Law Proposed to Outlaw Money Laundering

By Easton, Nina; Brohan, Mark | American Banker, June 14, 1985 | Go to article overview

Law Proposed to Outlaw Money Laundering


Easton, Nina, Brohan, Mark, American Banker


WASHINGTON -- The Reagan administration on Thursday proposed legislation that would make the specific act of mone laundering a criminal offense and give law enforcement agencies direct authority to prosecute banks and bank employees that are involved in the crime.

The legislation also would give courts the authority t order a financial inttitution whose customer records have been subpoenaed not to tell the customer about the investigation. That provision would alter the rule issued under the Right to Financial Privacy Act.

Current law does not specifically cite money laundering as a crime -- an omission that law enforcement officials say has hampered investigations.

In money laundering, illicitly gained cash is deposited into accounts from which the depositor draws the funds to invest elsewhere or otherwise convert into "clean" money, thus hiding the source of the gain.

In the past, law enforcement officials have gone after financial institutions involved in money laundering by demonstrating violations of the Bank Secrecy Act or proving that the bank was part of a conspiracy to commit the original crime. The Bank Secrecy Act requires financial institutions to file reports on certain large cash transactions and provides for punishment for those who fail to file the reports or file false information on them.

"There are cases of money laundering under existing law in which it is hard to prosecute some individuals," Attorney General Edwin Meese 3d said at a press conference Thursday. He added that prosecutors "need a mechanism to target more sophisticated forms of money laundering."

Earlier this year, First National Bank of Boston paid a fine of $500,000 after failing to file currency reports on $1.2 billion in cash transfers over a four-year period. The bank is still under investigation by federal authorities for other cash transactions.

In addition, another 44 banks are being still being investigated for possible violations of the Bank Secrecy Act, according to John M. Walker Jr., assistant secretary for enforcement at the Treasury Department.

About a dozen banks have stepped forward since the Bank of Boston disclosure to confess that they violated various reporting requirements of the Bank Secrecy Act.

Mr. Walker encouraged other banks that have violated the act to come forward but noted, "We've established a firm policy on the civil side not to grant amnesty. But it is a factor we'll take into account in assesing civil penalties." Mr. Meese added that admission also be a mitigating factor if criminal charges are being weighed.

The legislation proposed by the administration would provide for fines of up to $250,000, or twice the amount of money involved in the transaction, and a maximum of 20 years in prison.

The bill introduced in the House by Rep. …

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