Up Front
Three More US CongressionalVoices Raised OECD
Reproduced courtesy of Tax-News.com
The United States Government expressed cautioussupport for new ways to combat global money laundering schemesMarch 6, but refused to endorse an outright ban on the use ofcorrespondent accounts with so-called shell banks, an approachrecommended by a recent Senate report on the subject.
Mr. Joseph M. Myers, the Treasury Department'sacting deputy assistant secretary for enforcement policy, andMrs. Mary Lee Warren, deputy assistant attorney general in theJustice Department's criminal division, testified before the SenatePermanent Subcommittee on Investigations, which wrapped up threedays of hearings on the matter. Both said Congress should be waryof the unintended effects of passing new legislation aimed atreducing money laundering.
Eliminating certain correspondent accountsoutright could unfairly infringe upon legitimate commerce, Mr.Myers warned. "These hearings raise serious issues that arecomplex and difficult," he said. For example, an overly broaddefinition of shell bank could result in the banning of Internet-basedbanks. Mr. Myers noted that the US Government is still formulatingits position on the more detailed aspects of its anti-money launderingstrategy. Treasury is due to release an annual update of thisstrategy in June.
The subcommittee hearings followed a February5 report by Senator Mr. Carl Levin (D-Michigan), which found thatUS banks have unwittingly allowed criminals to use correspondentaccounts - accounts that banks use to provide services to otherbanks-to launder funds.
Current estimates are that $500 billionto $1 trillion in illegal funds from organized crime, narcoticstrafficking, and other criminal misconduct are laundered throughbanks worldwide each year, with about half going through US banks.Many of these banks offer correspondent accounts opened by shellbanks, which are banks that have no clear physical location andthat cannot be easily identified by law enforcement officials.
Legislation backed by the Clinton administrationand introduced last year to combat money laundering fizzled inthe 106th Congress in the face of privacy concerns, industry opposition,and lack of Republican support. The legislation would have giventhe Treasury Department new powers ranging from requiring banksto maintain additional records to imposing an outright prohibitionon correspondent accounts maintained by targeted banks.
Banking Committee Chairman Opposes 'Complex'Requirements
Speaking at a meeting of international bankersMarch 5, Senate Banking Committee Chairman Mr. Phil Gramm (R-Texas)said he would continue to oppose legislation that forces banksto comply with complex anti-money laundering requirements or thatauthorizes sweeping forfeiture of criminal proceeds. "I'mconcerned but I don't want to give bureaucrats the power to takepeople's property," he said.
Defending Treasury's anti-money launderingguidance to banks, which it releases periodically, Mr. Myers saidthe department is attempting to help US banks identify potentiallyillegitimate banks without explicitly instructing them on whatto do. "We're not telling a driver to not cross the bridge,but we are telling the driver to be careful," he said.
At a minimum, Levin said the US governmentshould forbid US banks to deal with banks located in jurisdictionsknown to have lax bank regulation, and also require them to maintaina list of the beneficial owners of accounts.
At the subcommittee's March 2 hearing onmoney laundering, Citibank, Bank of America, Chase Manhattan,and Bank of New York came under fire for not exercising due diligencewhen opening accounts for offshore banks and for not closing certainaccounts after it became clear they were opened for illegitimatepurposes.
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Insider notes from United Press International
Why do the Cayman Islands love Mr. JesseHelms? Because relief may be at hand for those offshore tax havenstargeted by the Organization for Economic co-operation and Development.Although Paris based, the OECD is an international body, and thehighest dues are paid by the United States. So the arrival ofa letter from heavyweight Congressman Mr. Sam Johnson, R-Texas,of the powerful Ways and Means Committee, should have rung analarm bell at rue Andre Pascal in Paris.