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. Last Updated: 07/27/2016

Senate Mulls Money-Laundering Bills




WASHINGTON -- U.S. President Bill Clinton's administration, as well as some senators, are studying legislation to make it illegal for American banks to handle the proceeds of official corruption abroad.


Proposals were offered this week as a Senate committee completed hearings into how Citibank Private Bank handled hundreds of millions of dollars in questionable deposits from foreign leaders and their families.


At a hearing Wednesday before the Senate Permanent Subcommittee on Investigations, regulators and a former private banker described how the use of offshore havens by American private banks shielded wealthy clients and impeded federal examiners' work in gauging a bank's financial soundness.


Senator Carl Levin, who initiated the inquiry, told the regulators, "You are stymied in getting information.''


Levin introduced a Money Laundering Abatement Act that would bar American banks from handling accounts for foreign entities unless records were maintained in the United States that showed the identities of the account owners.


A former private banker convicted of money laundering, Antonio Giraldi, described how private bankers helped clients hide their wealth by setting up shell corporations in safe havens, countries like the Cayman Islands with strict secrecy laws and few if any taxes, and keeping the records of the true corporation owners outside the United States.


The proposed legislation would also expand the list of foreign crimes that fall under the money-laundering statute. Presently, American financial institutions are barred from handling the proceeds from a narrow group of offenses committed abroad, including drug trafficking, kidnapping and bank fraud.


Levin said his bill would include as underlying offenses "corruption or fraud by or against a foreign government under the government's laws or the laws of the country in which the conduct occurred.''


The legislation, submitted by the Treasury and Justice Departments, would expand the list of foreign crimes that serve as a basis for laundering prosecutions to include fraud, official bribery, misappropriation of public funds, arms trafficking and crimes of violence.


The proposals follow disclosure that hundreds of millions of dollars in possibly corrupt money wound up in banks like Citibank and the Bank of New York after having left Africa, Mexico and Russia under questionable circumstances.


At the hearing, officials from the Federal Reserve and the Office of the Comptroller of the Currency testified that their examiners were not allowed to look at American bank operations in some foreign jurisdictions and that gaining access to customer records for those countries could be difficult if not impossible.