US Senators Call For New Government Powers Over Banks

Mike Godfrey, Tax-news.com, Washington

22 March 2001

In a bid to step up the government's fight against international money laundering and protect the United States' financial system, two US Senators called for legislation this week to strengthen the government's regulatory powers over US banks that deal with foreign banks and clients.

The two Democrats, John LaFalce and John Kerry, told the US press that their proposed bill would 'arm the United States with new tools to target foreign money-laundering threats and to bar money launderers and corrupt foreign officials from exploiting the US domestic financial system.'

The proposal follows a recent report conducted by Senate investigators which accused many of America's most powerful banks of deep and routine involvement in money laundering through the business they do using the correspondent banking system. This system allows banks with no physical presence in the US, otherwise known as shell banks, to open accounts for clients at US banks and the report recommended that US banks should be barred from doing such business.

Under the proposed bill US banks which do business outside the US would be required to keep records or reports on foreign transactions including the identification of account holders and the people they do business with via the banks. In addition, conditions would be imposed on US banks' correspondent accounts with banks in foreign jurisdictions.

Senators LaFalce and Kerry said the bill would enable the Treasury to identify offshore areas of 'primary money-laundering concern' and do away with the need to employ 'sweeping and often disruptive economic sanctions' demanded by the existing law against offending countries.

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