US Administration Wants Weaker Financial Privacy Rules

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

20 September 2001

The US administration will release its rapidly-recast money-laundering strategy document today, which includes a request to Congress for expanded law-enforcement powers. In particular, the administration would like to ease privacy restrictions that limit the IRS's ability to share tax data with outside investigators. Another proposal could authorize the Secret Service to work with the FBI in cases that involve computer break-ins.

The strategy also calls for the establishment of permanent law-enforcement teams in San Francisco and Chicago to combat money-laundering by suspected terrorists. Each task force will consist of agents from a variety of law-enforcement groups, including the Federal Bureau of Investigation, the Secret Service, the Internal Revenue Service and the Customs Service. These cities have been chosen because of their large banking sectors. The administration may also re-assign an existing Los Angeles task force to investigate the channels by which terror groups finance their activities. Existing teams in three other cities would continue to have broader mandates, including drug-related money-laundering.

The new strategy reflects a shift in focus from drugs to money. "We're going to be following the money trail wherever it leads," said Jimmy Gurule, Treasury undersecretary for enforcement.

Earlier in the week, Mr Gurule had announced the establishment of an inter-agency team dedicated to the disruption of terrorist fundraising. Said the Under-Secretary: 'The team is designed to increase our ability to identify foreign terrorist groups, assess their sources and methods of fundraising, and provide information that will make clear to law enforcement officials how terrorist funds are moved. This team will ultimately be transformed into a permanent Foreign Terrorist Asset Tracking Center in the Treasury Department's Office of Foreign Asset Control (OFAC).'

The center has a $6.4 million budget and will try to assemble financial profiles of terrorists and terrorist organizations to identify how they raise and transfer funds.

The administration also wants to strengthen the rules requiring banks to report large cash transactions, and to extend reporting requirements to include casinos and securities dealers. Currently banks must inform regulators of any cash transaction of $10,000 or more. Previous attempts to dent banking privacy in the interests of better tax collection and the control of money-laundering have been denied in the Congress, where there is strong support for individual financial privacy. It remains to be seen whether the impetus given to such efforts by last week's events will be enough to overcome Congress's inbuilt resistance.

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