Index

Prepared Testimony of the Honorable Michael Chertoff
Assistant Attorney General, Criminal Division
United States Department of Justice

10:00 a.m., Wednesday, September 26, 2001 - Dirksen 538

Chairman Sarbanes, Senator Gramm, and distinguished members of the Committee, I am pleased to appear before the Committee today to discuss the ever-increasingly important issue of money laundering and the Bush Administration's 2001 National Money Laundering Strategy.

As I understand it, today's hearing was originally scheduled for September 12th. Any testimony prepared for that day was rendered obsolete by the events of September 11th. Tuesday, September 11th, marked a turning point in this country's fight against terrorism and all other kinds of unlawful activity. President Bush has announced that we will meet that unspeakable attack on democracy with a full commitment or resources and with a firm resolve to rid the world of terrorism. As the President so eloquently stated, "Whether we bring our enemies to justice or bring justice to our enemies, justice will be done."

We in law enforcement must do everything within our powers to apprehend those persons who have committed and seek to commit terrorist acts, and we must eradicate the forces of terrorism in our country and around the world. As an initial step toward accomplishing this national mission against terrorism, the Attorney General has directed the creation of an Anti-Terrorism Task Force within each judicial district to be made up of prosecutors from the U.S. Attorney's Office, members of the federal law enforcement agencies, including the FBI, INS, DEA, Customs Service, Marshals Service, Secret Service, IRS, and the ATF, as well as the primary state and local police forces in that district. These task forces will be arms of the national effort to coordinate the collection, analysis and dissemination of information and to develop the investigative and prosecutive strategy for the country. As an integral part of this national effort, the Department of Justice and the FBI have established an interagency Financial Review Group to coordinate the investigation of the financial aspects surrounding the terrorist events of September 11th and beyond. All members of this Committee recognize the importance of understanding the financial components of terrorist and criminal organizations. These financial links will be critical to the larger criminal investigation, while also providing a trail to the sources of funding for these heinous crimes. The importance of "following the money," in this instance, as well as in the investigation of all criminal enterprises, cannot be overstated.

The members of this Committee are also well aware that money laundering constitutes a threat to the safety of our communities, to the integrity of our financial institutions and to our national security. In order to address this serious threat, we must apply and coordinate all the efforts and available resources of the federal government, along with those of our state and local authorities, as well as our foreign counterparts, if we are to be effective in our campaign against domestic and international money launderers. Money laundering techniques are innumerable, diverse, complex, subtle and secret. The 2001 National Money Laundering Strategy not only sets forth a plan to identify, disrupt and dismantle major money laundering organizations and the various financial systems they use but continues previous efforts to establish and expand effective countermeasures to detect and deter present and emergent money laundering techniques. Under Secretary Gurule has detailed the principal provisions of the 2001 Strategy. I would like to focus on an area of the Strategy in which we especially need the Congress' help - updating the money laundering laws.

The Need for New Legislation

In his address to the Nation last Friday, President Bush stated:

However, as Attorney General Ashcroft stated in his remarks in Chicago on August 7th to the Organized Crime Conference sponsored by the Chicago Police Department, and as I and other representatives of the Department of Justice have stated on several occasions in testimony before this and other Committees, we are fighting with outdated weapons in the money laundering arena today. When the money laundering laws were first enacted in 1986, they were designed to address what was primarily a domestic problem. Since 1986, money laundering increasingly has become a global problem, involving international financial transactions, the smuggling of currency across borders, and the laundering in one country of the proceeds of crimes committed in another country. Currency, monetary instruments and electronic funds flow easily across international borders, allowing criminals in foreign countries to hide their money in the United States, and allowing criminals in this country to conceal their illicit funds in any one of hundreds of countries around the world with scant concern that their activities will be detected by law enforcement.

International organized criminal groups based in Asia, Africa, Europe and this hemisphere have seized upon these opportunities for laundering of their assets. These criminals look upon globalization as an invitation to vastly expand the size and scope of their criminal activities - whether these organized criminal groups engage in narcotics trafficking, securities fraud, bank fraud and other white collar crimes, trafficking in persons, or terrorism. With their expanded power and reach, international organized criminals seek to corrupt police and public officials in countries around the world to protect their criminal enterprises and enhance their money-making opportunities. Foreign organized crime groups today threaten Americans, their businesses, and their property, as these groups work to expand their influence into this country.

In this environment, law enforcement is challenged, and the criminals often hold the advantage. Criminals are able to adapt to changing circumstances quickly. They pay no heed to the requirements of laws and regulations and recognize no sovereign's borders. Further, these criminal groups have learned to be adaptable and innovative and as we succeed in a new enforcement effort or implement a new regulatory regime, they quickly alter their methods and modes of operation to adapt to the new circumstances.

The reality of international money laundering in this new century has caused countries from Northern Europe to South Africa, and from here in the West to the financial centers of the Far East, to look for ways to update their domestic laws to address this threat to our security. Equally important, countries around the globe are searching for ways to work together to address this problem jointly, irrespective of our different legal systems, customs and traditions. Criminal proceeds can be moved from country-to-country in an instant. It is thus critical that our laws are brought up to date, so that we may act effectively and cooperate fully with our partners in law enforcement abroad. The United States should be the leader in this process, but sadly we are falling behind. While our laws have remained mostly static for 14 years, other countries are moving ahead to criminalize international money laundering and to take other steps to separate criminals from their criminal proceeds.

Legislative Initiatives

We are not suffering in this endeavor from the lack of ideas or proposals. The provisions of our proposed Money Laundering Act of 2001 would go a long way toward modernizing our money laundering laws by authorizing new and improved tools for our law enforcement agents and prosecutors, and by increasing our ability to cooperate with our international counterparts in tracing, freezing and seizing criminal funds in the United States.

In addition to the Department's legislative proposals, Members of Congress have also recognized the need to update our money laundering laws. For example, Senators Levin, Grassley, Dewine, Kyl, Nelson and Chairman Sarbanes recently introduced a money laundering bill, S.1371. We look forward to working with you as you consider these and related proposals.

I would like to highlight a few of the pending legislative proposals for the Committee that we believe would be particularly beneficial.

First, we must make it a crime to launder the proceeds of specified foreign crimes in the United States. People who commit crimes abroad, and then hide that money in the United States, are committing an offense that is at least as serious as the one committed by our home-grown criminals who hide their money at the local bank. The potential for terrorist organizations to finance their atrocities with money generated by committing crimes in other countries is obvious. (S. 1371, Sec. 3; Money Laundering Act of 2001, Sec. 6).

Second, it is important that the federal courts be given authority to restrain a criminal defendant's assets pending trial, so that he is not free to disburse his money before he is convicted and ordered to turn it over to the Government. It is meaningless to authorize the courts to enter post-conviction forfeiture judgments - as the current laws provide -- yet allow the criminal to send the money beyond the reach of the court in the months before he is convicted. (DOJ Anti-Terrorism Act of 2001, 406).

Third, the federal courts should be given authority to enforce the orders of foreign courts relating to criminal proceeds in the United States. Federal law already permits this in drug cases: a court in Virginia can enforce an order from a court in London if it relates to drug money found in the U.S. (28 U.S.C.  2467). As we speak, foreign countries are working to determine what assets of terrorist acts occurring within their borders may have involved funds in the United States. If foreign courts issue orders to confiscate that money, we need to be able to enforce them. As a result, the current law needs to be expanded beyond drug trafficking crimes. (Money Laundering Act of 2001,  39).

Fourth, the limitations period on seizing electronic funds from a bank account should be extended from one year to two years. Current law requires that the Government trace the money it wants to seize to the offense in which the money was involved. The law recognizes, however, that money is fungible, and that one dollar in a given bank account is the same as any other dollar. This "fungible property" rule, however, only applies for one year (18 U.S.C.  984). If the money has been in the bank account for more than a year, the Government cannot seize it without a strict tracing analysis -- something that is all but impossible if the account was active. We need to be able to go back at least two years to give true effect to the purposes underlying this law. (Money Laundering Act of 2001, 15, S. 1371,  10).

There are other provisions in the Department's anti-money laundering bill that would help us enormously in tracking the assets of terrorists. I mention these few as among the most critical, but a comprehensive revamping of these laws is necessary if we are to make meaningful headway against terrorism and other forms of international organized crime. The Department's Money Laundering Act of 2001 sets out a core group of statutory tools that are necessary in order to meet the domestic and transnational organized crime threats of the 21st Century. Attorney General Ashcroft considers passage of this legislation essential to any success in disrupting and dismantling the business of organized crime and the cruel reality of terrorism.

Conclusion

I believe that the extraordinary events of September 11th should provide the impetus to jump-start consideration of money laundering legislation that will allow us to address the threats presented to us by international terrorists and criminals. The Department stands ready to provide any assistance it can to facilitate prompt consideration of its legislative proposals.

I would like to conclude by expressing the gratitude of the Department of Justice for the continuing support that this Committee has demonstrated for our anti-money laundering activities. We in the Department of Justice look forward to working alongside our Treasury colleagues, with this Committee, with your other colleagues in the Senate and your counterparts in the House to strengthen the U.S. anti-money laundering regime at this critical hour.

Thank you, Mr. Chairman. I would welcome any questions you may have at this time.