Money-Laundering Legislation Clears House Committee

by Mike Godfrey, Tax-News.com, New York

12 October 2001

The House Financial Services Committee yesterday approved by 62 votes to 1 anti-money laundering legislation broadly similar to the Money Laundering Abatement Bill which sailed through the Senate Banking Committee last week. The near-unanimous vote suggests that the bill will clear the House with ease, perhaps even today.

The legislation requires banks and other financial institutions to make a serious effort to determine the source of deposits from foreign countries, and would authorize the Treasury Department to take various actions against dubious foreign banks, including prohibiting American banks from dealing with them. The administration would have new powers to block the movement of cash across US borders, to subpoena records from foreign banks that have relationships with US banks and to search mail and parcels that could be used to smuggle cash into the US.

The bill gives the US Treasury Secretary power to act against foreign banks from countries whose regimes are not sufficiently tough against money laundering, but in response to frenzied lobbying the committee agreed to distinguish between countries that accommodate money-laundering and those that have attracted investments through low taxes rather than banking secrecy.

Committee members on Thursday rejected an amendment that would have curbed the power of US customs officials to open any mail crossing US borders. They also approved an amendment that would attempt to force informal money service companies - such as the hawala that the US says has been used as a channel to finance terrorist activities - to register with the US Treasury and report on suspicious activities.

Representative Michael G. Oxley (R - Ohio), Chairman of the Committee, said: "We are discovering how easily the terrorists used American dollars and the world-class services of the American financial system to underwrite their deadly operations. They used credit cards, automated teller machines, checking accounts, international wire transfers and large amounts of cash to transact business, all without raising alarm in the financial community."

The main difference between the House and Senate versions of the bill is that the House measure seeks to thwart Internet gambling, which Federal Bureau of Investigation officials told the committee had developed into a major route for money laundering. The bill prohibits gambling interests from accepting credit cards, electronic fund transfers and checks from American banks, which could be ordered to stop doing business with gambling companies. If this provision survives, it could be bad news for the thriving offshore gambling industry. US banks are already leery of doing business with international sports betting sites and on-line casinos because of their doubtful legality in the US.

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