13 June 1998 Source: http://www.access.gpo.gov/su_docs/aces/aaces002.html See amendments notice: http://jya.com/hr4005-hv.htm ------------------------------------------------------------------------- [DOCID: f:h4005ih.txt] 105th CONGRESS 2d Session H. R. 4005 To amend title 31 of the United States Code to improve methods for preventing financial crimes, and for other purposes. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES June 5, 1998 Mr. Leach (for himself, Mr. Bereuter, Mr. Castle, Mr. Bachus, Mrs. Roukema, Mr. Baker, Mr. LaFalce, Mr. Kanjorski, Mr. Hinchey, Ms. Waters, and Ms. Velazquez) introduced the following bill; which was referred to the Committee on Banking and Financial Services, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned _______________________________________________________________________ A BILL To amend title 31 of the United States Code to improve methods for preventing financial crimes, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Money Laundering Deterrence Act of 1998''. SEC. 2. FINDINGS AND PURPOSES. (a) Findings.--The Congress finds as follows: (1) The dollar amount involved in international money laundering likely exceeds $500,000,000,000 annually. (2) Organized crime groups are continually devising new methods to launder the proceeds of illegal activities in an effort to subvert the transaction reporting requirements of subchapter II of chapter 53 of title 31, United States Code, and chapter 2 of Public Law 91-508. (3) A number of methods to launder the proceeds of criminal activity were identified and described in congressional hearings, including the use of financial service providers which are not depository institutions, such as money transmitters and check cashing services, the purchase and resale of durable goods, and the exchange of foreign currency in the so-called ``black market''. (4) Recent successes in combating domestic money laundering have involved the application of the heretofore seldom-used authority granted to the Secretary of the Treasury and the cooperative efforts of Federal, State, and local law enforcement agencies. (5) Such successes have been exemplified by the implementation of the geographic targeting order in New York City and through the work of the El Dorado task force, a group comprised of agents of Department of the Treasury law enforcement agencies, New York State troopers, and New York City police officers. (b) Purposes.--The purposes of this Act are as follows: (1) To amend subchapter II of chapter 53 of title 31, United States Code, to provide the law enforcement community with the necessary legal authority to combat money laundering. (2) To broaden the law enforcement community's access to transactional information already being collected which relate to coins and currency received in a nonfinancial trade or business. (3) To express the sense of the Congress that the Secretary of the Treasury should expedite the development and implementation of controls designed to deter money laundering activities at certain types of financial institutions. SEC. 3. AMENDMENTS RELATING TO REPORTING OF SUSPICIOUS ACTIVITIES. (a) Amendment Relating to Civil Liability Immunity for Disclosures.--Section 5318(g)(3) of title 31, United States Code, is amended to read as follows: ``(3) Liability for disclosures.--Notwithstanding any other provision of law-- ``(A) any financial institution that-- ``(i) makes a disclosure of any possible violation of law or regulation to an appropriate government agency; or ``(ii) makes a disclosure pursuant to this subsection or any other authority; or ``(B) any director, officer, employee, or agent of such institution who makes, or requires another to make any such disclosure; and ``(C) any independent public accountant who audits any such financial institution and makes a disclosure described in subparagraph (A), shall not be liable to any person under any law or regulation of the United States, any constitution, law, or regulation of any State or political subdivision thereof, or under any contract or other legally enforceable agreement (including any arbitration agreement), for such disclosure or for any failure to notify the person who is the subject of such disclosure or any other person identified in the disclosure.''. (b) Prohibition on Notification of Disclosures.--Section 5318(g)(2) of title 31, United States Code, is amended to read as follows: ``(2) Notification prohibited.-- ``(A) In general.--If a financial institution, any director, officer, employee, or agent of any financial institution, or any independent public accountant who audits any such financial institution, voluntarily or pursuant to this section or any other authority, reports a suspicious transaction to an appropriate government agency-- ``(i) the financial institution, director, officer, employee, agent, or accountant may not notify any person involved in the transaction that the transaction has been reported and may not disclose any information included in the report to any such person; and ``(ii) any other person, including any officer or employee of any government, who has any knowledge that such report was made, may not disclose to any other person or government agency the fact that such report was made. ``(B) Exception for use by government officers in official capacity.--Paragraph (1) shall not apply to the use or disclosure by an officer or employee of an appropriate government agency of any report under this subsection, or information included in such report, to the extent the use is made solely in conjunction with the performance of the official duties of such officer or employee to conduct or assist in the conduct of a law enforcement or regulatory inquiry, investigation, or proceeding. ``(C) Coordination with paragraph (5).-- Subparagraph (A) shall not be construed as prohibiting any financial institution, or any director, officer, employee, or agent of such institution, from including, in a written employment reference that is provided in accordance with paragraph (5) in response to a request from another financial institution, information that was included in a report to which subparagraph (A) applies, but such written employment reference may not disclose that such information was also included in any such report or that such report was made.''. (c) Authorization To Include Suspicions of Illegal Activity in Employment References.--Section 5318(g) of title 31, United States Code, is amended by adding at the end the following new paragraph: ``(5) Employment references may include suspicions of involvement in illegal activity.-- ``(A) In general.--Notwithstanding any other provision of law and subject to subparagraph (B) of this paragraph and paragraph (2)(C), any financial institution, and any director, officer, employee, or agent of such institution, may disclose, in any written employment reference relating to a current or former institution-affiliated party of such institution which is provided to another financial institution in response to a request from such other institution, information concerning the possible involvement of such institution-affiliated party in any suspicious transaction relevant to a possible violation of law or regulation. ``(B) Limit on liability for disclosures.--A financial institution, and any director, officer, employee, or agent of such institution, shall not be liable to any person under any law or regulation of the United States, any constitution, law, or regulation of any State or political subdivision thereof, or under any contract or other legally enforceable agreement (including any arbitration agreement), for any disclosure under subparagraph (A), to the extent-- ``(i) the disclosure does not contain information which the institution, director, officer, employee, agent, or accountant knows to be false; and ``(ii) the institution, director, officer, employee, agent, or accountant has not acted with malice or with reckless disregard for the truth in making the disclosure. ``(C) Institution-affiliated party defined.--For purposes of this paragraph, the term `institution- affiliated party' has the meaning given to such term in section 3(u) of the Federal Deposit Insurance Act, except such section 3(u) shall be applied by substituting `financial institution' for `insured depository institution'.''. (d) Amendments Relating to Availability of Suspicious Activity Reports for Other Agencies.--Section 5319 of title 31, United States Code, is amended-- (1) in the 1st sentence, by striking ``5314, or 5316'' and inserting ``5313A, 5314, 5316, or 5318(g)''; (2) in the last sentence, by inserting ``under section 5313, 5313A, 5314, 5316, or 5318(g)'' after ``records of reports''; and (3) by adding the following new sentence after the last sentence: ``The Secretary of the Treasury may permit the dissemination of information in any such reports to any self- regulatory organization (as defined in section 3(a)(26) of the Securities Exchange Act of 1934), if the Securities and Exchange Commission determines that such dissemination is necessary or appropriate to permit such organization to perform its function under the Securities Exchange Act of 1934 and regulations prescribed under such Act.''. SEC. 4. EXPANSION OF SCOPE OF SUMMONS POWER. Section 5318(b)(1) of title 31, United States Code, is amended by inserting ``examinations to determine compliance with the requirements of this subchapter, section 21 of the Federal Deposit Insurance Act, and chapter 2 of Public Law 91-508 and regulations prescribed pursuant to such provisions, investigations relating to reports filed by financial institutions or other persons pursuant to any such provision or regulation, and'' after ``in connection with''. SEC. 5. PENALTIES FOR VIOLATIONS OF GEOGRAPHIC TARGETING ORDERS AND CERTAIN RECORDKEEPING REQUIREMENTS. (a) Civil Penalty for Violation of Targeting Order.--Section 5321(a)(1) of title 31, United States Code, is amended by inserting ``or order issued'' after ``regulation prescribed''. (b) Criminal Penalties for Violation of Targeting Order.-- Subsections (a) and (b) of section 5322 of title 31, United States Code, are each amended by inserting ``or order issued'' after ``regulation prescribed''. (c) Structuring Transactions To Evade Targeting Order or Certain Recordkeeping Requirements.--Section 5324(a) of title 31, United States Code, is amended-- (1) in the portion of such section which precedes paragraph (1), by inserting ``, the reporting requirements imposed by any order issued under section 5326, or the recordkeeping requirements imposed by any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91-508'' after ``regulation prescribed under any such section''; (2) in paragraphs (1) and (2), by inserting ``, to file a report required by any order issued under section 5326, or to maintain a record required pursuant to any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91-508'' after ``regulation prescribed under any such section'' where such term appears in each such paragraph. (d) Increase in Civil Penalties for Violation of Certain Recordkeeping Requirements.-- (1) Federal deposit insurance act.--Section 21(j)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1829b(j)(1)) is amended by striking ``$10,000'' and inserting ``the greater of the amount (not to exceed $100,000) involved in the transaction (if any) with respect to which the violation occurred or $25,000''. (2) Public law 91-508.--Section 125 of Public Law 91-508 (12 U.S.C. 1955) is amended by striking ``$10,000'' and inserting ``the greater of the amount (not to exceed $100,000) involved in the transaction (if any) with respect to which the violation occurred or $25,000''. (e) Criminal Penalties for Violation of Certain Recordkeeping Requirements.-- (1) Section 126.--Section 126 of Public Law 91-508 (12 U.S.C. 1956) is amended to read as follows: ``SEC. 126. CRIMINAL PENALTY. ``A person willfully violating this chapter, section 21 of the Federal Deposit Insurance Act, or a regulation prescribed under this chapter or such section, shall be fined not more than $250,000, or imprisoned for not more than five years, or both.''. (2) Section 127.--Section 127 of Public Law 91-508 (12 U.S.C. 1957) is amended to read as follows: ``SEC. 127. ADDITIONAL CRIMINAL PENALTY IN CERTAIN CASES. ``A person willfully violating this chapter, section 21 of the Federal Deposit Insurance Act, or a regulation prescribed under this chapter or such section, while violating another law of the United States or as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period, shall be fined not more than $500,000, imprisoned for not more than 10 years, or both.''. SEC. 6. REPEAL OF CERTAIN REPORTING REQUIREMENTS. Section 407(d) of the Money Laundering Suppression Act of 1994 (31 U.S.C. 5311 note) is amended by striking ``subsection (c)'' and inserting ``subsection (c)(2)''. SEC. 7. LIMITED EXEMPTION FROM PAPERWORK REDUCTION ACT. Section 3518(c)(1) of title 44, United States Code, is amended-- (1) by redesignating subparagraphs (C) and (D) as subparagraphs (D) and (E), respectively; and (2) by inserting after subparagraph (B) the following new subparagraph: ``(C) pursuant to regulations prescribed or orders issued by the Secretary of the Treasury under section 5318(h) or 5326 of title 31.''. SEC. 8. TRANSFER OF REPORTING REQUIREMENTS FROM SECTION 6050I OF THE INTERNAL REVENUE CODE OF 1986 TO TITLE 31, UNITED STATES CODE. (a) Reenactment of Section 6050I.--Subchapter 2 of chapter 53 of title 31, United States Code, is amended by inserting after section 5313 the following new section: ``SEC. 5313A. REPORTS RELATING TO COINS AND CURRENCY RECEIVED IN NONFINANCIAL TRADE OR BUSINESS. ``(a) Coin and Currency Receipts of More Than $10,000.--Any person-- ``(1) who is engaged in a trade or business; and ``(2) who, in the course of such trade or business, receives more than $10,000 in coins or currency in 1 transaction (or 2 or more related transactions), shall file a report described in subsection (b) with respect to such transaction (or related transactions) at such time as the Secretary may by regulations prescribe. ``(b) Form and Manner of Reports.--A report is described in this subsection if such report-- ``(1) is in such form as the Secretary may prescribe; ``(2) contains-- ``(A) the name, address, and taxpayer identification number of the person from whom the coins or currency was received; ``(B) the amount of coins or currency received; ``(C) the date and nature of the transaction; and ``(D) such other information as the Secretary may prescribe. ``(c) Exceptions.-- ``(1) Amounts received by financial institutions.-- Subsection (a) shall not apply to amounts received in a transaction reported under section 5313 and regulations prescribed under such section. ``(2) Transactions occurring outside the united states.-- Except to the extent provided in regulations prescribed by the Secretary, subsection (a) shall not apply to any transaction if the entire transaction occurs outside the United States. ``(d) Currency Includes Foreign Currency and Certain Monetary Instruments.-- ``(1) In general.--For purposes of this section, the term `currency' includes-- ``(A) foreign currency; and ``(B) to the extent provided in regulations prescribed by the Secretary, any monetary instrument (whether or not in bearer form) with a face amount of not more than $10,000. ``(2) Scope of application.--Paragraph (1)(B) shall not apply to any check drawn on the account of the writer in a financial institution referred to in subparagraph (A), (B), (C), (D), (E), (F), (G), (J), (K), (R), or (S) of section 5312(a)(2). ``(e) Coins or Currency Received by Criminal Court Clerks.-- ``(1) In general.--Every clerk of a Federal or State criminal court who receives more than $10,000 in coins or currency as bail for any individual charged with a specified criminal offense shall file a report described in paragraph (2) (at such time as the Secretary may by regulations prescribe) with respect to the receipt of such bail. ``(2) Report.--A report is described in this paragraph if such report-- ``(A) is in such form as the Secretary may prescribe; and ``(B) contains-- ``(i) the name, address, and taxpayer identification number of-- ``(I) the individual charged with the specified criminal offense; and ``(II) each person posting the bail (other than a person licensed as a bail bondsman); ``(ii) the amount of coins or currency received; ``(iii) the date the coins or currency was received; and ``(iv) such other information as the Secretary may prescribe. ``(3) Specified criminal offense.--For purposes of this subsection, the term `specified criminal offense' means-- ``(A) any Federal criminal offense involving a controlled substance; ``(B) racketeering (as defined in section 1951, 1952, or 1955 of title 18, United States Code); ``(C) money laundering (as defined in section 1956 or 1957 of such title); and ``(D) any State criminal offense substantially similar to an offense described in subparagraph (A), (B), or (C). ``(4) Information to federal prosecutors.--Each clerk required to include in a report under paragraph (1) the information described in paragraph (2)(B) with respect to an individual described in paragraph (2)(B)(i)(I) shall furnish (at such time as the Secretary may by regulations prescribe) a written statement showing such information to the United States Attorney for the jurisdiction in which such individual resides and the jurisdiction in which the specified criminal offense occurred. ``(5) Information to payors of bail.--Each clerk required to file a report under paragraph (1) shall furnish (at such time as the Secretary may by regulations prescribe) to each person whose name is required to be set forth in such report by reason of paragraph (2)(B)(i)(II) a written statement showing-- ``(A) the name and address of the clerk's office required to file the report; and ``(B) the aggregate amount of coins and currency described in paragraph (1) received by such clerk.''. (b) Prohibition on Structuring Transactions.-- (1) In general.--Section 5324 of title 31, United States Code, is amended-- (A) by redesignating subsections (b) and (c) as subsections clause and (d), respectively; and (B) by inserting after subsection (a) the following new subsection: ``(b) Domestic Coin and Currency Transactions Involving Nonfinancial Trades or Businesses.--No person shall for the purpose of evading the report requirements of section 5313A or any regulation prescribed under such section-- ``(1) cause or attempt to cause a nonfinancial trade or business to fail to file a report required under section 5313A or any regulation prescribed under such section; ``(2) cause or attempt to cause a nonfinancial trade or business to file a report required under section 5313A or any regulation prescribed under such section that contains a material omission or misstatement of fact; or ``(3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with 1 or more nonfinancial trades or businesses.''. (2) Technical and conforming amendments.-- (A) The heading for subsection (a) of section 5324 of title 31, United States Code, is amended by inserting ``Involving Financial Institutions'' after ``Transactions''. (B) Section 5317(c) of title 31, United States Code, is amended by striking ``5324(b)'' and inserting ``5324(c)''. (c) Definition of Nonfinancial Trade or Business.-- (1) In general.--Section 5312(a) of title 31, United States Code, is amended-- (A) by redesignating paragraphs (4) and (5) as paragraphs (5) and (6), respectively; and (B) by inserting after paragraph (3) the following new paragraph: ``(4) Nonfinancial trade or business.--The term `nonfinancial trade or business' means any trade or business other than a financial institution that is subject to the reporting requirements of section 5313 and regulations prescribed under such section.''. (2) Technical and conforming amendments.-- (A) Section 5312(a)(3)(C) of title 31, United States Code, is amended by striking ``section 5316,'' and inserting ``sections 5313A and 5316,''. (B) Subsections (a) through (f) of section 5318 of title 31, United States Code, and sections 5326 and 5328 of such title are each amended by inserting ``or nonfinancial trade or business'' after ``financial institution'' each place such term appears. (C) Section 981(a)(1)(A) of title 18, United States Code, is amended by striking ``5313(a) or 5324(a) of title 31,'' and inserting ``5313(a) or 5313A of title 31, of subsection (a) or (b) of section 5324 of such title,''. (D) Section 982(a)(1) of title 18, United States Code, is amended by inserting ``5313A,'' after ``5313(a),''. (d) Repeal of Duplicate Provision.--Section 6050I of the Internal Revenue Code of 1986 is repealed. (e) Clerical Amendments.-- (1) Title 31.--The tables of sections for chapter 53 of title 31, United States Code, is amended by inserting after the item relating to section 5313 the following new item: ``5313A. Reports relating to coins and currency received in nonfinancial trade or business.''. (2) Internal revenue code of 1986.-- (A) The table of sections for subpart B of part III of subchapter A of chapter 61 of the Internal Revenue Code of 1986 is amended by striking the item relating to section 6050I. (B)(i) Subsection (l) of section 6103 of such Code is amended by striking paragraph (15). (ii) Subparagraph (A) of section 6103(p)(3) of such Code is amended by striking ``(15),''. (iii) Paragraph (4) of section 6103(p) of such Code is amended by striking in the material preceding subparagraph (A) ``(12)'' and all that follows through ``(16)'' and inserting ``(12), or (16)''. (iv) Clause (ii) of section 6103(p)(4)(F) of such Code is amended by striking ``(14), or (15)'' and inserting ``or (14)''. (C) Paragraph (2) of section 6721(e) of such Code is amended-- (i) in subparagraph (A) by striking ``6050I,'' and by adding ``or'' at the end, (ii) by striking ``or'' at the end of subparagraph (B) and inserting ``and'', and (iii) by striking subparagraph (C). (D) Subparagraph (B) of section 6724(d)(1) of such Code is amended by striking clause (iv) and by redesignating the succeeding clauses accordingly. (E) Paragraph (2) of section 6724(d) of such Code is amended by striking subparagraph (K) and by redesignating the succeeding subparagraphs accordingly. (F) Section 7203 of such Code is amended by striking the last sentence. (f) Regulations; Effective Date.-- (1) Regulations.--Regulations which the Secretary of the Treasury determines are necessary to implement this section shall be published in final form before the end of the 6-month period beginning on the date of the enactment of this Act. (2) Effective date.--The amendments made by this section shall take effect at the end of the 6-month period beginning on the date the regulations referred to in paragraph (1) are published in final form in the Federal Register. SEC. 9. SENSE OF THE CONGRESS. It is the sense of the Congress that the Secretary of the Treasury should, in conjunction with the Board of Governors of the Federal Reserve System, expedite the promulgation of ``know your customer'' regulations for financial institutions.