WASHINGTON Could this be the year or at least the Congress in which federal laws against money laundering are finally updated?
Anti-laundering legislation has languished on Capitol Hill for the past two years. One bill, approved 31-1 by the House Banking Committee last year, died on the way to a vote on the House floor. Another, introduced in the Senate, ran into adamant Republican opposition and died in committee.
If anything, the prospects for passage of new money-laundering legislation seemed even dimmer when the 107th Congress convened in January.
Sen. Phil Gramm, R-Tex., who single-handedly killed such legislation in the last Congress, remained chairman of the Senate Banking Committee. Additionally, Treasury Secretary Paul ONeill was making public comments that led many to assume that, unlike the Clinton administration, which had been ardently supportive of further enforcement powers, the newcomers wanted to scale back anti-laundering efforts.
In announcing a wide-ranging review of money-laundering enforcement policies, Mr. ONeill implied that much of the current regulatory structure including suspicious-activity reports and currency transaction reports is too flimsy to bother with.
His remarks provoked a warning from Democratic Sens. Paul Sarbanes of Maryland and Charles Schumer of New York. We are disturbed by a number of recent actions taken by the Treasury Department that suggest that the administration is shifting and weakening the longstanding U.S. policy regarding money laundering, they wrote in a letter to Mr. ONeill.
But in just a few months the outlook has changed dramatically.
Sen. Gramm lost his chairmanship in June when the Democrats took control of the Senate. His successor, Sen. Sarbanes, is much more sympathetic to anti-laundering legislation. He has co-sponsored a bipartisan bill to limit U.S. banks interaction with foreign shell banks, and he plans to hold hearings on the measure next month.
Even Mr. ONeill has changed his tune.
In hearings before the Senate Permanent Subcommittee on Investigations July 18, Mr. ONeill said the Bush administration is committed to aggressive enforcement of the money-laundering and asset-forfeiture laws. He also said that the enforcement of anti-money-laundering statutes will be the top priority for Jimmy Gurule, the Treasurys recently confirmed under secretary for enforcement.
At the same hearing, Assistant Attorney General Michael Chertoff told Congress that law enforcement officials need, and are committed to using, all of the legal and regulatory tools we have at our disposal today, and that some of these tools, such as our money laundering statutes themselves, need to be updated.
Those stances got the skeptics attention.
It is that kind of statement that I find very encouraging, said Stuart E. Eizenstat, the former deputy Treasury secretary, who spearheaded anti-money-laundering programs for the Clinton administration. My general impression is that they are moving this from the deep freeze to a more significant priority.
Donald T. Vangel, a partner with Ernst & Youngs risk management and regulatory practice, said the rhetoric coming out of the administration sounds a bit more hawkish than it did early on, and it suggests that they are poised to be more aggressive on the anti-money-laundering front.
The administrations position became clearer last week when Attorney General John Ashcroft called on lawmakers to pass a bill that would give law enforcement officials more authority to go after dirty money. He asked Congress to make it a federal crime to smuggle cash in bulk and to use interstate highways and other public facilities to move more than $10,000 of criminal proceeds.
In addition, he asked that the laundering of the proceeds of a serious crime be made a crime itself, regardless of the country in which the original offense was committed.
That speech garnered more praise from critics of the administrations early pronouncements on money laundering.
Attorney General Ashcrofts speech was a welcome and encouraging sign that this administration is getting tough on money laundering, said Elise J. Bean, the deputy chief counsel for the Senate investigations subcommittee.
The industry has had mixed reactions to talk about new anti-laundering laws. While some bankers automatically protest anything that could make regulatory burdens heavier, others are more tolerant of tight regulation because of the damage a laundering scandal can do to a banks reputation.
We know better than anyone the challenges of trying to handle compliance and trying to handle reporting criminal activity, said John J. Byrne, a senior counsel for the American Bankers Association. And if there is an opportunity to offer suggestions for a better way, we want to be a part of that.
But when it comes to laws that make it easier to take action against money launderers themselves, on the enforcement side, bringing actions against money-laundering activity doesnt trouble us, he said.
Mr. ONeill is expected to release the administrations National Money Laundering Strategy early next month. (A 1998 law requires the executive branch to produce such a report once a year.) Many observers expect it to include the administrations wish list for anti-laundering legislation.
But there is one barrier to administration support for any anti-money laundering bill: Lawrence Lindsey, President Bushs chief economic adviser.
A former Federal Reserve Board Governor, Mr. Lindsey has been a vocal opponent of anti-laundering laws. In a 1999 op-ed piece in the Financial Times he warned that the federal governments measures could lead to Orwellian surveillance.
To those watching the administrations development on the issue, Mr. Lindsey remains the big question mark. I dont know if Larry Lindsey is on board, one observer said, but everybody else is.
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