Letter to House and Senate banking Committees regarding the Anti-Money LaunderingProposals of Anti-Terrorism LegislationOctober 22, 2001The Honorable Paul Sarbanes The Honorable Michael Oxley309 Hart Senate Office Bldg 2233 Rayburn House Office BldgWashington, DC 20510 Washington, DC 20515The Honorable Phil Gramm The Honorable John LaFalce370 Russell Senate Office Bldg 2310 Rayburn House Office BldgWashington, DC 20510 Washington, DC 20515Re: Anti-Money Laundering Proposals of Anti-Terrorism LegislationDear Members of Congress:The anti-money laundering proposals of the House (the Financial Anti-TerrorismAct, H.R. 3004) and the Senate (Title III of the Uniting and Strengthening AmericaAct, S. 1510) deserve closer scrutiny. To paraphrase the title of a movie, manyof the provisions can be called the good, the bad, and those needing cosmeticsurgery. We urge Congress to review some of those sections more closely and makethe necessary changes.While we are encouraged by many of the changes proposed in National MoneyLaundering Strategy of 2001, we need to recognize the many reported failures ofthe anti-money laundering policies the Administration inherited. A bank filedreports to the Financial Crimes Enforcement Network (FinCEN) on transactionstotaling about $100,000 on Mohamed Atta, the reported mastermind of the planehighjackings; however, these reports did not initiate an investigation. Althoughthe United States and the United Nations have attempted to freeze bin Laden’sassets since the U.S. embassy bombings in Africa in 1998, no accounts had beenidentified, nor assets frozen, until after the attacks on the World Trade Centerand the Pentagon (with no new tools for law enforcement). The filing ofSuspicious Activity Reports (SARs) on double agent Aldrich Ames failed to triggeran investigation. Only a miniscule percentage of Currency Transaction Reports(CTRs) are ever used in a criminal conviction. The Bank of New York did not fileany SARs on the questionable accounts until after bank officials were notifiedthose accounts were under investigation.We do not need more of the same types of policies that failed to prevent thetragedies of September 11th. The Strategy institutes objective means to measureeffectiveness and will alter policies accordingly--as well as recognizes the needto balance concerns of privacy and regulatory burden.According to leaked preliminary forecasts from the Organization for Economic Co-operation and Development, this year is likely to be the worst for the world'sleading economies in two decades, and it is not likely to improved much next year.Deteriorating loan quality, increase of loan loss reserves, and increasedinsurance claims for September 11th, all call for reduced—not increased—regulatoryburden.We must be mindful of the law of unintended consequences. Most dangerously, theglobal Know Your Customer campaign has actually increased terrorist stateinfluence in the Caribbean. In a situation where poverty and resentment breedterrorism, Libya has taken advantage of economic hardship in the region (whereprivate banking business is off 30-50% year-on-year while FATF-related costs areescalating) by offering development assistance.