on money laundering lapses by private banks, lawmakers and regulators appear increasingly convinced that new anti-laundering laws are needed.
At least three bills -- inspired by recent allegations against major banking organizations, including Bank of New York and Citigroup Inc. -- have been introduced in the past six weeks. Sen. Carl Levin of Michigan, the ranking Democrat on the Senate Governmental Affairs investigations subcommittee, which hosted the hearing, is expected to introduce a fourth bill today.
House Banking Committee Chairman Jim Leach, R-Iowa, introduced an anti-laundering measure on Sept. 21 and reportedly plans further hearings, possibly during the upcoming legislative recess. "This is a very high item on the committee's agenda," a House Banking spokesman said.
An identical bill has been introduced in the Senate by New York Democrat Charles E. Schumer and Georgia Republican Paul D. Coverdell.
Meanwhile, the Clinton administration said it would unveil its own measure today, which Treasury Deputy Secretary Stuart E. Eizenstat said would expand the list of money laundering crimes to include "the misappropriation, theft, or embezzlement of public funds by or for the benefit of a public official."
The reaction from bankers and consultants has been mixed.
Citibank, whose private banking operation reportedly manages more than $100 billion of assets, is willing to support at least one provision common to the bills introduced by Rep. Leach and Sen. Levin. That provision -- a nod to the allegations surrounding the Bank of New York and Russian corruption -- would make it a crime for U.S. banks or foreign banks with U.S. operations to knowingly handle money traceable to corruption in a foreign government.
John Reed, Citigroup's co-chairman and co-chief executive officer, said it would be better if the industry came up with its own solutions. "Global standards and self-regulation would ensure that the long-term fight against money laundering and governmental corruption is not held hostage to short-term political interests in any one country," he said in written testimony Tuesday.
"This is a problem that needs to be addressed, but I do not believe that either my bank or the American banks in general have any significant amount of this money," Mr. Reed said. "That is not zero, but you would not notice it in the third decimal place in their earnings."
Karen Shaw Petrou, president of the ISD/Shaw consulting firm, said the 1970 Bank Secrecy Act needs to be updated -- both to reflect the ingenuity of today's criminals and to help banks strike an appropriate balance between customer privacy and crime-fighting. "Banks need a clear legal framework in which to operate," she said. "They don't have that today."
Ms. Petrou predicted that the recent money laundering embarrassments at major banks would provide momentum for "rapid action" on Rep. Leach's bill. "You have a new scandal, you have a new law," she said. "That's how Congress works."
But the American Bankers Association is opposed to new anti-laundering laws. "If any of the allegations are proven true," said ABA money laundering expert John J. Byrne, "I'm convinced existing law would be sufficient to prosecute and/or sanction all of the illegal activity."
Mr. Byrne warned that any quick legislative fixes could produce "unintended consequences." For example, he said one provision in Sen. Levin's bill could be interpreted to prohibit U.S. banks from accepting deposits from foreign citizens if the foreign government prohibits capital flight.
He also said it is "ironic" that, just eight months after lawmakers urged bank regulators to withdraw their proposed "know-your-customer" regulation, some of the same officials are now pushing bills that would enshrine new know-your-customer responsibilities in law.