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US Bankers Fear Congress Money-Laundering Laws

Tax-news.com

28 November 1999


New money-laundering proposals in Congress have U.S. Bankers worried they may lose most of their international business to foreign competitors. The proposed legislation aims to stiffen regulation of U.S. Banks' international operations by placing restrictions on the sort of foreign banks U.S. banks can set up as correspondents, the offshore financial centers that can be used by U.S. banks and the type of private banking transactions U.S. banks can process.

The new bill comes hot on the heels of two international banking scandals involving prominent U.S. banks Citigroup and Bank of New York and growing domestic concern about criminal abuse of the U.S. financial system by foreigners. One of the most significant aspects of the bill is the requirement that private banking customers disclose large amounts of information and prove that funds being deposited with U.S. banks do not come from criminal origins.

In addition to tougher regulations the bill also contains tougher enforcement measures. It proposes that any transaction classed as tax evasion, flight capital, or a violation of non-U.S. foreign exchange regulations would be subject to criminal sanctions rather than civil penalties, and would also prosecute for money laundering any U.S. bank handling funds originating from violations of foreign laws.

The U.S. banking industry has not reacted well to the proposed new laws. John Byrne of the American Bankers Association said, "We don't believe the proposals are necessary and we are very concerned about the direction our policymakers seem to be going. We already have in place all the laws we need and this will only make it more difficult for foreign customers to do business with U.S. institutions."

Another banking industry representative who wished to remain anonymous said that "This is becoming a big cops-and-robbers game between the Justice Department and Treasury on one hand and suspect foreigners on the other. Banks have gotten caught in the middle."

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