necessary.
Title III of the Patriot Act constitutes the most extensive updating of our civil anti-money laundering laws since 1970. But it means little if it is not promptly and effectively implemented, and implementation is a formidable task. Under the new law the Treasury Department, working with the federal financial regulators and the Department of Justice, must issue a number of new Bank Secrecy Act rules, in many cases by April 2002. It must also submit several important reports to Congress about issues that were deferred last year. These include application of the Bank Secrecy Act to investment companies, especially hedge funds, a subject raised by Senators Dodd and Corzine, and its application to underground banking systems, a subject on which Senator Bayh has already held a Subcommittee hearing. At the same time the agencies must establish the operating programs - for training, audit, intelligence analysis, and enforcement - that turn words into realities. Even as the broader strategy is put in place, attention must be focused on such matters as budgets, training, inter-agency coordination, and allocation of investigative resources. I note that Deputy Secretary Dam announced last week a $3.3 million budget increase for the Financial Crimes Enforcement Network, and we are looking forward to learning today more generally about how the agencies are marshaling their resources to get the job done.
I want to close with a brief comment on the regulatory guidance to be issued by Treasury under Title III. That guidance must be carefully drawn to reflect accurately the intent of Congress. While I commend Treasury for timeliness in issuing its first sets of proposed rules, I remain concerned about the draft rules relating to the ban on U.S. correspondent accounts for foreign shell banks. This rule would permit a U.S. bank to rely without any due diligence solely on a certification by its foreign customers, even if the bank has reason to doubt the certification, which in my view is not consistent with the statutory language, with other BSA rules, or with general guidance for banks provided by the Basel Committee on Banking Supervision. In addition, what was intended in my opinion to be a limited exception in the Patriot Act becomes a broad loophole when, as the rule proposes, a shell bank is permissible so long as a regulated bank owns as little as 25 per cent of the shell bank's shares. I would hope that Treasury will revisit these issues.
I look forward to hearing from our witnesses.