Senator vows strict oversight of Treasury on money laundering initiatives
Senate Banking Chairman Paul Sarbanes, D-Md., put the Bush administration on notice Tuesday that he intends to keep a firm eye on how the executive branch implements and administers the money laundering components included in last year's sweeping anti-terrorism bill.
"It is a matter we intend to follow very closely ... and review its workings once in place," Sarbanes told a panel of administration officials.
Pivotal rules implementing the statute, which are to be issued by the Treasury Department this April, "need to be carefully drawn to carry through the intent of Congress," Sarbanes said.
In that vein, Sarbanes said he is concerned about "aspects" of some interim Treasury guidance relating to U.S. institutions maintaining accounts for foreign "shell" banks.
Sarbanes said his reading was that the guidance still would allow U.S. banks to rely "without any due diligence, solely on the certification information of foreign customers, even if a bank has reason to doubt certification. That is not consistent with the statutory language."
Deputy Treasury Secretary Kenneth Dam, the leadoff witness for the administration, assured Sarbanes the money laundering legislation remained a top priority for his department and said he expected the regulatory framework to be in place "certainly by the end of the year. We are committed to an aggressive and thorough implementation of the statute."
However, Dam noted the administration was exploring whether some of the bill's exemptions ought to be "broadened," and said there were concerns that the regulations not be overly burdensome.
Treasury will be guided, "not only by the express statutory language, but also by certain core principles that reflect our vision of what this legislation should accomplish and the manner in which it should be implemented," Dam said in his written testimony. That includes "requiring only the degree of reporting that results in action by the government. If the information is not going to be used, it should not be requested," he added.
House Financial Services ranking member John LaFalce, D-N.Y., who also offered testimony, criticized the administration for failing so far to invoke its powers to impose "special measures" against areas of primary money laundering concern around the world.
Those measures can range from prohibiting certain transactions with countries or regions, or requiring the collection of certain information.
Under questioning by Sarbanes about whether the agency planned to invoke those powers, Dam acknowledged the department "need[s] to do some work" in that area. He said Treasury wants to make certain the definitions in that section of the law "are broad enough to do the job, and [do] not ... impose burdens that are not necessary."
LaFalce also urged the rulemaking process with respect to money laundering be kept as transparent as possible. While noting the financial industry had been "forthcoming and cooperative" in helping craft the law, "I'm concerned about a possible collapse back to a pre-Sept. 11 attitude," LaFalce said.