FC: Gore talks up privacy; Rep. Jim Leach denies it

[Declan McCullagh <declan () well com>]

[Note Gore's memo endorsing the Clipper chip below, and some statements 
from the House Banking markup this Thursday. --Declan]



http://www.wired.com/news/politics/0,1283,36908,00.html

Pols Prep Privacy Pitches
by Declan McCullagh (declan () wired com)

3:00 a.m. Jun. 10, 2000 PDT

WASHINGTON -- If you're concerned about your financial
privacy, you might want to ask Jim Leach why he doesn't think
you should have much of it.

As chairman of the House Banking Committee, Leach (R-Iowa)
on Thursday blocked two pro-privacy amendments from being
attached to a bill the panel was considering.

[...]

Win for Spam: A California court has ruled the state's
anti-spam law to be unconstitutional.

In a case brought against FriendFinder for allegedly sending
unsolicited bulk email, San Francisco County Superior Court
Judge David Garcia said the law was an illegal attempt by the
state to regulate the Internet.

It "unconstitutionally subjects interstate use of the Internet to
inconsistent regulations, therefore violating the dormant
commerce clause of the United States Constitution," Garcia said
in a two-page ruling this week.

[...]

Al Gore, privacy buff?: Al Gore says he wants to protect your
privacy.

This week the veep said he wants to make it a crime to sell
someone's Social Security number.

This isn't the first time Gore has talked up privacy. But if it
becomes a hot topic in the fall, look for George W. Bush to quiz
the vice president on why he enthusiastically supported the
Clipper Chip and pushed through a requirement for airlines to
collect more information about travelers.

[...]







     THE WHITE HOUSE
     OFFICE OF THE VICE PRESIDENT

     EMBARGOED UNTIL, 3: 00 PM EST             CONTACT: 202/456-7035
     February 4, 1994


     STATEMENT OF THE VICE PRESIDENT


     Today's announcements on encryption represent important steps in
     the implementation of the Administration's policy on this critical
     issue. Our policy is designed to provide better encryption to
     individuals and businesses while ensuring that the needs of law
     enforcement and national security are met.

     Encryption is a law and order issue since it can be used by criminals
     to thwart wiretaps and avoid detection and prosecution. It also has
     huge strategic value. Encryption technology and cryptoanalysis
     turned the tide in the Pacific and elsewhere during World War II.




http://www.house.gov/banking/6800pau.htm

Opening Statement of Rep. Ron Paul
 International Counter-Money Laundering
                      Act and
     Foreign Anticorruption Act of 2000
                     H.R. 3886


Mr. Chairman, Ranking Member LaFalce, thank you for addressing
this issue of great concern. Following the overwhelming opposition to
the "Know Your Customer" proposal last year (over 300,000 people
contacted the banking regulators against the proposal with only 72 in
favor), it is incumbent upon us to revisit this topic. And I would like to
note that I do support part of this particular approach, such as the
measure to facilitate bank's attempts to safeguard their institutions
regarding employment decisions.

Under common law traditions with private market regulation, banks
did not share or sell private, personal information in such a way that
concerns many people here. One of the pivotal changes was the
passage of the Bank Secrecy Act and the California Bankers
Association v. Shultz Supreme Court decision that ruled that the
government could require record-keeping by banks and that
individuals did not have a right to non-disclosure of their private,
personal information in those bank records (More information is
available in the Privacy Paper, "Financial Privacy: How To Protect
What's Left Of It" published by the Free Congress Foundation).

I will be offering an amendment with Tom Campbell and Jack Metcalf
which would sunset the Bank Secrecy Act three years after enactment
of this bill. Adoption of the amendment would force a three-year
review of our money laundering policies and their ramifications. During
that time, Congress (mindful of the privacy-busting implications) could
then enact new policies. Failing to adopt a new Federal law, Congress
would devolve the issue back to the states (many of which already had
money laundering laws on the books before the passage of the Bank
Secrecy Act). I believe, given our Constitutional constraints and
protections from unreasonable search and seizure, that the states
would be better able to design plans tailored to their respective
situations than the one-size-fits-all-cookie-cutter approach of
Washington that treats rural community banks in my district as if they
were the Bank of New York.

Bank secrecy itself is not necessarily indicative of a crime. In fact,
secrecy can be vitally necessary: it was Swiss bank secrecy that saved
many Jews from the Nazi terror. Just as Nazi Germany persecuted
many of its citizens then, other governments around the world
persecute some of its citizens today. Bank secrecy is an important way
for individuals to protect themselves--and possibly have the resources
to save themselves and their loved ones. Enacting this bill into law in
the 1930s would have been the equivalent of a death sentence to Jews
in the Nazi era just as it would threaten those persecuted individuals
now relying on bank secrecy.

For similar as well as institutional concerns , I question the desirability
of Congress granting so much "discretion" to the Executive branch in
this bill. There is a disproportionate penalty on bankers for money
laundering compared to "safety and soundness." I do recognize, of
course, that there is a great deal of overlap here and that there is a
good deal of complexity involved. For that reason I support the
amendment of Rep. Tom Campbell to seek input from the relevant
Federal regulators concerning this issue--and his attempts to recognize
the importance of financial privacy to our constituents.

The Barr amendment to raise the threashold of Currency Transaction
Reports would be the largest single benefit considered here for our
banks, credit unions and other institutions. According to Treasury's
FinCEN, each CTR requires an average of 19 minutes per report to
fill out (in addition to another average of five minutes of recordkeeping
time) in compliance time (and money). The nearly 13 million CTRs
files last year constituted about 95% of the $110 million regulatory
burden imposed by just the BSA last year. This $10,000 limit has
never been raised or adjusted for inflation since 1970 (would be about
$45,000 today).

Also, a distinction must be made between tax avoidance and tax
evasion. It is understandable, and entirely laudable, for companies and
individuals to conduct their affairs in such a way as to reduce their
costs--including taxes. To act in a manner that legally allows one to
avoid taxes (move to a lower tax jurisdiction for example) should not
be considered indicative of a crime. Tax evasion, on the other hand, is
the attempt to evade one's legal obligations.

One must question the motives of multilateral attempts alleging to
thwart money laundering. Organizations such as the Financial Action
Task Force (FATF) and the Organization for Economic Cooperation
and Development (OECD) are often more interested in curbing what
they consider "harmful tax competition" which just means that countries
following more misguided policies such as punitively higher tax policies
should be using the 20th century version of "gunboat diplomacy" (as
now-US delegate to the IMF Karin Lissakers referred to the
International Monetary Fund in her book Banks, Borrowers and the
Establishment: A Revisionist Account of the International Debt
Crisis) against lower tax jurisdictions. This multilateral strong-arming is
causing diplomatic problems with our friends and neighbors, especially
in the Caribbean.

What is needed to address the corruption concerns are "Know Your
Customer" policies for public officials so that they would not be able to
hide behind the shallow excuse that there is no evidence of misuse of
funds when the system is designed to preclude such evidence with the
fungibility of monies. It is my hope that we will adopt all pro-privacy
amendments and act to respect our constituents.


http://www.house.gov/banking/6800lea.htm

  Opening Statement
                 Of Rep. James A. Leach
  Chairman, House Banking and Financial Services Committee
                  Markup of H.R. 3886



Before the Committee today is H.R. 3886, the International
Counter-Money Laundering Act, a bipartisan proposal dealing
with one of the most confounding international financial issues.

A Committee Print of H.R. 3886 was circulated to all Members
earlier in the week and will be the markup vehicle. Briefly, this
legislation will give the Secretary of the Treasury additional
tools to root out international money laundering havens, which
are used to funnel dirty money - that is the profits of illegal or
corrupt activities - into the legitimate international financial
network.

Yesterday, I received letters in support of the legislation from
Treasury Secretary Summers and six U.S. law enforcement
agencies. "This bill will provide the United States with critical
tools to target international money laundering havens and
combat money laundering here and abroad," wrote the directors
of the FBI, FINCEN and the Secret Service; the commissioner
of the Customs Service; the acting administrator of the Drug
Enforcement Administration; and the criminal investigations
chief at the IRS.

Money laundering is perhaps best understood as a seemingly
modest offense that opens a window onto greater crimes, be
they drug traffickers who have assumed quasi-political control
in some countries or corrupt officials who have looted their
country's treasury in another, that can have serious geopolitical
ramifications.

Unfortunately, the U.S. banking system is hardly immune from
the dirty money that flows all too freely through the global
economy. For someone seeking to confer the appearance of
legitimacy on illicitly derived profits and place them in secure
investments, the U.S. and other established financial centers
are attractive destinations.

Indeed, there is little doubt that funds representing illegal
capital flight or the proceeds of crime and corruption abroad
enter the U.S. system in large volumes on a daily basis. What
distinguishes the U.S. from many other countries that criminals
or corrupt government officials use as conduits for their
ill-gotten gains, however, is our insistence on transparency and
the rule of law.

When schemes such as the Bank of New York case of last year
come to light, institutions and individuals can be expected to be
held accountable, and legal mechanisms ensure that the facts -
as awkward or inconvenient as they may turn out to be - are
exposed, either through the criminal justice process or
congressional hearings, or both.

The same can most assuredly not be said for some of the
offshore havens that are the subject of the legislation before us,
where supervisory controls are often lax or nonexistent, and
where brass-plate banks and shell corporations are permitted to
operate free from any meaningful judicial or regulatory
oversight. The legal regimes in many of these jurisdictions
guarantee a level of secrecy for financial institutions licensed to
do business in them that far exceeds what is necessary to
satisfy reasonable privacy interests or legitimate commercial
concerns.

U.S. investigators who follow money trails to some of these
jurisdictions often run into dead ends created by statutory
provisions making it a criminal offense to release information
regarding clients' transactions even in response to formal
requests from duly constituted law enforcement authorities.
Even where cooperation from the local authorities is ultimately
forthcoming, it is often only achieved after a period of delay and
foot-dragging sufficient to permit the target of the investigation
to transfer the relevant assets and records to another secrecy
haven.

A growing number of offshore jurisdictions have enacted
meaningful anti-money laundering statutes that conform to
internationally recognized standards and. Have executed
Mutual Legal Assistance Treaties with the U.S. authorizing the
exchange of information and evidence in criminal investigations.

But even with laws on the books, there remains a serious
question as to whether there exists either the political will or the
legal infrastructure to enforce those laws, particularly given the
sheer volume of activity being conducted offshore.

Further complicating the international anti-money laundering
effort is the dynamic nature of the offshore market. No sooner
does one jurisdiction commit itself to meaningful
counter-measures against money laundering than another pops
up in some other corner of the globe to service the business
flushed out of the first locale.

In recent years, authorities in this country have noted a
migration of unsavory operators from havens in the Caribbean
to remote islands in the South Pacific - such as Nauru - that did
not even register on their collective radar screen five years
ago. The ever-changing face of the offshore sector presents
enormous challenges for law enforcement officials and
regulators struggling to keep pace with international criminal
organizations.

It is self-evident that in an interdependent global economy with
fewer and fewer barriers to capital flows, an international
anti-money laundering regime is only as strong as its weakest
link. Accordingly, the U.S. and its allies in the anti-money
laundering fight must embrace aggressive multilateral and
bilateral strategies designed to encourage jurisdictions that
have been "missing in action" in this fight to adopt the
necessary legal reforms and dedicate the necessary resources
to supervising their financial sectors.

H.R. 3886 allows the Secretary of the Treasury to take actions
against foreign jurisdictions, financial institutions operating
outside the United States and international transactions that are
determined to be of "primary money laundering concern."
Among the steps the Secretary can take are prohibiting, or
imposing conditions on, corespondent or payable-through
accounts with an institution outside the U.S.

The revised Committee Print of H.R. 3886:

     Modifies the title of the bill to include foreign corruption,
     as well as money laundering, and adds a finding on
     multilateral anti-money laundering initiatives.

     Adds to the list purposes of the bill: to strengthen
     measures to prevent the use of the U.S. financial system
     by corrupt foreign officials.

     Adds the Secretary of Commerce and the U.S. Trade
     Representative to the list of those to be consulted on
     decisions by the Secretary to find a foreign jurisdiction,
     institution, or class of transactions to be of primary
     money laundering concern.

     Authorizes the Secretary to consult with other agencies
     and interested parties the Secretary finds appropriate, in
     addition to consultations with the Federal Reserve on
     special measures to counter-money laundering threats
     posed by foreign jurisdictions.

     Explicitly provides that in selecting which special
     measures to take, the Secretary shall consider the
     compliance costs and burdens on U.S. financial
     institutions.

     Modifies the special measure relating to beneficial
     ownership information for accounts held by foreign
     persons to make clear that the Secretary will require
     steps that are "reasonable" and "practicable."

     Adds to the list of factors the Secretary shall consider in
     finding foreign jurisdictions, institutions, or transactions
     to be of primary money laundering concern a sixth factor:
     the extent of high level corruption.

     Imposes a requirement on the Secretary to notify
     Congress within 10 days of special measures taken under
     this bill.

     Adds a definition of payable-through accounts.

     Drops provisions relating to voluntary suspicious activity
     reports filed by independent accountants.

     Adds a title III to the bill on anti-corruption measures to
     include: (1) a sense of the Congress that the United
     States should emphasize to foreign governments the need
     to prevent and reduce public corruption and make clear
     the United States will work to return the proceeds of
     foreign corruption in U.S. institutions to the citizens to
     whom it belongs; and (2) a requirement that the Secretary
     issue guidance to U.S. financial institutions on how to
     reduce the risk that they will become depositories for the
     proceeds of corruption by foreign officials.

Mr. LaFalce is recognized for an opening statement on H.R.
3886.

                      #########

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