Laundering Issues Aired: Senators Ask Why Treasury Hasn't Done More

By Garver, Rob | American Banker, October 4, 2002 | Go to article overview

Laundering Issues Aired: Senators Ask Why Treasury Hasn't Done More


Garver, Rob, American Banker


Bipartisanship and cooperation between Congress and the White House have reigned in anti-money-laundering policy since the terrorist attacks last year, but that peace was interrupted Thursday by a trio of senators who criticized the Treasury Department's enforcement efforts.

Banking Committee Chairman Paul Sarbanes, D-Md., led the charge at an oversight hearing on the Bush administration's National Money Laundering Strategy.

He asked administration officials why Treasury Secretary Paul O'Neill had so far not used a provision of the USA Patriot Act that gives him broad authority to impose sanctions against countries and foreign financial institutions that he determines are of "primary money-laundering concern."

He said that Congress had structured the law enacted within weeks after the Sept. 11 attacks to give the Treasury secretary "pretty extensive authority" to penalize countries and institutions that fail to cooperate in the fight against dirty money.

"But it is my understanding that you have not yet used that authority," he told Deputy Treasury Secretary Kenneth W. Dam. "What's the problem?"

The law gives the Treasury secretary the ability to take a series of actions, ranging from increasing record-keeping and due diligence requirements on U.S. institutions that do business with designated entities to requiring the termination of specific accounts.

"I too have been wondering why we have not moved forward yet," Mr. Dam told the panel.

He said that the Treasury had been slowed by "procedural and due-process concerns" as well as by caution about providing evidence that would hold up under a court challenge. He also warned that when trying to persuade other countries to meet international anti-money-laundering standards, "imposing sanctions may be counterproductive."

Sen. Sarbanes urged the Treasury to exercise its authority, in at least a few cases, to make it clear that the United States is willing to take such action. In addition, he said, such a move might have a beneficial deterrent effect.

In an interview after his testimony, Mr. Dam remained cautious.

"Obviously deterrence is important, but we need to have a case that will stand up if challenged and that, obviously, goes against major targets," he said. …

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