WASHINGTON, Oct. 4 (UPI) -- As Congress quickly pushes toward an omnibus anti-terrorism act, the Senate Banking Committee finished their markup and approval Thursday on a bill that will target terror group funding with the aim of cutting it off.
The International Money Laundering Abatement and Anti-Terrorism Act of 2001 -- passed unanimously 21 to 0 by the committee Thursday -- is expected to be combined into the larger Patriot Act, a comprehensive anti-terrorism bill, which is slated for a vote by the Senate by next week.
"The purpose of the Act (Money Laundering) is to combat international money laundering, thwart the financing of terrorism and protect the United States' financial systems," said Sen. Paul Sarbanes, D-Md., chairman of the banking committee. "These tightly linked objectives are critical national objectives."
This bill will markedly increase the enforcement powers of the U.S. Treasury, among other bodies, in both tracking down and imposing restrictions on the flow of money. It covers not only banking activities and relationships in the United States and abroad but also activities by securities brokers and dealers.
This measure, along with the larger "Patriot Act" come in the wake of the Sept 11 devastating terrorist attack on the World Trade Center Towers and the Pentagon, collectively resulting in the death of an estimated over 6000 persons. For banking committee members and for the Senate at large, the matter of combating terrorism -- on military, political and financial fronts -- is a top priority in light of the changed U.S. security situation.
The World Trade Center and Pentagon attacks have been linked by the U.S. government to alleged terrorist financier Osama bin Laden, and the al Qaida group, a worldwide network established by bin Laden and suspected of various terror acts.
At issue in the Money Laundering Act will be the federal government's stepped-up efforts to shut off funding for the violent radical groups, including halting money transfers among terror group members from banks around the world.
The measure was largely backed the U.S. banking industry, with trade groups such as the American Bankers Association working closely with Congress on banking measures that would halt the flow of terror group funds.
"ABA strongly supports the ongoing congressional efforts to strengthen existing money laundering laws," the Bankers Association said in a statement. "We support fully the thrust of the provisions in both bills -- the one reported today by the Senate Banking Committee and the one introduced in the House yesterday by House Financial Services Committee Chairman Michael Oxley and Rep. John LaFalce."
Among other aspects of halting terrorist funding, the Banking Committee examined in a recent hearing how to control effectively various parts of the "correspondent" relationships among banks internationally.
The correspondent relationship is common one among banks. It allows, for instance, a London bank to send funds in dollars to a client in the United States. Banks commonly maintain correspondent accounts for other banks in an often complicated spider web of relationships.
The Money Laundering Act as amended Thursday --- per an amendment offered by Sen. Debbie Stabenow, D-Mich. -- increases the expectations of banks for "due diligence" in monitoring and reporting on private bank accounts or correspondent accounts "in the United States for a non-United States person, including a foreign individual visiting the United States," the bill reads.
Under the terms of the Money Laundering Act, banks would be expected to obtain "sufficient information about the identity of the nominal and beneficial owners of, and source of funds deposited into any such account as in needed to guard against money laundering."
In previous testimony to the banking committee, Sen. Carl Levin, D-Mich., who chaired an investigation into money laundering, said "We (the Permanent Investigations subcommittee) found that U.S. banks often performed an inadequate background review of the foreign banks seeking to open a correspondent account in the United States. Too often the U.S. banks assumed -- and we heard this verbatim -- that a bank is a bank is a bank"
"There are good banks and there are bad banks, and we found numerous situations where U.S. banks held accounts for foreign banks engaged in criminal activity," he added
The bill also will bar foreign banks that are pure shell banks from the U.S. banking system. The bill requires any foreign bank that uses U.S. correspondent bank facilities to appoint an agent for service of process in the U.S. to assure that law enforcement officials can obtain records.
Also, Sen. Stabenow offered an amendment that proposed to increase the authority of the Treasury Department to require that bankers report to investigators the identity of persons using pooled, or "concentration" funds, which under standard rules allow them to remain anonymous.
Under objection by Sen. Phil Gram, R-Tex., who noted that individuals often use pooled, confidential funds for legitimate reasons, the amendment was revised to lessen the reporting requirement of banks.
Also, after opposition from Sens. Gramm and Sarbanes, an amendment from Sen. Charles Schumer, D-N.Y., was withdrawn that would have restricted the access to U.S. banks from countries whose banking laws have made their banks havens for secret accounts -- often for illegitimate funds.
A short list of these countries included not only the more familiar banking "havens" such as the Cayman islands, but also Israel, Lebanon, Ukraine, Indonesia and the Philippines.
Gramm described the provision as "Draconian" and said that the Money Laundering Act already took into account the tracking and elimination of various offshore accounts.
The committee accepted an amendment proposal from Sen. Evan Bayh, D-Ind. to expand oversight of the so-called "hawalas," a system of brokers (referred to by the Hindi name, "hawalas," meaning "in trust), which provide an essentially recordless banking system. The hawalas are extensive in South Asia and the Middle East, where they provide an informal network for businesses to transfer funds outside the conventional banking system.
Under Sen. Bayh's amendment, the U.S. Treasury Department will require that hawalas in the U.S file reports of any suspicious activity reports, as standard banks are already required to. Also Treasury would be required to conduct onsite inspection of U.S. registered hawalas.
"It is unacceptable that a terrorist today can open the phone book in a number of American cities, find a hawala ... and walk out with thousands of dollars from Afghanistan -- with no one to stop him and no record of the transaction" Bayh said. "The ability to monitor hawalas operating in this country will be an important tool for the law enforcement community in their fight against terrorist financing."
