Radical US Bill To Counter Money Laundering Approved

Mike Godfrey, Tax-news.com, Washington

12 June 2000

The fight in the US against money laundering took a significant step forward last Thursday when the House Banking and Financial Services Committe approved by 31 to one the International Counter-Money Laundering Act, a major new law aimed at locating activities in international money laundering havens which are used to filter so-called "dirty" money into the legitimate international financial system. If the Act becomes law, it could mean that the US federal government could ban some transactions between US banks and offshore havens.

It is well-known that most money laundering involves illicit profits from drug-trafficking, prostitution or other criminal activities, which are moved through a series of bank or brokerage accounts to make them appear to be the proceeds of legitimate business activity. The issue has long been debated in the US but perhaps more so over the last year following last summer's revelations that US$7 billion in Russian money had passed through the Bank of New York, some of it believed to be from criminal activities.

The International Counter-Money Laundering Act is the direct result of cooperation between the Clinton administration and key Republican lawmakers, combining earlier anti-money laundering proposals from the administration and the banking panel's chairman Jim Leach, who said 'This legislation will give the secretary of the Treasury additional tools to root out international money-laundering havens, which are used to funnel dirty money ... into the legitimate international financial network. Unfortunately, the U.S. banking system is hardly immune from the dirty money that flows all too freely through the global economy.'

The Act is quite radical in that it would give the Treasury Department the power to ask U.S. financial institutions to collect data on all kinds of transactions with an offshore bank or financial company. In cases where foreign governments shield banks from investigation, the Treasury would have the authority to cut them off from the U.S. financial system without seeking congressional approval.

Earlier this year Treasury Secretary Lawrence Summers identified Russia, Colombia and Nigeria as among the biggest sources of illicit money

and named the Caribbean islands of Dominica and Antigua, Nauru in the South Pacific and Liechtenstein in Europe as some of the leading money-laundering centres.

He is of course delighted with the Banking Committee vote and called it 'a significant step forward in our fight to protect the U.S. financial system against international money laundering and to confront those countries that serve as ready havens to hide and move dirty money around the world.'

Although the vote sent the bill to the full House, the Senate has yet to act on similar legislation, but many are keen to see the bill become law. Last week's vote was certainly timely, coming as it did in the same week as the opening of the Florida trial into a money laundering and investment scam dubbed "Operation Risky Business", which used an Antiguan bank to hide its profits. Scandals such as this can surely only strengthen the resolve of the US to try and oust the money-laundering thorn in its side once and for all.

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