FOR IMMEDIATE RELEASE September 30, 1999

SCHUMER, COVERDELL INTRODUCE MONEY LAUNDERING LEGISLATION

Bill Would Prohibit US Banks from Working with Offshore "Brass Plate" Banks

US Senators Charles E. Schumer (D-NY) and Paul Coverdell (R-GA) yesterday introduced legislation to combat money laundering, the process by which criminals seek to legitimize ill- gotten gains by circulating them through financial institutions. In addition to strengthening domestic money laundering regulations, this legislation would significantly curtail ill-gotten gains from filtering into the United States financial system. The Schumer-Coverdell bill is companion legislation to a bill which House Banking Chairman James Leach (R-IA) introduced last week in the US House of Representatives.

"Every year, six trillion dollars are laundered through offshore jurisdictions," said Schumer. "That's more money than the combined GDPs of France, Germany and Italy. Almost without exception, that money is dirty in some way. Just as offshore banks are used to avoid taxation, they are also used to launder drug and terrorist money, which poses a threat to our very way of life."

The Schumer-Coverdell bill would prohibit financial institutions from opening or maintaining correspondent accounts in the United States with so-called "brass plate" banks - foreign banking institutions that are organized in offshore jurisdictions but offer no services there and are not subject to the regulations of that jurisdiction.

"Our State Department has identified offshore jurisdictions that do not cooperate with law enforcement who are hunting down the trail of dirty money," said Schumer. "That money is used to finance terrorism, drug operations, and fraud in the United States and throughout the world. Schumer-Coverdell will compel these countries to lift the veil of secrecy that allows criminals to create phony banks and shell corporations to hide and launder their illegal money."

Recent events involving billions of dollars of money laundered from Russia through global financial institutions have highlighted the importance of combating money laundering and the pervasiveness of this problem. Schumer-Coverdell would address the mechanisms that allowed these activities to take place by toughening current "know your customer" rules for US banks which operate foreigners' accounts. Banks would be required to know the identities of the ultimate owners of accounts not opened by publicly-traded firms, thereby ending the practice of setting up shell corporations for the purpose of laundering money. These regulations would have forced the institutions involved in the Russian money laundering events to identify the owners of these accounts, which would have immediately raised suspicions about the source of the money.

Furthermore, the bill would add six new categories of crimes, including violent crime and misuse of IMF funds, to the list of activities that constitute money laundering.

"If you look at some of the major ills in society - drugs, terrorism, and fraud - there is a nexus with money laundering," said Schumer. "Criminals and terrorists have to find a way to launder money so they can use it for their own personal gain. If the banks cannot operate in the U.S., the entire operation of international crime and terrorism begins to grind to a halt."

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