June 7, 2001

Bush Reviews Money Laundering Rules

By THE ASSOCIATED PRESS

Filed at 7:44 p.m. ET

WASHINGTON (AP) -- The Bush administration is reviewing rules designed to fight money laundering, saying they may be burdensome for U.S. banks without achieving their goal.

Democratic lawmakers are pushing legislation to give the government new authority over U.S. banks that do business with foreign banks and customers.

Treasury Secretary Paul O'Neill has ordered the major review of anti-money-laundering regulations as part of a study of all department functions aimed at finding out whether taxpayers get value for the money being spent.

In congressional testimony last month, O'Neill questioned whether the $700 million spent annually in efforts to crack down on money laundering was being wisely expended. He said current law requiring banks to report all cash transactions exceeding $10,000 ``imposes a significant cost on society'' and questioned whether that much information was needed.

Sen. Carl Levin, D-Mich., said Thursday he will use his new power as chairman of the Senate Governmental Affairs Committee's investigative panel to scrutinize Treasury's actions. The panel has conducted extensive investigations of money laundering and the role of big U.S. banks.

``It would be a real setback to the progress that has been made in anti-money-laundering efforts in our country and internationally if the Treasury Department attempts to weaken the programs we now have in place,'' Levin said.

Combating laundering of illicit money became a major priority in the Clinton administration, particularly after revelations in 1999 that the Bank of New York, one of the nation's largest, had served as a conduit for $7 billion in Russian money -- some of it believed to be from criminal activity.

The banking industry has opposed new legislation, and conservative Republicans had sharply criticized the Clinton policies.

Texas Sen. Phil Gramm, the former chairman of the Senate Banking Committee, last year denounced a bill he said would give the Treasury secretary too much power.

The measure died in Congress, partly because of heavy lobbying by Texas bankers who contend they are overburdened with federal paperwork requirements because of the large volume of cash transactions made over the border with Mexico.

In recent months, opponents of stricter measures have invoked privacy concerns, buttressed by position papers from conservative think tanks.

Prosecutions of money laundering have not increased under the Clinton rules, according to the Bush administration.

Sen. John Kerry, D-Mass., who has proposed new legislation with Rep. John LaFalce, D-N.Y., expressed concern Thursday that the administration ``may be moving in a direction of weakening protections that need to be strengthened, which means taxpayers and good corporate citizens will continue to pay the price for money laundering.''

In recent years, Kerry said, ``powerful interests have quietly conspired to stop a serious and bipartisan effort to address money laundering.''

Money laundering, in which profits from drug trafficking and other illegal activities are moved through a series of bank or brokerage accounts to disguise them as proceeds of legitimate business, is estimated to absorb close to $600 billion a year. That equates to 5 percent of the world's gross domestic product.

The measure proposed by Kerry and LaFalce would give the Treasury secretary new tools if he were to identify an area of ``primary money-laundering concern'' offshore. That would avoid having to invoke ``sweeping and often disruptive economic sanctions'' against offending countries under current law, they have said.

The proposed new tools would include requiring U.S. banks that operate outside the United States to maintain records or report on transactions of foreign operations.

Sen. Paul Sarbanes, D-Md., chairman of the Senate Banking Committee, has said he planned to have the committee address efforts to fight money laundering. He declined comment Thursday on the Treasury review.

John Hall, a spokesman for the American Bankers Association, had no immediate comment Thursday.

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