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MONEY LAUNDERING
Money laundering occurs when criminals disguise proceeds from criminal activities as legitimate funds. Terrorists, drug traffickers and other criminals rely on money laundering to move funds, disguise dirty money and carry out criminal acts. Current estimates are that $500 billion to $1 trillion in illegal funds are laundered through banks worldwide each year, with about half going through U.S. financial institutions.
Senator Levin has worked hard to strengthen anti-money laundering laws and procedures to prevent terrorists and other criminals from using our financial systems against us. From 1999 until 2001, through his role on the Senate Permanent Subcommittee on Investigations, Senator Levin led a three-phase investigation into how criminals use U.S. financial institutions to launder funds and how U.S. institutions, regulators, and others could fight back.
This investigation examined money laundering issues in the fields of private banking, which specializes in providing financial services to wealthy individuals; correspondent banking, which occurs when one bank provides services to another bank to move funds or carry out other financial transactions, and financial securities, which provides clients with financial accounts that can be used, not only to buy and sell securities, but also transfer funds and transact financial matters in ways virtually identical to those associated with bank accounts.
In November 1999, Senator Levin issued a staff report and subcommittee hearings were held examining how criminals were using U.S. private banks to launder ill-gotten gains, including foreign government officials suspected of looting their countries.
Private Banking and Money Laundering:
A Case Study of Opportunities and Vulnerabilities
(Link is to GPO Website - See S. Hrg. 106-428, Report appears on p. 872 of hearing record entitled "Private Banking and Money Laundering: A Case Study of Opportunities and Vulnerabilities" held on November 9 and 10, 1999)
In March 2001, Senator Levin issued a second staff report with ten case histories of foreign banks laundering funds through U.S. correspondent accounts. This report identified three categories of foreign banks carrying high risks of money laundering: foreign shell banks, offshore banks and banks in jurisdictions with weak anti-money laundering controls. Subcommittee hearings on correspondent banking and money laundering were held the same month.
Correspondent Banking:
A Gateway for Money Laundering
(Large 13 MB PDF file on GPO Web site - Report appears on p. 273)
In October 2001, Senator Levin released a report by the General Accounting Office [PDF] that identified gaps and inadequacies in the anti-money laundering efforts in the U.S. securities industry. Among other problems, the report found that thousands of U.S. securities firms did not have even basic anti-money laundering controls in place.
After the 9/11 terrorist attacks, Senator Levin testified before the Senate Banking Committee about how terrorists could use U.S. financial institutions to move monies to carry out terrorist acts and about the many weaknesses in U.S. law. [View this testimony]
Senator Levin then led a successful effort to strengthen U.S. anti-money laundering laws, building upon a bipartisan bill, S. 1371, that he had introduced in August 2001, with Senator Grassley and others, called the Money Laundering Abatement Act. Among other provisions, this bill barred U.S. banks from opening accounts for foreign shell banks; required U.S. banks to use enhanced due diligence before opening accounts for foreign offshore banks or wealthy foreign individuals or political figures; and strengthened the ability of U.S. law enforcement to prosecute money laundering cases involving foreign banks, corporations, or individuals.
Senator Levin worked with Senator Sarbanes, then chairman of the Senate Banking Committee, to expand his bill further and add new measures to stop terrorist financing. The resulting provisions were included in Title III of the USA Patriot Act, an anti-terrorism bill signed into law in October 2001. [View a summary of the anti-money laundering provisions in the USA Patriot Act]
In addition to strengthening U.S. law, Senator Levin’s work supported international efforts to detect and stop money laundering and terrorist financing. For example, in 2000, a dozen large private banks established an international code of best practices called the "Wolfsberg Principles" to strengthen anti-money laundering practices in the private banking field.
In 2003, the leading international anti-money laundering body, the Financial Action Task Force on Money Laundering, modified its 40 recommendations for anti-money laundering laws and included key provisions from the Levin bill, including a ban on opening accounts for shell banks and requirements for greater due diligence when opening accounts for foreign banks or foreign government officials.
Money laundering and terrorist financing continue to threaten the United States. Listed below are links to legislation, statements and press releases related to Senator Levin’s ongoing battle against money laundering and terrorist financing:
Related Links:
Correspondent Banking: A Gateway for Money Laundering
(Link is to GPO Website - See S. Hrg. 107-84, Report appears on p. 273 of Volume 1 of Hearing records entitled "Role of U.S. Correspondent Banking in International Money Laundering" held on March 1, 2, and 6, 2001)
Private Banking and Money Laundering: A Case Study of Opportunities and Vulnerabilities
(Link is to GPO Website - See S. Hrg. 106-428, Report appears on p. 872 of hearing record entitled "Private Banking and Money Laundering: A Case Study of Opportunities and Vulnerabilities" held on November 9 and 10, 1999)
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