WASHINGTON - Treasury Secretary Lawrence H. Summers is expected on Thursday to propose anti-money-laundering legislation that would give him more authority to single out parts of the world where U.S. financial institutions may not do business.
The industry would prefer that approach to a proposal by House Banking Committee Chairman Jim Leach, which would bar banks from establishing relationships with financial institutions from countries that lack "comprehensive" and "consolidated" supervision. The reason, said American Bankers Association senior counsel John J. Byrne, is that the Leach bill would put too much responsibility on banks to make that determination instead of the government.
"We are not in a position to know how strong the regulatory oversight of a particular country is," Mr. Byrne said. "Chairman Leach's bill places too much onus on the private sector. To the extent that Treasury is willing to take this burden, that would not only be preferable, but it is the only way to go."
Mr. Summers is scheduled to discuss his legislative proposal and preview some details of the Clinton administration's other anti-money-laundering initiatives Thursday.
Treasury officials and lawmakers from both parties have said they share a common aim: keeping criminal proceeds out of the banking system and preventing U.S. financial institutions from establishing relationships with so-called "brass plate" banks, or shell companies in offshore locations such as the Caribbean or Pacific. But they have been negotiating details.
Sources in the industry and on Capitol Hill said Mr. Summers will propose that the Treasury secretary be given authority to declare which countries, or parts of countries, are off-limits to U.S. banks that want to establish correspondent accounts for foreign institutions. Supporters argue that such an approach would be more flexible and diplomatically sensitive than a strict definition.
A House Banking spokesman said that Rep. Leach, who has tentatively scheduled the latest in a series of hearings on money laundering for March 9, had never intended for the responsibility to fall on banks. "If Treasury's proposal is to do that, that is most welcome," the spokesman said. "There is a great deal of flexibility on Mr. Leach's part."
Mr. Summers' speech will kick off a week of renewed focus on U.S. policy to curb money laundering, which came under intense scrutiny last year after news reports that employees of Bank of New York Co. and accomplices had laundered $7 billion of Russian funds through the bank.
Deputy Treasury Secretary Stuart E. Eizenstat and Deputy Attorney General Eric H. Holder Jr. are expected next week to unveil an updated version of the federal anti-money-laundering strategy that regulators issued in September. Though the officials will proclaim progress by some of the interagency task forces established last year, they are expected to have little to report on sticky issues such as guidelines on how banks should scrutinize high-risk accounts.