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. Last Updated: 07/27/2016

U.S. Plans to Assault Money Laundering




WASHINGTON -- The U.S. administration plans to ask Congress for sweeping new powers to combat money laundering, including the authority to ban financial transactions between U.S. banks or brokerage houses and offshore financial centers, administration officials said Wednesday.


The request is the centerpiece of administration efforts to tighten money-laundering laws after the Bank of New York was found to have acted as a conduit for about $7 billion in Russian money, some of which investigators believe was derived from illegal activities. The administration has also been searching for ways to make it harder for drug traffickers to funnel their profits through U.S. banks.


Treasury Secretary Lawrence Summers plans to announce proposed legislation in a speech to bankers Thursday, officials said. The legislation would give his department a broad range of powers to investigate and in serious cases forbid transactions between U.S. financial institutions and individual foreign banks or entire foreign countries.


Administration officials say current laws do not provide enough authority to fight money laundering, the practice of filtering profits from illegal activities through banks to disguise their origin. Short of having Congress declare emergency sanctions against countries deemed to be a national security threat, the officials said, they are mostly confined to waving a finger at nations that tolerate money laundering and urging U.S. banks to be wary of doing business with such places.


"The issue of money laundering is so prominent and public that it can't be ignored anymore," a senior official said. "We need to be able to target the root problems without unnecessarily hindering legitimate economic activity."


The effort to seek new powers is clearly a response to Russia, where financial mismanagement has been a problem for the U.S. administration and the International Monetary Fund. Some analysts and members of Congress have complained that widespread corruption in Russia - helped in part by the ease of transferring funds abroad - undermined multibillion-dollar foreign aid programs and left one of the administration's top foreign policy priorities a shambles.


The proposed legislation also appears to be an attempt to broker a compromise between congressional proposals and private financial companies. Both the House and the Senate are weighing bills that would impose draconian restrictions on foreign banks that hide money and, in some cases, new enforcement duties on domestic banks and brokerage houses. Financial companies have complained that such laws threaten to make them uncompetitive against foreign rivals.


The new legislation would give the Treasury Department the right to take any number of steps, along a progressive scale, to fight laundering. On the light end of the spectrum, the department wants the power to ask U.S. companies to collect data on all kinds of transactions with an offshore bank or financial company. That would help law enforcement officials track suspicious activity, and would also make U.S. banks wary of doing business with such places, officials said.