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Bank Secrecy Act Amendments (2)
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Ronald Reagan Presidential Library
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Collection: Barr, William: Files
Folder Title: Bank Secrecy Act Amendments (2)
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5/16/82
Bills -
d thuih we had best acton
This. Jet's discuss.
Due
DOCUMENT No. 07/802PD
OFFICE OF POLICY DEVELOPMENT STAFFING MEMORANDUM
DATE: 4/27/82
ACTION/CONCURRENCE/COMMENT DUE BY: 5/5/82
SUBJECT: Administration positions on bills proposing amendments of the Bank Secrecy
Act
ACTION
FYI
ACTION
FYI
HARPER
SMITH
PORTER
UHLMANN
BANDOW
ADMINISTRATION
BAUER
DRUG POLICY
BOGGS
TURNER
BRADLEY
D. LEONARD
CARLESON
OFFICE OF POLICY INFORMATION
FAIRBANKS
GRAY
FRANKUM
HOPKINS
HEMEL
OTHER
KASS
B. LEONARD
MALOLEY
REMARKS:
Please provide comments on the attached.
EDWIN L. HARPER
ASSISTANT TO THE PRESIDENT
FOR POLICY DEVELOPMENT
STATE OFFICE WTRE TM PRESIDENT SERVICE CHECK
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
APR 26 1982
MEMORANDUM FOR: ED HARPER
FROM:
ANNELISE ANDERSON Signed
Subject:
Administration positions on bills proposing
amendments of the Bank Secrecy Act
The Department of the Treasury has submitted for OMB clearance a
proposed report supporting legislation (H.R. 5044-H.R. 5048)
sponsored by Congressman LaFalce to amend the Bank Secrecy Act
for the purpose of strengthening drug enforcement and enhancing
the Government's ability to seize drug traffickers' cash before
it leaves the country. Justice has submitted a report on
S. 1907, a somewhat similar bill, sponsored by Senator Roth and
eight others.
The Bank Secrecy Act requires that anyone leaving the United
States with more than $5000 file a report in advance with the
Customs Service. Failure to file this report, combined with a
subsequent taking of the unreported money out of the United
States, is a criminal misdemeanor and a felony if committed in
furtherance of another crime. Enforcement is difficult, because
the offense does not occur until the money has left the juris-
diction of the United States. Nevertheless, Treasury considers
this provision of the Act to be an important tool in its efforts
to combat drug smuggling, and Justice, Treasury, and LaFalce
believe that the existing law needs to be strengthened.
LaFalce's bills would -
0 Make it an offense to attempt to take unreported money out
of the United States. Treasury says this will allow arrest
and prosecution of a suspect once the first overt act
towards leaving the country occurs and, thus, will overturn
a Federal district court decision holding that no offense
occurs under the Bank Secrecy Act until a suspect actually
leaves the United States. Justice is appealing this
decision, because it makes the law unenforceable.
O Raise the floor on the Bank Secrecy Act's reporting require-
ments from $5,000 to $10,000. Treasury opposes raising the
floor, noting that there appears to be little justification
for so doing.
2
0 Authorize warrantless searches of persons leaving the United
States based on findings of "probable cause," "reasonable
cause," or "no cause" at all. (The alternative standards
are presented in different bills for the committee's
consideration.) The Bank Secrecy Act currently requires
that exit searches be conducted pursuant to warrants issued
upon findings of probable cause. Treasury says that the
Act's present search provision is unduly restrictive and
impedes its law enforcement efforts unnecessarily. Of the
three alternatives, Treasury prefers the "reasonable cause"
standard.
0 Authorize the payment of rewards to informers in cases where
the information was original and leads directly to the
recovery of a criminal fine, a civil penalty, or monetary
forfeiture. The reward would not exceed 25% of the net
amount of the fine, penalty, or forfeiture, or $250,000,
whichever is less, and would be paid out of appropriated
funds. Treasury supports this provision on the ground that
it will encourage those involved in drug trafficking to
provide the information that is needed to make successful
drug cases. (Treasury already has similar reward authority
to pay up to $25,000 in customs law cases.)
The Justice Department supported a similar draft Treasury legisl-
ative proposal last year, which OMB has not cleared. Specifical-
ly, Justice strongly supported the attempt and reward provisions
and deferred to Treasury on the appropriate standard for the
conduct of warrantless exit searches. Justice did conclude that a
search provision based upon "reasonable cause" would probably
pass constitutional muster.
S. 1907 is similar to the LaFalce legislation, and Justice
supports it, as well. S. 1907 would also (1) criminalize
attempts under the Bank Secrecy Act, (2) provide for rewards of
up to $250,000 to informants, and (3) authorize warrantless exit
searches based on findings of reasonable cause. In addition,
S. 1907 would:
-- add currency violations to the definition of "racketeering
activity" for purposes of prosecutions under the Racketeer
Influenced and Corrupt Organizations (RICO) statute;
-- add a requirement for a "knowing" violation of the Bank
Secrecy Act's reporting requirement to support a civil for-
feiture under the Act; and
-- increase civil and criminal sanctions for violations of the
Bank Secrecy Act.
3
Justice supports each of the proposed changes with the exception
of the proposed knowledge requirement, which it says would make
prosecutions much more difficult.
I do not object to clearing Treasury positions on the sections of
the bills that would (1) make it an offense to attempt to trans-
port unreported money from the United States and (2) raise the
floor on the Act's reporting requirements. It is already an
offense in most jurisdictions to attempt to commit most offenses,
and opposition to raising the floor does not seem unreasonable.
Nor do I object to Justice's report on S. 1907, except for its
position on warrantless searches and rewards.
Historically, this country has not conducted exit searches of
departing persons; and the Bank Secrecy Act's express requirement
that such searches may be conducted only pursuant to warrants
based upon determinations of probable cause reflects a sound
policy. I believe that, absent extraordinary circumstances, exit
searches are not and should not be conducted by the government.
Perhaps a case can be made for permitting warrantless exit
searches based upon the traditional probable cause standard, but
such a major departure from the way our government has treated
its departing citizens deserves especially close scrutiny.
Similarly, the practice of paying rewards to informants, many of
whom are themselves participants in criminal activities, concerns
me. Following extensive discussion, we recently cleared a legis-
lative proposal of the Justice Department that would, among other
things, establish a limited reward program on a two-year trial
basis for information leading to the forfeiture of property used
in certain criminal enterprises. We agreed to this provision
only after Justice agreed to reduce the cap from $250,000 to
$50,000 and to run the program as an experiment. Given our
rather reluctant clearance of Justice's forfeiture bill, I do not
believe that we can now support the more expansive reward program
that LaFalce and S. 1907 proposed. In addition, I strongly
believe that the philosophy underlying the payment of rewards to
informers by the Federal government should be given some serious
rethinking.
The problems that LaFalce is seeking to solve are serious, and I
am advised that there is considerable support for his bills in
the House. Treasury and Justice are anxious to go on the record.
Moreover, Ed Meese has written LaFalce thanking him for his con-
cern and promising Administration positions on his legislation
(copy of draft Meese letter attached).
4
Among the options you may wish to consider are the following:
Clear the Treasury and Justice reports supporting (1) the
crime of attempt, (2) not raising the threshold for
reporting under the Bank Secrecy Act, (3) a $250,000
reward provision, and (4) warrantless exit searches based
on "reasonable cause" (Treasury, Justice positions).
Clear the reports but require probable cause as the
standard for warrantless exit searches and limit rewards
to $50,000, on an experimental basis.
Clear the reports but continue to require a warrant
based on a finding of probable cause prior to conducting
an exit search, and limit rewards to $50,000, on an
experimental basis.
Refer the matter of warrantless exit searches and rewards
to the Cabinet Council on Legal Affairs ( OMB recommenda-
tion).
Copies of the pertinent documents are attached for your review.
Attachment
THE WHITE HOUSE
WASHINGTON
Dear Congressman LaFalce:
Thank you for your letter of January 13, enclosing copies
of five bills which you have recently introduced to help
curb the illegal flow of currency to finance international
narcotic traffic.
The intent of your legislation is laudable. Cutting off
the flow of currency that brings illicit drugs into this
country and detecting and apprehending the individuals in-
volved in this sordid business is a matter of the utmost
importance. Recently, the President has established a
task force, under the leadership of the Vice President,
to suggest ways in which the federal government might re-
spond more effectively to the growing menace of drug traf-
ficking in the Miami area.
I understand that the Treasury Department is preparing a
detailed response to the specifics of your legislative
proposals, and of course at an appropriate time Administra-
tion officials will be ready to testify in Congressional
hearings on the bills.
For the present, I want to thank you for your efforts in
this area and indicate that the Administration is willing
and ready to assist in a broad effort to frustrate the
objectives of those who would profit from narcotics trade.
Sincerely,
Edwin Meese III
DEPARTMENT
OF
THE
TREASURY
DEPARTMENT OF THE TREASURY
1789
WASHINGTON, D.C. 20220
ASSISTANT SECRETARY
Dear Mr. LaFalce:
Thank you for extending an opportunity to me to express
the position of the Treasury Department on your bills to amend
the Bank Secrecy Act. As you know, the Treasury Department is
fully committed to detecting and apprehending persons involved
in international, narcotics-related financial schemes and
seizing the monetary instruments used to finance them.
H.R. 5044 would amend section 231 (a) (1) and (a) (2) of the
Act by expressly making an attempt to transport unreported
monetary instruments across U.S. borders a crime; and, elimi-
nate any reporting requirement except where the amount of
the monetary instruments to be transported exceeded $10,000.
The Treasury Department fully supports the attempt provision
because it is needed to obviate some lower Federal court
holdings that have made it virtually impossible, except in
certain narrowly prescribed circumstances involving attempted
departures by commercial carriers from international sea and
airports, to legally apprehend violators and seize unreported
monetary instruments before they actually leave the U.S. The
proposed amendment is broad enough to cover all attempted
departures, particularly by those who leave surreptitiously
from small airports, airstrips, and domestic waterways by
private aircraft and boats.
The Treasury Department, on the other hand, cannot fully
support that portion of the bill which would eliminate the
reporting requirement except where the amounts to be trans-
ported exceed $10,000. Our reluctance in this regard is based
upon an experience factor showing that in a great many seizure
cases involving less than $10,000, the individuals apprehended
are frequently couriers working for large narcotics trafficking
organizations who, subsequent to apprehension, often provide
valuable intelligence resulting in further arrests, or needed
leads. Illustrative of this is the following case:
On December 11, 1981, Customs agents were tipped that
a flight plan had been filed for a charter Lear jet carrying
a single passenger on a one-day round trip between Fort
Lauderdale, Florida and Grand Caymans, Bahamas. After
-2-
receiving the tip, the Customs agents went to the Fort
Lauderdale Executive Airport where they intercepted the
aircraft before departure and interviewed the passenger
concerning the nature of his trip and possible possession
of unreported monetary instruments in excess of $5,000.
The passenger stated that he was on a business trip and
did not have over $5,000 in monetary instruments.
After his return later that day, he underwent
Customs processing. During his processing, he was asked
if he was carrying more than $5,000 in monetary instru-
ments, to which he replied, NO. However, a search of
his purse and pockets uncovered $5,524 in cash, a package
of cocaine and a container containing traces of cocaine.
After his arrest, a further search of his person revealed
an additional $5,000 concealed in his underwear.
Subsequent investigation, as a result of this arrest,
showed that the subject was a money courier for a large
international narcotics trafficking organization and on
his trip to Grand Cayman had met with a DEA Class I
violator.
The point to be made by the foregoing is that if there had
only been a reporting requirement for monetary instruments in
excess of $10,000 and no cocaine initially found, there would
have been little justification for a search of the subject's
person and he could have been released without further inten-
sive investigation. As a consequence, valuable intelligence
would have been lost.
Accordingly, the Treasury Department believes that there
is little justification for eliminating the existing reporting
requirement. On the other hand. we would not be opposed to
a provision giving the Secretary of the Treasury statutory
latitude with respect to determining when reports would be
required with provision that in no case could the amount be
less than the existing $5,000. Such a provision would permit
the Secretary to raise the amount upon which a report would
be required as circumstances and experience permit.
H.R.'s 5045, 5046 and 5047 are alternative amendments to
section 235 relating to search authority. Each would permit
warrantless searches for unreported monetary instruments based
on suspicion but would differ with respect to the quantum of
evidence necessary to support the suspicion. For instance,
-3-
H.R. 5045 would require the suspicion be supported by probable
cause; H.R. 5046 would require it be supported by reasonable
cause; and H.R. 5047 would articulate no standard. While the
Treasury Department could support any of the proposed amend-
ments, we would prefer the standard found in H.R. 5046; the
authority to conduct a warrantless search when there is reason-
able cause to suspect that unreported monetary instruments are
in the process of being transported. Our preference for the
reasonable cause to suspect standard is based upon the fact
that it is identical to the Customs border search authority
found in 19 U.S.C. 482.
As you may recall the Treasury Department supported an
identical search provision during the 96th Congress. However,
questions arose in both Houses concerning the constitutional
propriety of Customs officers conducting warrantless exit
searches of travellers based merely on a reasonable cause to
suspect a violation. It was the Customs position, then
supported by the Justice Department, as it is now, that the
well established and well recognized Customs border search
authority extends equally to exiting as well as incoming
travellers. There is ample authority for our position found
in U.S. V. Ajlouny, 629 F 2d 830 (2nd Cir. 1980) ; U.S. V.
Swarovski, 592 F.2d 131 (2nd Cir. 1979) ; U.S. V. Stanley,
545 F. 2d 661 (9th Cir. 1979), cert. denied 436 U.S. 917 (1973) ;
and dicta in California Bankers Association V. Schultz, 416
U.S. 21,63 (1974). I have taken the liberty of enclosing a
legal memorandum discussing these cases in more detail.
Despite favorable case law supporting broad application
of the Customs' border search authority to exiting travellers,
agents and inspectors are reluctant to use it in unreported
currency cases due to the express probable cause - warrant
requirements of section 235 of the Act, and the underlying
legislative history of that section. This reluctance is based
upon an agent-inspector fear of incurring personal liability if
they follow case law and not the statute. Consequently, exiting
smugglers carrying large sums of currency to purchase narcotics
for resale in the United States have been able to violate the
Act's reporting requirements in most cases almost without fear
of challenge. Illustrative of this situation is the following
incident occurring at Los Angeles International Airport in the
summer of 1980:
-4-
Customs agents received unverifiable information that
a named Peruvian would be departing LA International Air-
port for Lima, Peru later that day on Braniff Flight No.
921. A query of TECS indicated that the subject was on
record with DEA as an alleged cocaine smuggler. Because of
the correlation between narcotics smuggling and the outbound
transportation of large sums of currency, the agents deter-
mined to interview the subject.
After identifying the subject in the terminal, they
followed him to the boarding platform area. During the
course of their surveillance, he displayed suspicious
conduct. For example, he appeared nervous, perspired
heavily, and met with an unidentified Latin male who
gave him a black plastic bag with unknown contents.
The agents finally intercepted the subject as he
attempted to board the aircraft and identified themselves.
During the interview. the subject was asked to identify
himself and was advised of the reporting requirements of
the Currency and Foreign Transactions Reporting Act. The
subject stated that he was aware of the requirements and
that he was not carrying currency in excess of $5,000.
He was then asked if he would voluntarily consent to
an examination of his luggage, which he refused to give.
Because probable cause could not be established, he was
permitted to board the aircraft.
The report reflects that the agents immediately
advised DEA of the occurrence and requested that Peruvian
authorities be contacted with respect to their suspicions.
The following day, Peruvian Customs authorities reported
that they had apprehended the subject on his arrival and
had found $95,000 in his luggage.
The point to be made by the foregoing is that if effective
enforcement of the currency reporting requirements is to be
achieved, the Customs Service should be authorized to conduct
a search based on reasonable cause to suspect that unreported
monetary instruments are being transported outside the U.S.
It also has been suggested by some that, assuming the
legality of such searches, it would be contrary to public
policy to permit warrantless searches of exiting travellers.
It is our position that there is a more important offsetting
public policy requiring the government to take all lawful
-5-
steps in protecting the people from proliferating drug traf-
ficking and other illegal enterprises which debilitate our
society and nation. Therefore, where it appears that the
courts have upheld the constitutionality of exit border
searches, there is no valid reason for not seeking statutory
articulation of that authority.
H.R. 5048 would add a new section to the Act permitting
the compensation of informers in cases where the information
provided was original and directly lead to the recovery of a
criminal fine, civil penalty or forfeiture exceeding $50,000.
Rewards would never exceed 25 percent of the net amount of the
fine, penalty or forfeiture of collarteral or $250,000, which-
ever was less; and Federal, state and local government employees
who provided such information in the performance of their
official duties would not be eligible to recover. We believe
that the reward provision will provide an essential impetus in
persuading knowledgeable sources to come forward with needed
information. Because the reward could be substantial in certain
cases, it provides a needed incentive for those involved in, and
knowledgeable about large drug trafficking schemes and other
criminal endeavors to come forward despite the personal and
financial risk to themselves and their families.
For the reasons stated, the Treasury Department fully
supports H.R.'s 5044, 5046 and 5048.
Please contact me if I may be of any further assistance in
this matter.
Sincerely,
John M. Walker, Jr.
Assistant Secretary
(Enforcement)
The Honorable
John J. LaFalce
House of Representatives
Washington, D.C 20515
Enclosure
LEGAL ANALYSIS IN SUPPORT OF EXTENDING
CUSTOMS BORDER SEARCH AUTHORITY
TO EXITING TRAVELERS
Section 2 of the Treasury Department's proposed amendments
to the Bank Secrecy Act allows any Customs officer to stop,
search and examine any vehicle, vessel, aircraft, envelope or
other container, or person entering or departing from the United
States on which or whom he shall have reasonable cause to suspect
there are monetary instruments for which a report is required
under the Act. This proposal has been attacked on the grounds
that the Fourth Amendment dictates a probable cause standard for
all warrantless searches. This argument falls before an
examination of the border search exception to the Fourth
Amendment:
The reasonable cause standard is Constitutional for border
searches--. The Supreme Court stated in United States V. Ramsey,
431 U.S. 606, 616-17 (1976):
That searches made at the border, pursuant to the
longstanding right of the sovereign to protect itself by
stopping and examining persons and property crossing into
this country, are reasonable simply by virtue of the fact
that they occur at the border, should, by now, require no
extended demonstration. The Congress which proposed the
Bill of Rights, including the Fourth Amendment, to the state
legislatures on September 25, 1789, 1 Stat. 97, had, some
two months prior to that proposal, enacted the first customs
statute, Act of July 31, 1789, c. 5, 1 Stat. 29. Section 24
of this statute granted Customs officers authority to search
"any ship or vessel, in which they shall have reason to
suspect any goods, wares or merchandise subject to duty
shall be concealed
This acknowledgment of plenary
customs power was differentiated from the more limited power
to enter and search "any particular dwelling-house, store,
building, or other place where a warrant upon "cause
to suspect" was required. The historical importance of the
enactment of this customs statute by the same Congress which
proposed the Fourth Amendment is, we think, manifest. This
Court so concluded almost a century ago. In Boyd V. United
States, 116 U.S. 616, 623 (1886), this Court observed:
-2-
"The seizure of stolen goods is authorized by the
common law; and the seizure of goods forfeited for a
breach of the revenue laws, or concealed to avoid the
duties payable on them, has been authorized by English
statutes for at least two centuries past; and the like
seizures have been authorized by our own revenue acts
from the commencement of the government. The first
statute passed by Congress to regulate the collection
of duties, the act of July 31, 1789, 1 Stat. 29, 43,
contains provisions to this effect. As this act was
passed by the same Congress which proposed for adoption
the original amendments to the Constitution, it is
clear that the members of that body did not regard
searches and seizures of this kind as 'unreasonable,'"
and they are not embraced within the prohibition of the
amendment." [Emphasis supplied].
There is no Constitutional difference between incoming and
outgoing border searches--. In California Bankers Ass'n V.
Shultz, 416 U.S. 21, 62-63 (1973), the Supreme Court upheld
currency import/export reporting requirements when it said:
Of primary importance
is the fact that the
information required by the foreign reporting require-
ments pertains only to commercial transactions which
take place across national boundaries. Mr. Chief
Justice Taft, in his opinion for the Court in Carroll
V. United States, 267 U.S. 132 (1925), observed:
Travellers may be stopped in crossing an inter-
national boundary because of national self-
protection reasonably requiring one entering the
country to identify himself as entitled to come
in, and his belongings as effects which may be
lawfully brought in. (Id., at 154).
This settled proposition has been reaffirmed as
recently as last term in Almeida-Sanchez V. United
States, 413 U.S. 266, 272 (1973). If reporting of
income may be required as an aid to enforcement of the
federal revenue statutes, and if those entering and
leaving the country may be examined as to their
belongings and effects, all without violating the
Fourth Amendment, we see no reason to invalidate the
Secretary's regulations here. The statutory
authorization for the regulations was based upon a
conclusion by Congress that international currency
transactions and foreign financial institutions were
being used by residents of the United States to
circumvent the enforcement of the laws of the United
States. The regulations are sufficiently tailored so
as to single out transactions found to have the
-3-
greatest potential for such circumvention and which
involve substantial amounts of money. They are
therefore reasonable in the light of the statutory
purpose, and consistent with the Fourth Amendment.
[Emphasis added].
The Second Circuit concisely stated the current judicial
position on warrantless departure searches in United States V.
Swarovski, 592 F.2d 131, 133 (1979)
The warrantless searches of appellant's luggage as
he was about to depart the country did not violate his
Fourth Amendment rights. See United States V. Asbury,
586 F.2d 973, 975 (2d Cir. 1978). Appellant's
contention that customs officials can make such a
search only when the person whose effects are being
searched is entering the United States is not the
law. [Emphasis added]. See 22 U.S.C. section 401(a) ;
California Bankers Ass'n V. Shultz, 416 U.S. 21, 63
(1974); United States V. Chabot, 193 F.2d 287, 290
(2d Cir. 1951); United States V. Stanley, 545 F.2d 661,
667 (9th Cir. 1976), cert. denied, 436 U.S. 917 ...
(1978); Samora V. United States, 406 F.2d 1095, 1098-99
(5th Cir. 1969).
o00
It has been alleged that, notwithstanding Constitutional
propriety, there currently exists no statutory authority to
conduct warrantless searches of persons and things leaving the
country. Anyone who has ever flown out of the country can bear
witness to the exercise of such a search authority under 49
U.S.C. 1356 which requires that every single air traveler leaving
the United States be subjected to a physical search of person and
luggage for weapons without even reasonable cause. In addition:
19 U.S.C. 1581 authorizes "Any [Customs] officer at any time
... [to] go on board of any vessel or vehicle at any place in
the United States or within the customs waters
...
and examine,
inspect, and search the vessel or vehicle and every part thereof
and any person, trunk, package, or cargo on board
21 U.S.C. 953 makes it unlawful for "any person to bring or
possess on board any vessel or aircraft, or on board any vehicle
or carrier, arriving in or departing from the United States"
certain narcotic drugs and controlled substances as proscribed in
21 U.S.C. 953;
22 U.S.C. 401(a) prohibits the attempt to export "any arms
or munitions of war or other articles in violation of law
=
The court in United States V. Marti, 321 F. Supp. 59 (1970), held
that 22 U.S.C. 401 (a) gives Customs broad authority to conduct
-4-
warrantless exit searches in order to enforce the Export Control
Act of 1949 (50 U.S.C. App. 2401, et seq.) and upheld a
warrantless search and seizure of jewelry from a traveler leaving
the United States. See also, 22 U.S.C. 1934 (munitions control),
and 22 U.S.C. 2778 (control of arms exports and imports).
The courts have consistently recognized Customs' authority
to conduct warrantless border searches to enforce these statutes
on travelers entering as well as leaving the country. United
States V. Ajlouny, 476 F. Supp. 995 (1979) see cases cited
supra.
o0o
Treasury's proposed legislation has been mistakenly labeled
a "money control bill". Neither the bill nor the Act which it
amends can effect, alter, prohibit or discourage any currency
transaction. The bill does not substantively change the purpose
of the Act which requires redordkeeping and reporting of certain
currency transactions that, eleven years ago, Congress found to
have a high degree of usefulness in criminal, tax and regulatory
investigations. Recordkeeping can only serve to protect innocent
transactions.
o0o
Finally, Treasury's proposed legislation has been attacked
for treating all currency as contraband. This is too simplistic.
If a Customs officer has a "reasonable cause to suspect", he
could search for unreported currency to the same degree he could
search for dutiable or undeclared merchandise as well as
contraband; there, the similarity ends. Contraband is prohibited
on its face. Currency clearly is not. The transportation of
monetary instruments is an inherently innocent action. However,
Congress has seen fit to declare that the exportation of monetary
instruments worth more than $5,000 must be reported. Currency is
not illegal, but the refusal to report currency is. As long as
the currency transaction is reported, there is no violation of
the law.
JOHN J: LAFALCE
2447 PLAYSURING BUILDING
30TH DISTRICT, NEW York
WASHINGTON, D.C. 20515
(202) 225-3231
COMMITTEE ON
BANKING, FINANCE AND
URDAN AFFAIRS
Congress of the United States
FEDERAL BUILDING
BUPFALO, NEW York 14202
COMMITTEE ON
House of Representatives
(716) 846-4056
SMALL BUSINESS
CHAIRMAN:
SUBCOMMITTEE ON
Mashington, D.C. 20515
MAIN POST OFFICE BUILDING
GENERAL OVERSIGHT
NIAGARA FALLS, NEW York 14302
(716) 204-0076
January 13, 1982
Powis
2.5
walker
Mr. John Walker
Assistant Secretary for
memo only
Enforcement and Operations
Department of the Treasury
4308 Main Treasury Bldg.
15th Street & Pennsylvania Avenue, NW
Washington, D.C. 20220
Dear Mr. Walker:
I have recently introduced five bills designed to help curb the illegal
flow of currency in violation of the Currency and Foreign Transactions
Act (the Bank Secrecy Act). Enclosed please find copies of these bills
and the remarks which I made upon their introduction.
These bills, amending the Bank Secrecy Act, are similar to measures
which I introduced in the 96th Congress. I am reintroducing these bills
because I believe that it is a most propitious time for the existing
loopholes in the Act to be closed to give enforcement officials the im-
proved tools which will help them do their most difficult but vitally
important jobs in curbing the illegal flow of money wich feeds the inter-
national drug trade.
In the 96th Congress these bills enjoyed the full backing of the previous
Administration and I worked closely with officials in the U.S. Customs
Service, the Treasury Department and the Drug Enforcement Administration
as the bills moved through the legislative process. I hope that I can
count on your support in encouraging the Congress to act favorably upon
these bills.
I was very encouraged that in recent testimony before the Senate Perma-
nent Committee on Investigations the Administration witnesses stressed the
importance of cracking down on drug trafficking through the use of finan-
cial and currency investigations. I know that you share my interest in
stopping the menacing flow of drugs to our country. This task could be
greatly aided by more effective use of the Bank Secrecy Act with the amend-
ments which I have proposed.
E0-1-45-82
Mr. John Walker
January 13, 1982
Page Two
Your comments on the enclosed bills would be greatly appreciated and I
certainly do look forward to working closely with you in an effort to have
these measures enacted by the Congress. Please don't hesitate to contact
me if I may answer any questions which you might have about the bills.
Thank you for your consideration in this matter.
Sincerely,
Congress
JJL:JK
Enclosures
CC: John Powis
Deputy Assistant Secretary for
Enforcement
Department of the Treasury
4308 Main Treasury Bldg.
Washington, D.C. 20220
Congressional Record
United States
America
PROCEEDINGS AND DEBATES OF THE
97ᵗʰ
CONGRESS, FIRST SESSION
Vol. 127
WASHINGTON, THURSDAY, NOVEMBER 19, 1981
No. 170
House of Representatives
LEGISLATION TO CURB DRUG
TRAFFICKING
HON. JOHN J. LaFALCE
OF NEW YORK
IN THE HOUSE OF REPRESENTATIVES
Mr. LAFALCE. Mr. Speaker, drug
this country. The bills would amend
abuse in our Nation has reached epi-
the Currency and Foreign Transac-
large amounts of currency without
filing the reports already required
demic proportions. The sheer numbers
tions Reporting Act-popularly called
under the Bank Secrecy Act. The bill
which are used to describe the extent
the Bank Secrecy Act-to fill some se-
of drug abuse are 80 enormous that
rious gaps in the current law which
raises the amount of money being
taken out of the country, in order to
their significance becomes hard to
hinders the law enforcement capabill-
grasp and put into terms with which
ties of U.S. customs agents. These bills
require a customs report, from $5,000
to $10,000.
we can readily identify.
are largely the same measures which I
The second, third, and fourth bills
What tragedy do we really experi-
Introduced in the last Congress after I
would allow customs officials to search
ence when we learn that, according to
returned from a factfinding mission to
for unreported amounts of cash-in
recent figures, over 10 percent of the
Colombia with the Select Committee
their presently authorized search for
graduating students in American high
on Narcotics. Certain technical and
contraband-where cause exists to be-
schools use marihuana every day?
substantive changes have been made
lieve that this currency is leaving the
What anguish can be felt by those of
to address some of the concerns raised
country as a result of illegal activities.
us removed from the human Incapaci-
by some Members tn the last Congress.
Each bill proposes a different standard
tation which is experienced by nearly
In his state of the Union address in
of cause: First, "reasonable cause";
half a million daily heroin users? Can
1979, President Carter stated that it
second, "probable cause"; and third,
we comprehend the impact of the im-
would be the policy of his administra-
when the customs official shall "sus-
portation into the United States of
tion to "stress financial investigations
pect that there are monetary Instru-
more than 30 metric tons of cocaine
as a means of prosecuting individuals
ments in the process of being trans-
per year? We are assulted with statis-
responsible for the drug traffic." The
ported out of the country" in violation
tics and, not surprisingly, find it diffi-
Carter administration, indeed, did
of the Bank Secrecy Act. I encourage
cult to equate those numbers with the
commit its wholehearted support for
the Members who will study these
human suffering it represents.
my bills in the 96th Congress, H.R.
bills at the committee level to help me
In a larger sense, though, the trage-
4071,4072, 4073, and the omnibus ver-
determine the most appropriate. or.
dy of drug abuse in our country does
sion combining all three, H.R. 5961,
more precisely. the most acceptable
not need numbers to be adequately de-
which enjoyed the support of over 50
standard.
fined. The street corners and school-
cosponsors.
The fifth and final bill would give
yards, the back alleys of ghettos and
At the conclusion of my remarks,
informants & portion of the recovered
the backrooms at fashionable parties
Mr. Speaker, I would like to insert in
currency, thereby giving a further in-
are the places where the shadow of
the RECORD letters of support which I
centive to those who know of cash
drug abuse casts its ominous pall. The
received from officials in the previous
smuggling to report this to U.S. Gov-
devastation of health, productive
administration when my bills were
ernment officials. These rewards
work, and family life, and the spectre
under consideration. Notable among
would prove to be extremely helpful
of personal and property crime to
these letters are those from the U.S.
for obtaining information from infor-
maintain millions of drug habits is the
Department of Justice Drug Enforce-
mants. The Secretary of Treasury
saddest-and most accurate-descrip-
ment Administration, the Department
would have discretion to determine
tion of the human havoc wreaked by
of Treasury Office for Enforcement
the amount of award, within a speci-
this cancer within us.
and Operations, and the U.S. Customs
fied ceiling. to be given to informants.
Why then talk at all about statistics?
Service-all providing critiques of my
Because some statistics are meaningful
bills and stressing the importance of
Mr. Speaker, I am encouraged that
and can be made more readily under-
those measures in combating drug
the Senate is currently involved in a
series of hearings to study the interna-
standable. If human misery cannot,
abuse.
Last May, counselor to the Presi-
tional drug trafficking problem. I urge
and should not, be put into cold nu-
dent, Edwin Meese, commented that
my colleagues in the House to contin-
merical terms, perhaps the billions of
dollars of cash transactions which feed
stemming the flow of drug traffic is
ue and renew their own efforts to
the illegal drug trafficking can be de-
going to be a priority of the current
combat this pernicious drain on our
administration. I am confident that
country, by favorably considering a
scribed with raw data.
the President and his administration
very simple and very practical series of
Recently. the Los Angeles Times re-
will continue the policy of his prede-
bills which will help curb the flow of
ported that some experts estimate
cessor and fully embrace the efforts to
money which is use to. feed the drug
that in Dade County, Fla, there may
trade.
use financial Investigations as a means
be as much as $7 to $11 billion a year
in underground drug-related cash ac.
of prosecuting individuals responsible
The drug abuse problem is one
tivity. Perhaps, Mr. Speaker, our col-
for drug traffic.
which has permeated our society and,
I would now like to describe the cur-
at times, seems totally out of control.
leagues recall that when 880 pounds of
rent operation of some of the provi-
My bills will not solve the drug abuse
cocaine was seixed in Bogota, Colom-
sions of the Bank Secrecy Act. and
epidemic, nor put a complete halt to
bia, 2 years ago, over $1.1 million in
how my bills would address some of
the drug trafficking problem. But
U.S. currency was also found with the
the loopholes contained in that law.
these bills will help our law enforce-
setzed dope. Our dollars leave the
Present law makes It illegal to leave
ment officials to more effectively do
country at as rapid a pace as the nar.
the country with more than $5,000
their jobs in stopping the flow of
cotics, which the money buys, come
without filing a Customs Service re-
money out of the country so that the
back to our shores.
porting form. However, courts have
flood of drugs which comes back to
I am convinced that there is some-
held that a person cannot be arrested
our shores may be abated.
thing positive which we can do to
for violating this law until he has ac-
The letters of support for the com-
crack down on the enormous illegal
tually left the country. But by that
parable bills which I introduced in the
transfer of money which leaves the
time the violator is outside the juris-
96th Congress are inserted in the
country in order to subsidise the inter-
diction of the United States and cannot
RECORD at this time.
national drug trade. Accordingly,
be successfully prosecuted. Tying the
THE WHITE HOUSE,
today I am introducing a package of
hands of our own customs officials in
Washington, October 22, 1979.
five bills designed to help law enforce-
this way is an obvious gaping loophole
Hon. JOHN J. LAFALCE,
ment officials police the movement of
in the law. Therefore, the first of my
House of Representatives,
drug-related currency into and out of
Washington, D.C.
five bills would make it illegal to "at-
DEAR CONGRESSMAN LAPALCE I want to ex-
tempt" to leave the United States with
press the President's appreciation for your
decision to join in leading the effort to pass
(MORE)
the financial privacy bills. We look forward
order to purchase illegal drugs, and that
transports, mails, or ships, or causes to be
to working with you on these important
figure represents only the wholesale cost. It
physically transported, mailed, or shipped"
bills in the coming months.
is quite apparent that the illegal drug trade
monetary instruments in excess of $5,000
Sincerely,
is an extremely lucrative one. and we believe
into or out of the United States. 31 CFR
STUART E. ELZENSTAT,
one way to cut down on the amount of
103.23(a) (emphasis added). It has been the
Assistant to the President
drugs being smuggled in is to stop the flow
position of the Department that the inten-
for Domestic Affairs and Policy.
of unreported currency going out of the
tional use of the adjective "physical" means
country.
that electronic fund transfers are not cov-
In the first decade of the Bank Secrecy
DRUG ENFORCEMENT AGENCY.
ered by the provisions of the Act which
Washington, D.C., November 5, 1979.
Act, we have found the Act to be a useful
your bill will amend. We assure you now
tool in the law enforcement effort against
that this position will not change. There-
Hon. JOHN J. LAFALCE,
House of Representatives,
drug traffickers as well as other internation-
fore, your bill would not grant the Depart-
al organized crime ventures. However, the
ment any additional authority to monitor or
Washington, D.C.
DEAR MR. LAFALCE 1 have been monitor-
Act has glaring deficiencies which severely
intercept any electronic fund transfer.
ing closely the three legislative initiatives
restrict its effectiveness. Your legislation
There is another section of the Act, 31
you introduced upon your return from Co-
would remedy these deficiencies.
U.S.C. 1121 that currently authorizes the
lombia this past May. I refer to H.R. 4071,
H.R. 4071 would add & new section to the
Secretary to issue regulations requiring re-
4072, and 4073 which still remain pending in
Act which, by offering as a reward a per-
ports of international transactions including
centage of any recovery, would encourage
electronic transfers if in the Secretary's
the House of Representatives.
people to supply information to the Govern-
opinion such reports are necessary.
As you know, the enactment of these
three laws would greatly improve the effec-
ment about individuals who are about to
If we can be of any further assistance,
enter or depart the United States with large
please contact us again.
tiveness of our law enforcement efforts to
curtail the illegal movement of U.S. curren-
sums of currency or other monetary instru-
Sincerely,
ments. Since it is extremely difficult to
RICHARD J. DAVIS,
cy out of the U.S.A. Most of this illegally
detect monetary instruments in large
Assistant Secretary
obtained money is realized as a result of
narcotics trafficking. With the enactment of
amounts-for example, it may be a single
(Enforcement and Operations).
H.R. 4071 there no doubt would be the
check-we must acquire as much reliable in-
formation as possible. Your bill should en-
added incentive for law-abiding citizens to
come forward with information relating to
courage people to come forward with this
much needed and extremely valuable infor-
currency violations. The impact would
greatly improve the effectiveness of the
mation.
H.R. 4072 would close the loophole in the
U.S. Customs Service in its enforcement re-
Act which creates the most difficulties for
sponsibilities.
Customs. By including an "attempt" provi-
Present law makes it illegal to leave the
sion in the Act, we will be able to prosecute
country with more than $5,000 without
successfully those individuals who are about
filing a declaration. However, the courts
to leave the country with unreported funds,
have held that a person cannot be arrested
but decide to "postpone" their journey
for this violation unless he has actually left
when confronted by Customs, only to make
the country, thus escaping U.S. jurisdiction.
another attempt later when Customs offi-
The enactment of H.R. 4072 would remove
cers are not present. This very important
this loophole by providing that attempting
amendment will stop the merry-go-round.
to leave the country is also a violation. This
H.R. 4073 would authorize Customs offi-
will improve our effectiveness in stemming
cers to search suspected individuals at the
the flow of illegally obtained currency from
border for currency and other monetary in-
leaving the country. H.R. 4073 would give to
struments without a search warrant and
our brother law enforcement officers of the
with "reasonable suspicion," rather than
Customs Service the authority to search for
probable cause. Several Federal courts of
undeclared monetary instruments where
both the District (trial) and Appellate level
reasonable cause exists to believe that these
have reviewed the constitutionality of this
monetary instruments are leaving the coun-
standard and approved it. It is crucial that
try as a result of illegal activities. With
we be able to act quickly when we receive in-
today's sophisticated drug trafficking orga-
formation that an individual is about to
nizations, much of the profits leave the
leave the country within a short period of
United States for source countries to pur-
time with a large amount of money. Where
chase additional drugs and other smuggling
the quality of this information does not
resources.
meet the probable cause standard, we are
I understand that the above three legisla-
powerless to verify a departing individual's
tive initiatives are before the Subcommitte
claim that he has no-money to report, even
on Financial Institutions and there is a pos-
though we have a strong indication that he
sibility for hearings regarding these meas-
is not being entirely truthful. Once he
ures. As Administrator of the Drug Enforce-
leaves the United States, our opportunity to
ment Administration, I would welcome the
enforce the Act is lost forever, regardless of
opportunity to participate in these hearings
how much information we may subsequent-
and discuss further with the Subcommittee
ly acquire. Your bill would give us the
the importance of this corrective legislation
lawful tools we need to enforce the Act ef-
as It relates to effective drug law enforce-
fectively.
ment.
In closing, I want to assure you that we
On behalf of the Drug Enforcement Ad-
stand ready to assist you in your efforts to
ministration's Special Agents, I thank you
amend the Bank Secrecy Act which should
for your efforts.
enable us to do a better job in the future.
Sincerely,
Sincerely,
PETER B. BENSINGER
R. E. CHASEN,
Administrator.
Commissioner of Customs.
THE COMMISSIONER OF CUSTOMS.
DEPARTMENT OF THE TREASURY,
Washington, D.C., January 21, 1980.
Washington, D.C., April 1, 1980.
Hon. JOHN LAFALCE,
Hon. JOHN J. LAFALCE,
House of Representatives,
House of Representatives,
Washington, D.C.
Washington, D.C.
DEAR MR. LAFALCE I would like to express
DEAR Mr. LAFALCE I have recently been
the appreciation of the U.S. Customs Serv-
informed that your bill to amend the Cur-
ice for your efforts to amend the Currency
rency and Foreign Transactions Reporting
and Foreign Transactions Act, popularly
Act-H.R. 5961-was unanimously reported
known as the Bank Secrecy Act of 1970 (31
out of the House Subcommittee on Finan-
U.S.C. 1101-1105). With the passage of the
cial Institutions Supervision, Regulation
three bills you have introduced-H.R. 4071,
and Insurance and was referred to the
4072, and 4073-we believe that the loop-
House Committee on Banking. Financing.
holes in the present law will be eliminated
and Urban Affairs with a recommendation
and a more effective and productive en-
that expeditious action be taken. On behalf
forcement of this Act will result. The views
of the Department of the Treasury and the
of the Department of Treasury on your leg.
U.S. Customs Service, I wish to thank you
islation have previously been set forth in
for your efforts in this matter.
the Department's report of October 5 and
23 you are sware, the Department strong-
i:12, 1979.
ly endorses all of the provisions of your bill.
As you are well aware, the Customs Serv-
It has come to our attention that on point
Ice has the primary responsiblity of enforc-
requires clarification. A question has been
ing that section of the Act which requires
raised concerning the applicability of the
that an individual entering or departing
amended Currency and Foreign Transac-
from the United States with over $5,000
Lions Reporting Act provisions to electronic
must file a report with the Customs Service.
transfers of currency. The current regula-
While a vast majority of those individuals
tions require that reports must be filed with
who are aware of the law do comply with it,
the Customs Service in accordance with 31
we believe that most of the money ear-
U.S.C. 1101 by each person who "physically
marked for marihuana and other narcotics
purchases overseas goes unreported. In
fiscal year 1978, we estimate that $2.6 bil-
lion was exported from the United States in
U.S. Department of Justice
Office of Legislative Affairs
Office of the Assistant Attorney General
Washington, D.C. 20530
Honorable Strom Thurmond
Chairman
Committee on the Judiciary
United States Senate
Washington, D.C. 20510
Dear Mr. Chairman:
This is in response to your request for the views of the
Department of Justice regarding S. 1907, a bill to amend the
Currency and Foreign Transaction Reporting Act, 31 U.S.C. 1101,
et seq., popularly known as the Bank Secrecy Act of 1970, and 18
U.S.C. 1961(1), the Racketeer Influenced and Corrupt Organiza-
tions statute, generally referred to as "RICO."
In essence, the proposed legislation would do the following
things: (1) increase civil and criminal sanctions for violations
of the Bank Secrecy Act; (2) criminalize the attempted transfer
of currency or monetary instruments in excess of $5,000 into or
out of the United States without the filing of required reports;
(3) limit forfeitures of unreported monetary instruments to those
involving "knowing" failures to report; (4) authorize customs
officers to conduct warrantless searches of persons, mail, or
vehicles entering or leaving the United States where there is
reasonable cause to believe monetary instruments are being
transported illegally; (5) authorize payment of rewards for
information leading to recovery of fines, penalties, or forfeit-
ures and (6) make currency violations RICO predicate offenses.
The Justice Department enthusiastically endorses all of these
measures except for the "knowledge" requirement of Section (d)
which it opposes.
NEED FOR AMENDMENTS
The Department of Justice endorses S. 1907 in its efforts to
amend the Currency and Foreign Transaction Reporting Act to
create an attempt offense, to authorize the payment of rewards
for information leading to successful civil or criminal prosecu-
tion of currency violations, and to include currency violations
as RICO predicate offenses. These provisions would substantially
strengthen the ability of federal law enforcement authorities to
stem the illicit flow of currency involved in narcotics traffick-
ing and "money laundering" schemes associated with organized and
- 2 -
white collar crime. Narcotics transactions alone are estimated
to generate more than $60 billion per year, much of which goes to
foreign suppliers or is "laundered" before being received by
high-level traffickers. The magnitude of this law enforcement
problem and the deficiency in existing law require expeditious
action upon corrective legislation. In fact, these amendments
are essential to any meaningful enforcement program under Section
231 of the 1970 law (31 U.S.C. 1101).
THE ATTEMPT PROVISION
With respect to the need for an attempt provision, we would
note at the outset that detection and apprehension of individuals
violating this statute are extremely difficult -- particularly
the exportation of currency and monetary instruments -- due to
the ease with which items can be secreted on an individual's
person or among his effects. Even where law enforcement officers
can detect and apprehend violators, a conviction is uncertain as
a result of court decisions holding that an attempt to export
unreported money out of the country is not an offense. In
summary, the law has been construed by some courts to be that an
offense does not occur until an individual has departed the
United States with unreported currency or monetary instruments.
At that point, of course, federal officials generally have no
jurisdiction to make an arrest. This creates an untenable
situation which we feel requires prompt remedial action.
The facts of a recent case will illustrate the current state
of the law. Federal officers monitoring a court-ordered wiretap
of members of a major narcotics trafficking ring learned that a
courier would be departing the United States for Bogota,
Colombia, carrying a large sum of currency to make a narcotics
purchase. In an effort to avoid apprehending the suspect prema-
turely, Customs agents kept the suspect under suveillance as she
entered the airport, checked her luggage, presented her flight
ticket, obtained her boarding pass, and received notice of the
necessity of reporting the possession of any currency in excess
of $5,000. Only as she was preparing to board the aircraft was
an arrest made. A search of the luggage and her handbag produced
$1.5 million in United States currency. Despite the facts of
this case, a conviction was possible only because the United
States District Court Judge before whom the case was tried found
that the facts here established a completed offense; that finding
is currently on appeal. A judge in a very similar case dismissed
an indictment holding that no offense occurs until a person
actually leaves the United States. United States V. Centeno, No.
75-660-CR-JE (S.D. Fla., March 25, 1976) (unreported).
While the absence of an attempt offense has created
difficulty in connection with departures from public airports,
this gap in the law is even more disruptive of efforts to control
the exportation of currency and monetary instruments through the
use of private aircraft flying out of private airports or makeshift
- 3 -
runways in remote areas. Furthermore, we have reason to believe
that substantial illicit currency transactions are carried out in
this way.
REWARD AUTHORITY
With respect to the need for authority to offer monetary
rewards to persons providing information leading to the imposi-
tion of fines and forfeitures under currency reporting laws, the
nature of the offense is such that only through reports from
persons aware of the transactions can we expect to intercept a
sufficient number of shipments to achieve a significant deterrent
effect. The proposed reward authority would provide a powerful
incentive for persons to come forward and report such illicit
activities by providing monetary payments of twenty-five percent
of fines and forfeitures recovered up to a ceiling of $250,000.
While it has been suggested that the amount of rewards which can
be paid may be excessive, we would point out that the risk
inherent in reporting such crimes -- which usually involve
activities of either narcotics trafficking rings or organized
crime syndicates noted for their reliance upon violence --
requires a substantial incentive in order to encourage individ-
uals to come forward and provide information to law enforcement
officials.
AMENDMENT OF RICO
The proposed legislation would add currency violations to
the definitions of "racketeering activity" listed at 18 U.S.C.
Section 1961(1), thereby making Title 31 crimes predicate offenses
for RICO prosecution. Title 31 offenses are analogous to the
offense of interstate travel in aid of racketeering to distribute
the proceeds of unlawful activity, 18 U.S.C. 1952, which is
currently included within the RICO definition. However, the
growing sophistication of organized crime and the proliferation
of foreign tax havens has made Section 1952 inadequate to cope
with illegal money flow. "Money laundering" has been documented
as a condition precedent for organized crime and narcotics
trafficking enterprises. Investigations in South Florida have
revealed a multi-billion dollar clandestine money market operating
offshore. The inclusion of currency violations proscribed by
Title 31 as racketeering offenses is necessary to allow a concerted
attack upon all aspects of such criminal enterprises. Moreover,
this amendment would expedite a unified federal response by
facilitating cooperation between Treasury agents from IRS and
Customs having enforcement jurisdiction over Title 31 and FBI
investigators specializing in racketeering cases under Title 18.
The Justice Department's position is that it is ineffective to
prosecute racketeers in narcotics offenses without including the
currency violations they commit as RICO predicate offenses
because, without the proposed amendment, Title 31 violations are
now likely to be severed from a RICO case. Moreover, inclusion
- 4 -
of currency violations as RICO predicate offenses would enhance
the ability of prosecutors to seek forfeiture of criminal assets
by authorizing RICO forfeiture of monies used to violate Title
31. Passage of the proposed amendment is viewed as being essen-
tial to an adequate law enforcement response to money laundering
by organized crime and narcotics organizations. Enactment of
this amendment is strongly recommended.
THE KNOWLEDGE REQUIREMENT
Subsection (d) of the proposed legislation would require a
knowing violation of reporting requirements in order to support a
civil forfeiture under Section 232 (a) of the 1970 law (31 U.S.C.
1102(a).). Due to the nature of this offense, there would virtu-
ally never be direct evidence that a failure to file a required
report was "knowing." Moreover, we are unaware of cases in which
it has been suggested by disinterested persons that a conviction
was inequitable because of the absence of a knowledge requirement.
In our view there is no basis for complicating prosecutions
through this amendment and we therefore strongly urge that it be
disapproved.
WARRANTLESS SEARCHES
S. 1907 also authorizes warrantless searches where there is
reasonable cause to believe that currency is unlawfully being
removed from the country. In this regard, border searches of
persons and things entering the United States have been author-
ized and executed, without requirements of a warrant or probable
cause, since the earliest period of our constitutional history.
See Act of July 31, 1799, $24, 1st Cong., 1st Sess., 1 Stat. 43
(ships and vessels); Act of March 2, 1799, $46, 5th Cong., 3rd
Sess., 1 Stat. 662 (personal baggage). The courts have so noted.
United States V. Ramsey, 431 U.S. 606, 616-19 (1977). The issue
raised by this proposal, therefore, is whether the border search
exception to the Fourth Amendment warrant and probable cause
requirements is applicable only to persons and things entering
the United States. The only court which has to our knowledge
squarely considered this question is the Ninth Circuit Court of
Appeals which concluded that the "the similarity of purpose,
rationale, and effect between the two types of border searches
(outgoing as compared to incoming) compels us to hold that the
search here (which was conducted on less than probable cause and
without a warrant) was proper. United States V. Stanley, 545
F.2d 661, 667 (9th Cir. 1976), cert. denied, 436 U.S. 917 (1978).
Dictum in other cases indicates that searches at the border of
outbound traffic are legally indistinguishable from incoming
searches for Fourth Amendment purposes. E.g., California Bankers
Association V. Shultz, 416 U.S. 21, 63 (1974) and United States
V. Asbury, 586 F.2d 973, 975 (2d Cir. 1978).
- 5 -
In short, the Constitution would not appear to require that
border searches of outgoing persons or things be supported by the
issuance of a warrant or a showing of probable cause. Yet the
Currency and Foreign Transaction Reporting Act (31 U.S.C. 1105 (a) )
requires issuance of a search warrant based upon a showing of
probable cause in order to conduct a search related to enforce-
ment of that Act. This requirement is inconsistent with prior
law establishing the border search exception. In view of the
importance of enforcing the Currency and Foreign Transaction
Reporting Act, and considering the ease with which persons
departing the United States can conceal currency in their luggage
or on their persons, this requirement impedes law enforcement
efforts.
S. 1907 would retain the existing search warrant requirement
with respect to enforcement of the Currency Transaction and
Reporting Act generally, but would authorize warrantless searches
upon reasonable cause to believe a person entering or departing
the United States is unlawfully transporting a monetary instrument.
We understand, therefore, that a showing of objective reasonable-
ness would still be required in keeping with judicial opinions
governing border searches. More specifically, we believe searches
could only be conducted pursuant to the amendment where there is
an objective basis for a reasonable belief that the person or
thing searched is unlawfully transporting monetary instruments.
Moreover, the search would necessarily be conducted in a reason-
able manner. Although we recognize that an analogous revision of
a previous bill (H. R. 5961 of the 96th Congress) was the focus of
considerable controversy, we believe that critics of the earlier
bill may have lacked a full understanding of the law of border
searches. Moreover, the standard used in S. 1907 (reasonable
cause to believe) is somewhat more demanding than that set out in
H.R. 5961 (reasonable cause to suspect). We would hope,
therefore, that this provision of S. 1907 can be enacted during
the 97th Congress.
For purposes of clarity, we believe that the search provi-
sion should specify that warrantless searches are authorized only
upon "reasonable cause to believe there are monetary instruments
being transported in violation of section 1101 of this title."
The language of subsection (b) as presently written would
arguably authorize a search even in circumstances where a
person has declared all currency in his possession. Further, for
stylistic reasons, we suggest substitution of the words "with
respect to which or whom" for "on which or on whom".
INCREASED SANCTIONS FOR VIOLATIONS
Because we feel that violations of the Currency and Foreign
Transaction Reporting Act are serious matters, and that such
violations are often perpetrated in order to mask even more
serious offenses such as narcotics trafficking and organized
- 6 -
crime, we believe that the proposed increase in civil penalties
from $1,000 to $10,000 and in criminal sanctions from a mis--
demeanor to a felony are clearly justified.
:
CONCLUSION
In conclusion, the Department of Justice recommends enactment
of the attempt, reward, search, and increased sanction provisions
of S. 1907. We recommend against enactment of the knowledge
provision. The Office of Management and Budget has advised that
there is no objection to the submission of this report from the
standpoint of the Administration's program.
Sincerely,
Robert A. McConnell
Assistant Attorney General
Office of Legislative Affairs
MEMORANDUM
THE WHITE HOUSE
WASHINGTON
May 18, 1982
FOR:
EDWIN L. HARPER
FROM:
MICHAEL M. UHLMANN
SUBJECT:
Bank Secrecy Act Amendments
Sen. Roth and Rep. LaFalce have introduced "Bank Secrecy Act
Amendments", designed to enhance the Government's ability to
seize drug traffickers' cash before it leaves the country.
The legislation would (1) make it an offense to attempt to
leave the country carrying unreported currency in excess of
$5,000; (2) authorize warrantless searches of persons leaving the
country where there is reasonable cause to believe these persons
are illegally transporting unreported currency; and (3) authorize
rewards to informants.
The Treasury and Justice Departments strongly support the
legislation. OMB opposes the warrantless search and reward
provisions of the legislation on philosophical grounds.
The Justice Department and the Senate Judiciary Committee
have tentatively agreed to include at least the attempt provision
of this legislation in the Alternative Law Enforcement
Package.
Early next week, the entire package is being taken up by the
CCLP. At that time, the Council will have the opportunity to
consider objections which OMB may have to any elements of the
package, including the Bank Secrecy Act Amendments.
(If you would like more background on the issue, see the
attached memorandum.)
cc: Roger Porter
MEMORANDUM
THE WHITE HOUSE
WASHINGTON
May 18, 1982
MEMORANDUM FOR THE FILE
FROM:
WILLIAM P. BARR
SUBJECT:
Bank Secrecy Act Amendments
Overview
Treasury and Justice strongly support legislation introduced
by Senator Roth (S. 1907) and Rep. LaFalce (H.R. 5044-48), which
would enhance the Government's ability to seize drug traffickers'
cash before it leaves the country by:
-- making it an offense to attempt to take
unreported currency out of the U.S.;
--
authorizing warrantless searches of persons
leaving the country based on either probable
cause or reasonable cause to believe such
persons are illegally transporting unreported
currency; and
--
authorizing payment of rewards to informants.
OMB does not object to the attempt provision but opposes the
warrantless search and reward provision on philosophical grounds.
The Justice Department has concluded that the warrantless
search provision is "probably constitutional".
Similar legislation was supported by the Carter administra-
tion; but, during the 96th Congress, a motion to suspend the
rules to consider the bill was defeated in the House by an
yea-and-nay vote, with debate centering on the constitutional
propriety of the warrantless search provision.
Justice and Senate Judiciary Committee negotiations have
tentatively agreed to include the legislation in the Alternative
Law Enforcement Package.
Background
The sheer volume of cash generated by drug-trafficking and
other organized crime activities is awesome. For example, sale
of 1 ton of cocaine can produce 4 tons of cash. Disposal of
these massive amounts of cash has become a major problem for
Basically, the criminals have two choices: (1) deposit the
money in domestic institutions; (2) take the cash out of the
country for offshore laundering. The first option has been
obstructed by recently-enacted laws which require filing of
reports when large domestic deposits are made. There is evidence
that organized crime is increasingly resorting to the second
option. Law enforcement officials would like to catch organized
crime in a squeeze by blocking their efforts to export currency.
Current Law
Requires filing of reports if transporting
more than $5,000 out of country.
Person transporting currency without filing
report faces:
-- forfeiture of money
-- civil penalty of $1,000
-- misdemeanor.
Some courts have held that no offense occurs
until person actually departs U.S.
Authorizes searches pursuant to warrant based
on probable cause.
Proposed Amendments
Sen. Roth's and Rep. LaFalce's bills would amend existing law
to:
Make it an offense to attempt to take
unreported money out of the country. (S.1907
and H.R. 5044).
Authorize warrantless exit searches based on
"reasonable cause" (S. 1907 and H.R. 5046) or,
alternatively, on "probable cause" (H.R. 5045)
or on "suspicion" (H.R. 5047).
-- Treasury prefers "reasonable cause".
-- Justice defers to Treasury.
Authorize payment of rewards to informers in
illicit currency transportation cases where
the information leads to a forfeiture, fine or
penalty. (Reward would not exceed 25% of
fine, penalty or forfeiture, or $250,000,
whichever is less.) (S. 1907 and H.R. 5048).
Raise the reporting threshold from $5,000 to
O
Raise the reporting threshold from $5,000 to
$10,000 (H.R. 5044).
-- Treasury opposes this.
Add currency violations to definition of
"racketeering activity" for purposes of RICO
(Only S. 1907).
O
Increase civil penalties ($1,000 to $10,000)
and criminal penalties (1 year to 5 years,
$1,000 to $50,000) (Only S. 1907).
O
Add requirement for "knowing" violation to
support civil forfeiture (Only S. 1907).
-- Justice opposes this.
OMB's Position
OMB objections to the bill's warrantless search provision is
basically philosophical:
"I believe that, absent extraordinary
circumstances, exit searches are not and
should not be conducted by the government.
Perhaps a case can be made for permitting
warrantless exit searches based upon the
traditional probable cause standard, but such
a major departure from the way our government
has treated its departing citizens deserves
especially close scrutiny."
OMB's objection to the reward provision likewise appears
philosophical:
"[T]he practice of paying rewards to
informants, many of whom are themselves
participants in criminal activities, concerns
me."
OMB has recommended setting this matter down for CCLP
consideration.
31 USCS § 1083
MONEY AND FINANCE
FOREIGN TRA
required to file a report under this chapter [31 USCS §§ 1081 et seq.] with
(2) receives n
respect to a transaction with a domestic financial institution shall file the
tion to the U
report with that institution, except that (1) if the institution is not
States
designated under subsection (a), the report shall be filed as the Secretary
shall prescribe, and (2) any such person may, at his election and in lieu of
in an amount e:
filing the report in the manner hereinabove prescribed, file the report with
reports in accord
the Secretary. Domestic financial institutions designated under subsection
(b) Contents of
(a) shall transmit reports filed with them, and shall file their own reports,
filed at such tir
as the Secretary shall prescribe.
information and
(Oct. 26, 1970, P. L. 91-508, Title II, ch 2, § 223, 84 Stat. 1122.)
detail, as the Sec
(1) The legal c
HISTORY; ANCILLARY LAWS AND DIRECTIVES
respect to the :
References in text:
(2) The origin,
"This Act," referred to in this section, probably should read "this
(3) Where the
Title," which Title is Title II of Act Oct. 26, 1970, P. L. 91-508, 84
owned by the
Stat. 1114, which Title is popularly known as the Currency and
Foreign Transactions Reporting Act, and appears generally as 31 USCS
purpose than 1
§§ 1051 et seq. For full classification of this Title, consult USCS Tables
same, the ident
volumes.
are received, or
Effective date of section:
(4) The amoun
For the effective date of this section, see the Other provisions note to
(c) Common carri
31 USCS § 1051.
of passengers in
passengers, nor to
CODE OF FEDERAL REGULATIONS
monetary instrum
Financial recordkeeping and reporting of currency and foreign transactions,
(Oct. 26, 1970, P.
31 CFR Part 103.
HIST
INTERPRETIVE NOTES AND DECISIONS
Effective date
Fourth Amendment rights of banks are not
1083), and regulations thereunder. California
For the effect
abridged by domestic reporting provisions of
Bankers Asso. V Shultz (1974) 416 US 21, 39 L
Bank Secrecy Act of 1970 (31 USCS §§ 1081-
Ed 2d 812, 94 S Ct 1494.
31 USCS § 10
REPORTS OF EXPORTS AND IMPORTS OF MONETARY
INSTRUMENTS
This section is
§ 1101. Reports
(a) Persons required to file. Except as provided in subsection (c) of this
Am Jur:
section, whoever, whether as principal, agent, or bailee, or by an agent or
10 Am Jur 2c
bailee, knowingly-
32 Am Jur 2c
(1) transports or causes to be transported monetary instruments—
Law Review i
(A) from any place within the United States to or through any place
outside the United States, or
McLaughlin,
(B) to any place within the United States from or through any place
Corporations:
Rev 1071, Ma
outside the United States, or
348
FINANCE
FOREIGN TRANSACTION REPORTS
31 USCS § 1101
with
(2) receives monetary instruments at the termination of their transporta-
file
the
tion to the United States from or through any place outside the United
is
not
States
Secretary
in
lieu
of
in an amount exceeding $5,000 on any one occasion shall file a report or
port
with
reports in accordance with subsection (b) of this section.
ubsection
(b) Contents of filed report. Reports required under this section shall be
reports,
filed at such times and places, and may contain such of the following
information and any additional information, in such form and in such
detail, as the Secretary may require:
(1) The legal capacity in which the person filing the report is acting with
respect to the monetary instruments transported.
(2) The origin, destination, and route of the transportation.
"this
84
(3) Where the monetary instruments are not legally and beneficially
and
owned by the person transporting the same, or are transported for any
JSCS
purpose than the use in his own behalf of the person transporting the
ables
same, the identities of the person from whom the monetary instruments
are received, or to whom they are to be delivered, or both.
(4) The amounts and types of monetary instruments transported.
to
(c) Common carriers. Subsection (a) does not apply to any common carrier
of passengers in respect of monetary instruments in the possession of its
passengers, nor to any common carrier of goods in respect of shipments of
monetary instruments not declared to be such by the shipper.
sactions,
(Oct. 26, 1970, P. L. 91-508, Title II, ch 3, $ 231, 84 Stat. 1122.)
HISTORY; ANCILLARY LAWS AND DIRECTIVES
Effective date of section:
California
US
21,
39
L
For the effective date of this section, see the Other provisions note to
31 USCS § 1051.
CROSS REFERENCES
This section is referred to in 31 USCS §§ 1102, 1103, 1105.
RESEARCH GUIDE
c)
of
this
Am Jur:
agent
or
10 Am Jur 2d, Banks § 18.5.
32 Am Jur 2d, False Pretenses § 86.
any
place
Law Review Articles:
McLaughlin, The Criminalization of Questionable Foreign Payments by
any
place
Corporations: A Comparative Legal Systems Analysis, 46 Fordham L
Rev 1071, May, 1978.
349
31 USCS § 1101
MONEY AND FINANCE
INTERPRETIVE NOTES AND DECISIONS
L IN GENERAL
benefit of this instruction was plain error; iso-
1. Purpose
lated act of bringing money in excess of $5,000
2. Scope
into country is not illegal or even immoral, since
3. Willfulness requirement
what is required is merely filing of proper form,
and proof of requisite knowledge and willfulness,
II. CONSTITUTIONALITY
therefore, is almost impossible unless affirmative
steps are taken by government to make laws'
4. Generally
requirement known. United States v Granda
5. First Amendment
(1978, CA5 Fla) 565 F2d 922.
6. Fourth Amendment
7. Fifth Amendment
II. CONSTITUTIONALITY
L IN GENERAL
4. Generally
Portion of Currency and Foreign Transctions
1. Purpose
Reporting Act (31 USCS §§ 1051 et seq.) dealing
LAW
Provision in 31 USCS § 1101 providing that
with export and import of monetary instruments
amounts not exceeding $5,000 need not be re-
and with foreign monetary interests or accounts
ported was obviously meant to avoid creating
(§§ 1101-1105), does not violate Forth Amend-
problems of enforcement and imposing unneces-
ment. California Bankers Assn. V Shultz (1974)
sary inconveniences on travelers which would
416 US 21, 39 L Ed 2d 812, 94 S Ct 1494.
result were reporting obligations extended to
31 USCS §§ 1101-1105 did not violate defen-
small or insignificant amounts of money. Ivers V
dant's First, Fourth, and Fifth Amendment
United States (1978, CA9 Cal) 581 F2d 1362.
rights and should not be declared unconstitu-
Underlying purposes of Congress in promul-
tional. United States V Fitzgibbon (1978, CA10
LIBRARY
gating foreign reporting requirements of 31
Colo) 576 F2d 279, cert den (US) 58 L Ed 2d
USCS § 1101 were fundamentally prosecutorial,
256, 99 S Ct 279.
not essentially regulatory, since stated objective
of Bank Secrecy Act was to acquire information
5. First Amendment
which would have high degree of usefulness in
On defendant's motion to dismiss information,
criminal investigations and proceedings. United
in which she was charged with willful failure to
States V San Juan (1975, DC Vt) 405 F Supp
file reports required by 31 USCS § 1101 in
686.
connection with her transportation of $77,500 in
cash from Canada to United States, compulsory
2. Scope
disclosure of information sought from defendant
31 USCS § 1101 determines when travelers
on reporting form would not have deterent or
and others must report transportations of mone-
detrimental affect upon her freedom to enter into
tary instruments, and once transportation falls
associations or to participate in organizations as
within its scope, entire amount transported must
allowed by USCS Constitution Amend. 1. United
be reported. Ivers V United States (1978, CA9
States V San Juan (1975, DC Vt) 405 F Supp
Cal) 581 F2d 1362.
686.
3. Willfulness requirement
6. Fourth Amendment
31 USCS § 1101 punishes not transportation
Neither domestic nor foreign transactions re-
of money, but willful failure to file report.
porting requirements of Title II of Bank Secrecy
United States V Gomez Londono (1977, CA2
Act of 1970 (31 USCS §§ 1081-1122), and regu-
NY) 553 F2d 805.
lations pursuant thereto, violate Fourth Amend-
Term "knowingly" as used in 31 USCS § 1101
ment rights of banks. California Bankers Asso. V
requires proof of defendant's knowledge of re-
Shultz (1974) 416 US 21, 39 L Ed 2d 812, 94 S
porting requirement and his specific intent to
Ct 1494.
commit crime; Congress, by adding this term,
took this regulatory statute out of ranks of strict
7. Fifth Amendment
liability type crimes; in case involving alleged
Fifth Amendment self-incrimination claims of
violations of § 1101, proper instruction to jury
bank depositor plaintiffs against foreign reporting
would include some discussion of defendant's
requirements of Bank Secrecy Act of 1970 (31
ignorance of law since defendant's alleged igno-
USCS §§ 1101-1122) are premature where de-
rance of reporting requirement goes to heart of
positor plaintiffs allege that they intend to en-
his or her denial of specific intent necessary to
gage in foreign currency transactions or dealings
commit crime, and failure of defendant to have
with foreign banks which Treasury Regulations
350
FINANCE
FOREIGN TRANSACTION REPORTS
31 USCS § 1102, n 1
will require them to report, but they make no
later lead to criminal liability, compliance with
additional allegation that any of information
requirement did not by itself implicate defendant
lain error; iso-
required by regulations will tend to incriminate
xcess of $5,000
in criminal conduct, where defendant was
them. California Bankers Asso. V Shultz (1974)
immoral, since
charged with failure to file reports in connection
416 US 21, 39 L Ed 2d 812, 94 S Ct 1494.
of proper form,
with her transportation of $77,500 in cash from
Reporting requirements of 31 USCS § 1101 do
and willfulness,
Canada to United States, and compelling disclo-
not violate USCS Constitution Amend. 5; in
nless affirmative
spite of underlying prosecutorial purposes, re-
sures did not undermine accusatorial system of
to make laws'
porting requirements created only possibility of
criminal justice which privilege against self-in-
ates V Granda
incrimination which was insufficient to require
crimination was designed to protect. United
validation, and while disclosures demanded on
States V San Juan (1975, DC Vt) 405 F Supp
reporting form could lead to inquiry that could
686.
LITY
eign Transctions
§ 1102. Forfeiture
1 et seq.) dealing
tary instruments
(a) Any monetary instruments which are in the process of any transporta-
ests or accounts
tion with respect to which any report required to be filed under section
: Forth Amend-
231(1) either has not been filed or contains material omissions or misstate-
V Shultz (1974)
ments are subject to seizure and forfeiture to the United States.
S Ct 1494.
ot violate defen-
(b) For the purpose of this section, monetary instruments transported by
fth Amendment
mail, by any common carrier, or by any messenger or bailee, are in process
ared unconstitu-
on (1978, CA10
of transportation from the time they are delivered into the possession of
US) 58 L Ed 2d
the postal service, common carrier, messenger, or bailee until the time they
are delivered into or retained in the possession of the addressee or intended
recipient or any agent of the addressee or intended recipient for purposes
miss information,
other than further transportation within, or across any border of, the
willful failure to
United States.
USCS § 1101 in
(Oct. 26, 1970, P. L. 91-508, Title II, ch 3, § 232, 84 Stat. 1123.)
ion of $77,500 in
tates, compulsory
t
from defendant
HISTORY; ANCILLARY LAWS AND DIRECTIVES
have deterent or
References in text:
dom to enter into
organizations as
"Section 231(1)," referred to in this section, probably should be
Amend. 1. United
"section 231(a) of Act Oct. 26, 1970, P. L. 91-508, Title II, ch 3,"
Vt) 405 F Supp
which appears as 31 USCS § 1101(a).
Effective date of section:
For the effective date of this section, see the Other provisions note to
transactions re-
31 USCS § 1051.
of Bank Secrecy
1122), and regu-
CROSS REFERENCES
Fourth Amend-
Bankers Asso. V
This section is referred to in 31 USCS § 1103.
Ed 2d 812, 94 S
INTERPRETIVE NOTES AND DECISIONS
1. Generally
to file reports required by 31 USCS § 1101 in
ination claims of
2. Relation to customs laws
connection with transportation of approximately
foreign reporting
3. Standing
$77,500 in cash from Canada to United States,
Act of 1970 (31
4. Delay in forfeiture proceedings
defendant could not legitimately object to seizure
nature where de-
4
5. Amount of forfeiture
of money she was carrying; forfeiture was proper
ey intend to en-
under 31 USCS § 1102(a) since defendant failed
ctions or dealings
1. Generally
to fill out form -4790, and letters and other
asury Regulations
In prosecution of defendant for willful failure
documents in packages were properly seized as
351
31 USCS § 1102, n 1
MONEY AND FINANCE
evidence of alleged violation of statute. United
complaint, and where claimants by counterclaim
States V San Juan (1975, DC Vt) 405 F Supp
sought return of currency and damages, govern-
686.
ment's motion for summary judgment was
Jurisdiction of District Court in forfeiture
granted; unlike 19 USCS § 1305, which requires
proceeding is limited to determining whether all
that forfeiture proceedings be instituted within
elements of alleged violation have been proved,
fourteen days of seizure and that district court
since 31 USCS § 1102 subjects any money im-
take no more than sixty days to dispose of
ported in violation of § 1101 to forfeiture. Ivers V
action, 31 USCS § 1102 provides for administra-
United States (1975, DC Cal) 413 F Supp 394,
tive determination on claimant's petition for
affd in part and revd in part on other grounds
remission, distinction being based upon fact that
(CA9 Cal) 581 F2d 1362.
§ 1305 deals with materials which might prop-
Currency which has been brought into United
erly be subject to First Amendment protection; it
States from a place outside country is subject to
was therefore unrealistic to use same time limits
forfeiture to United States under 31 USCS
imposed under 19 USCS § 1305 in proceeding
§ 1102 where required report has not been filed
brought under § 1102 where latter statute per-
under 31 USCS § 1101 and where claimants
mits administrative determination on question of
lacked any valid affirmative defense. United
remission. United States V One 1964 MG (1976,
States V Eleven Thousand Five Hundred &
DC Wash) 408 F Supp 1025, revd on other
Eighty Dollars ($11580) in United States Cur-
grounds (CA9 Wash) 584 F2d 889.
rency (1978, DC Fla) 454 F Supp 376.
Ordinarily Constitution demands that person
not be deprived of property without previously
2. Relation to customs laws
having been afforded notice of proposed action
19 USCS §§ 1602 et seq., which are applicable
and opportunity to be heard, but extraordinary
to proceedings in conjunction with seizures and
situation may justify departure from mandate
LIBRARY
forfeitures under customs laws, do not govern
and permit postponement of notice and opportu-
proceedings under 31 USCS § 1102. United
nity for hearing; seizure of property for forfeiture
States V One 1964 MG (1976, DC Wash) 408 F
to government is such situation and post-seizure
Supp 1025, revd on other grounds (CA9 Wash)
notice and hearing are justified by facts that
584 F2d 889; Ivers V United States (1975, DC
seizure is necessary to secure important govern-
Cal) 413 F Supp 394, affd in part and revd in
ment interest and there is special need for
part on other grounds (CA9 Cal) 581 F2d 1362.
prompt action and seizure is initiated by govern-
ment official responsible for determining under
3. Standing
standards of narrowly drawn statute as found in
Where one claimant pleaded guilty to charge
31 USCS § 1102; due process, however, requires
of transporting unreported monetary instruments
proceedings be commenced with some prompti-
and another claimant was not in actual or con-
tude; proceedings under 31 USCS § 1102 are
structive possession of currency at time it was
governed by Customs Service's general regula-
seized, they have no standing to object to forfeit-
tions on subject. Ivers V United States (1975, DC
ure of automobile and cash in forfeiture proceed-
Cal) 413 F Supp 394, affd in part and revd in
ing pursuant to 31 USCS § 1102. United States V
part on other grounds (CA9 Cal) 581 F2d 1362.
One 1964 MG (1976, DC Wash) 408 F Supp
1025, revd on other grounds (CA9 Wash) 584
5. Amount of forfeiture
F2d 889.
Entire amount of currency is subject to forfeit-
ure under 31 USCS § 1102 despite provision in
4. Delay in forfeiture proceedings
31 USCS $ 1101 providing that persons trans-
In civil action by which United States sought
porting monetary instruments in amounts ex-
forfeiture against automobile and sum of $17,883
ceeding $5,000 file reports; $5,000 amount
in United States and Canadian currency under
merely triggers reporting requirement and once
authority of 19 USCS § 1595a and 31 USCS
triggered all amounts transported are required to
§ 1102, where claimants of currency raised affir-
be reported, and since entire amount should
mative defenses challenging constitutionality of
have been reported and was not, entire amount
statutes on their faces and as applied because of
is subject to forfeiture. United States V One 1964
government delay between seizure and filing of
MG (1978, CA9 Wash) 584 F2d 889.
352
FINANCE
FOREIGN TRANSACTION REPORTS
31 USCS § 1104
by counterclaim
lamages, govern-
§ 1103. Civil liability
judgment was
which requires
The Secretary may assess a civil penalty upon any person who fails to file
instituted within
any report required under section 231 [31 USCS § 1101], or who files such
at district court
a report containing any material omission or misstatement. The amount of
to dispose of
for administra-
the penalty shall not exceed the amount of the monetary instruments with
t's petition for
respect to whose transportation the report was required to be filed. The
d upon fact that
liabilities imposed by this chapter [31 USCS §§ 1101 et seq.] are in
ich might prop-
addition to any other liabilities, civil or criminal, except that the liability
ent protection; it
same time limits
under this section shall be reduced by any amount actually forfeited under
5 in proceeding
section 232 [31 USCS § 1102].
tter statute per-
(Oct. 26, 1970, P. L. 91-508, Title II, ch 3, § 233, 84 Stat. 1123.)
n on question of
1964 MG (1976,
revd on other
HISTORY; ANCILLARY LAWS AND DIRECTIVES
89.
Effective date of section:
nds that person
thout previously
For the effective date of this section, see the Other provisions note to
proposed action
31 USCS § 1051.
ut extraordinary
from mandate
CROSS REFERENCES
ice and opportu-
rty for forfeiture
Civil penalty for violation of Bank Secrecy Act, 12 USCS § 1955; 31 USCS
and post-seizure
§ 1056.
d by facts that
portant govern-
INTERPRETIVE NOTES AND DECISIONS
pecial need for
tiated by govern-
Civil and criminal penalties of Bank Secrecy
Secretary of Treasury; if Secretary were to do
termining under
Act of 1970 (12 USCS §§ 1730d, 1829b, 1951-
nothing, Act would impose no penalties on any-
tute as found in
1959, and 31 USCS §§ 1051-1122) attach only
one. California Bankers Asso. V Shultz (1974)
owever, requires
upon violation of regulations promulgated by
416 US 21, 39 L Ed 2d 812, 94 S Ct 1494.
some prompti-
SCS § 1102 are
general regula-
§ 1104. Remission of forfeiture or penalty
States (1975, DC
The Secretary may in his discretion remit any forfeiture or penalty under
art and revd in
581 F2d 1362.
this chapter [31 USCS §§ 1101 et seq.] in whole or in part upon such terms
and conditions as he deems reasonable and just.
(Oct. 26, 1970, P. L. 91-508, Title II, ch 3, § 234, 84 Stat. 1123.)
ubject to forfeit-
ite provision in
HISTORY; ANCILLARY LAWS AND DIRECTIVES
persons trans-
n amounts ex-
Effective date of section:
$5,000 amount
For the effective date of this section, see the Other provisions note to
ment and once
31 USCS § 1051.
are required to
amount should
INTERPRETIVE NOTES AND DECISIONS
entire amount
ates V One 1964
Administrative consideration of claimant's pe-
ole by court; mere filing of petition for remission
889.
tition for remission is not governed by any
under 31 USCS § 1104 does not excuse govern-
statutory or regulatory requirement of prompti-
ment from obligation to commence prompt judi-
1
tude but it does afford claimant full panoply of
cial proceedings until petition is decided, but
due process rights inherent in judicial proceed-
parties are not precluded from agreeing that
ing; remission being matter of legislative grace,
judicial action should be postponed pending res-
exercise of Secretary's discretion is not reviewa-
olution of administrative claim as it simply pre-
353
31 USCS § 1104
MONEY AND FINANCE
vents unilateral adoption of that course by gov-
seeking forfeiture under 31 USCS § 1102, though
ernment. Ivers V United States (1978, CA9 Cal)
this does not mean that remission decision can
581 F2d 1362.
be made at any pace. United States V One 1964
Administrative claim for remission of seized
MG (1976, DC Wash) 408 F Supp 1025, revd on
property should be completed before Govern-
other grounds (CA9 Wash) 584 F2d 889.
ment, if there is no remission, files civil claim
§ 1105. Enforcement authority
(a) If the Secretary has reason to believe that monetary instruments are in
the process of transportation and with respect to which a report required
under section 231 [31 USCS § 1101] has not been filed or contains material
omissions or misstatements, he may apply to any court of competent
jurisdiction for a search warrant. Upon a showing of probable cause, the
court may issue a warrant authorizing the search of any or all of the
following:
(1) One or more designated persons.
(2) One or more designated or described places or premises.
(3) One or more designated or described letters, parcels, packages, or
other physical objects.
(4) One or more designated or described vehicles.
LIBRARY
Any application for a search warrant pursuant to this section shall be
accompanied by allegations of fact supporting the application.
(b) This section is not in derogation of the authority of the Secretary under
any other law.
(Oct. 26, 1970, P. L. 91-508, Title II, ch 3, § 235, 84 Stat. 1123.)
HISTORY; ANCILLARY LAWS AND DIRECTIVES
Effective date of section:
For the effective date of this section, see the Other provisions note to
31 USCS § 1051.
RESEARCH GUIDE
Am Jur:
10 Am Jur 2d, Banks § 18.5.
INTERPRETIVE NOTES AND DECISIONS
Where customs officer viewed crewman
Police Department officers had requisite reasona-
emerge from vessel with something in hands,
ble suspicion to believe that contraband or dutia-
walk over to automobile, depart from area and
ble item had been introduced into United States
proceed up gangway without sack or bundle he
and had exercised valid search and seizure pur-
had upon departure from vessel and disappear
suant to Customs "border search" authority.
into ship at which point automobile sped away
United States V Eleven Thousand Five Hundred
from area, such circumstances gave customs
& Eighty Dollars ($11580) in United States
officers probable cause to stop suspected auto
Currency (1978, DC Fla) 454 F Supp 376.
and seize currency; customs officers and Tampa
354
FINANCE
FOREIGN TRANSACTION REPORTS
31 USCS § 1121, n 1
$ 1102, though
FOREIGN TRANSACTIONS
1 decision can
as V One 1964
1025, revd on
d 889.
§ 1121. Records and reports
(a) The Secretary of the Treasury, having due regard for the need to avoid
impeding or controlling the export or import of currency or other mone-
tary instruments and having due regard also for the need to avoid
ents are in
burdening unreasonably persons who legitimately engage in transactions
rt required
with foreign financial agencies, shall by regulation require any resident or
ns material
citizen of the United States, or person in the United States and doing
competent
business therein, who engages in any transaction or maintains any relation-
cause, the
ship, directly or indirectly, on behalf of himself or another, with a foreign
all of the
financial agency to maintain records or to file reports, or both, setting forth
such of the following information, in such form and in such detail, as the
Secretary may require:
(1) The identities and addresses of the parties to the transaction or
ackages, or
relationship.
(2) The legal capacities in which the parties to the transactions or
relationship are acting, and the identities of the real parties in interest if
one or more of the parties are not acting solely as principals.
on shall be
(3) A description of the transaction or relationship including the
amounts of money, credit, or other property involved.
etary under
(b) No person required to maintain records under this section shall be
required to produce or otherwise disclose the contents of the records
except in compliance with a subpena or summons duly authorized and
issued or as may otherwise be required by law.
(Oct. 26, 1970, P. L. 91-508, Title II, ch 4, § 241, 84 Stat. 1124.)
note to
HISTORY; ANCILLARY LAWS AND DIRECTIVES
Effective date of section:
For the effective date of this section, see the Other provisions note to
31 USCS § 1051.
CROSS REFERENCES
Financial recordkeeping under Bank Secrecy Act, 12 USCS §§ 1951 et seq.
This section is referred to in 31 USCS § 1122.
quisite reasona-
RESEARCH GUIDE
aband or dutia-
United States
Am Jur:
nd seizure pur-
10 Am Jur 2d, Banks § 18.5.
rch" authority.
Five Hundred
INTERPRETIVE NOTES AND DECISIONS
United States
upp 376.
1. Constitutionality, First Amendment
No concrete controversy is presented for adju-
2. -Fourth Amendment
dication by ACLU's claim that Bank Secrecy
3. -Fifth Amendment
Act's reporting requirements with respect to
1. Constitutionality, First Amendment
foreign and domestic transactions (31 USCS
355
31 USCS § 1121, n 1
MONEY AND FINANCE
§§ 1051-1122) invade its associational interests
3. -Fifth Amendment
protected by First Amendment where there is no
Fifth Amendment self-incrimination claims of
showing that reporting requirements contained in
bank depositor plaintiffs against foreign reporting
Treasury Regulations would require reporting of
requirements of Bank Secrecy Act of 1970 (31
information with respect to organization's finan-
cial activities. California Bankers Asso. V Shultz
USCS §§ 1101-1122) are premature where de-
(1974) 416 US 21, 39 L Ed 2d 812, 94 S Ct
positor plaintiffs allege that they intend to en-
1494.
gage in foreign currency transactions or dealings
with foreign banks which Treasury Regulations
2. -Fourth Amendment
will require them to report, but they make no
Neither domestic nor foreign transactions re-
additional allegation that any of information
porting requirements of Title II of Bank Secrecy
required by regulations will tend to incriminate
Act of 1970 (31 USCS §§ 1081-1122), and regu-
them. California Bankers Asso. V Shultz (1974)
lations pursuant thereto, violate Fourth Amend-
416 US 21, 39 L Ed 2d 812, 94 S Ct 1494.
ment rights of banks. California Bankers Asso. V
Shultz (1974) 416 US 21, 39 L Ed 2d 812, 94 S
Ct 1494.
LAW LIBRARY
§ 1122. Classifications and requirements
The Secretary may prescribe:
(1) Any reasonable classification of persons subject to or exempt from
any requirement imposed under section 241 [31 USCS § 1121].
(2) The foreign country or countries as to which any requirement
imposed under section 241 [31 USCS § 1121] applies or does not apply
if, in the judgment of the Secretary, uniform applicability of any such
requirement to all foreign countries is unnecessary or undesirable.
(3) The magnitude of transactions subject to any requirement imposed
under section 241 [31 USCS § 1121].
(4) Types of transactions subject to or exempt from any requirement
imposed under section 241 [31 USCS § 1121].
(5) Such other matters as he may deem necessary to the application of
this chapter [31 USCS §§ 1121 et seq].
(Oct. 26, 1970, P. L. 91-508, Title II, ch 4, § 242, 84 Stat. 1124.)
HISTORY; ANCILLARY LAWS AND DIRECTIVES
Effective date of section:
For the effective date of this section, see the Other provisions note to
31 USCS § 1051.
RESEARCH GUIDE
Am Jur:
10 Am Jur 2d, Banks § 18.5.
FOREIGN CURRENCY REPORTS
HISTORY; ANCILLARY LAWS AND DIRECTIVES
This subchapter was enacted as a part of Act Sept. 21, 1973, and not
as a part of the Currency and Foreign Transactions Reporting Act,
356
INANCE
FOREIGN TRANSACTION REPORTS
31 USCS § 1142
which generally comprises the first four subchapters of this chapter. It
n claims of
formerly was classified to Chapter 22.
En reporting
of 1970 (31
where de-
§ 1141. Congressional statement of findings
tend to en-
or dealings
The Congress finds that-
Regulations
(1) movements of mobile capital can have a significant impact on the
ey make no
information
proper functioning of the international monetary system;
incriminate
(2) it is important to have as complete and current data as feasible on
hultz (1974)
the nature and source of these capital flows, including transactions by
1494.
large United States business enterprises and their foreign affiliates;
(3) it is desirable to emphasize this objective by supplementing existing
legal authority for the collection of data on capital flows contained in
section 5(b) of the Emergency Banking Act of 1933 (12 U.S.C. 95a) [12
USCS § 95a] and section 8 of the Bretton Woods Agreements Act of
1945 (22 U.S.C. 286f) [22 USCS § 286f].
(Sept. 21, 1973, P. L. 93-110, Title II, § 201, 87 Stat. 353.)
from
HISTORY; ANCILLARY LAWS AND DIRECTIVES
quirement
Explanatory notes:
not apply
This section was not enacted as a part of the Currency and Foreign
any
such
Transactions Reporting Act, which generally comprises subchapters
this Chapter.
imposed
CROSS REFERENCES
quirement
This section is referred to in 31 USCS § 1142.
of
CODE OF FEDERAL REGULATIONS
Transactions in foreign exchange, transfers of credit, and export of coin and
currency, 31 CFR Part 128.
§ 1142. Regulations
to
(a) General requirements. The Secretary of the Treasury (hereafter referred
to as the "Secretary") is authorized and directed, under the authority of
this title and any other authority conferred by law, to supplement regula-
tions requiring the submission of reports on foreign currency transactions
consistent with the statement of findings under section 201 [31 USCS
§ 1141]. Regulations prescribed under this title shall require that such
reports contain such information and be submitted in such manner and at
such times, with reasonable exceptions and classifications, as may be
necessary to carry out the policy of this title.
(b) Foreign currency transactions of United States person and controlled
foreign person. Reports required under this title shall cover foreign
not
currency transactions conducted by any United States person and by any
Act,
foreign person controlled by a United States person as such terms are
357
31 USCS § 1142
MONEY AND FINANCE
defined in section 7(f)(2)(A) and 7(f)(2)(C) of the Securities Exchange Act
of 1934 [15 USCS § 78g(f)(2)(A), (C)].
(Sept. 21, 1973, P. L. 93-110, Title II, § 202, 87 Stat. 353.)
HISTORY; ANCILLARY LAWS AND DIRECTIVES
References in text:
"This title," referred to in this section, is Title II of Act Sept. 21, 1973,
P. L. 93-110, 87 Stat. 352, and appears as 31 USCS §§ 1141 et seq.
Explanatory notes:
This section was not enacted as a part of the Currency and Foreign
WH LAW LIBRARY
Transactions Reporting Act, which generally comprises this chapter.
CODE OF FEDERAL REGULATIONS
Transactions in foreign exchange, transfers of credit, and export of coin and
currency, 31 CFR Part 128.
§ 1143. Enforcement
(a) Penalty. Whoever fails to submit a report required under any rule or
regulation issued under this title may be assessed a civil penalty not
exceeding $10,000 in a proceeding brought under subsection (b) of this
section.
(b) Injunction; jurisdiction; relief granted; bond; penalty. Whenever it
appears to the Secretary that any person has failed to submit a report
required under any rule or regulation issued under this title or has violated
any rule or regulation issued hereunder, the Secretary may in his discretion
bring an action, in the proper district court of the United States or the
proper United States court of any territory or other place subject to the
jurisdiction of the United States, seeking a mandatory injunction com-
manding such person to comply with such rule or regulation, and upon a
proper showing a permanent or temporary injunction or restraining order
shall be granted without bond, and additionally the sanction provided for
failure to submit a report under subsection (a).
(Sept. 21, 1973, P. L. 93-110, Title II, § 203, 87 Stat. 353.)
HISTORY; ANCILLARY LAWS AND DIRECTIVES
References in text:
"This title," referred to in this section, is Title II of Act Sept. 21, 1973,
P. L. 93-110, 87 Stat. 352, and appears as 31 USCS §§ 1141 et seq.
Explanatory notes:
This section was not enacted as a part of the Currency and Foreign
Transactions Reporting Act, which generally comprises this chapter.
CODE OF FEDERAL REGULATIONS
Transactions in foreign exchange, transfers of credit, and export of coin and
currency, 31 CFR Part 128.
358
FOREIGN TRANSACTION REPORTS
31 USCS § 1102
suspend and disbar any person representing elaimants from further practice before the
Treasury Department. 50 ALR Fed 817.
CHAPTER 21. REPORTS OF CURRENCY AND FOREIGN
TRANSACTIONS
§ 1058. Criminal penalty
INTERPRETIVE NOTES AND DECISIONS
2. Willfulness requirement
000 into country, evidence that defendant knew
Defendant's conviction must be reversed where,
she must file report was woefully insufficient.
although evidence was sufficient to establish that
United States v Chen (1979, CA9 Wash) 605 F2d
defendant knew she was carrying more than $15,-
433.
$ 1059. Additional criminal penalty in certain cases
INTERPRETIVE NOTES AND DECISIONS
Series of currency transfers which, by them-
Prosecution under 31 USCS $ 1059 is not un-
selves, constitute only misdemeanors, may also
constitutionally vague on grounds that terms
constitute felonious activity if they show pattern of
"transaction" and "currency trends action" are
illegal activity and exceed $100,000 over 12-month
nowhere defined because statute and regulations as
period; therefore, series of misdemeanor violations
defined did not fail to afford defendant fair notice
may, by themselves, call forth increased penalties
of what constitutes "transaction in currency of
of 31 USCS $ 1059(2). United States V Beusch
more than $10,000." United States v Thompson
(1979, CA9 Cal) 596 F2d 871.
(1979, CAS Tex) 603 F2d 1200.
§ 1081. Reports
INTERPRETIVE NOTES AND DECISIONS
1. Scope
decision to structure $45,000 transaction in cur-
It is no defense to criminal prosecution that
rency as five $9,000 loans was done with intent to
defendant structured single loan transaction in
annul reporting requirements. United States V
currency as multiple loans, thus avoiding obliga-
Thompson (1979, CA5 Tex) 603 F2d 1200.
tion to report pursuant to 31 USCS § 1081, where
§ 1101. Reports
INTERPRETIVE NOTES AND DECISIONS
3. Willfulness requirement
the statutory terms "knowingly" and "willfully"
Form distributed by airline clearly warned trav-
applied to ingress and egress of currency alike, and
eler of penalties for false reporting or failure to
nowhere does statute distinguish between ways in
report accurately any monetary instruments in
which border is crossed so that government must
excess of $5,000, and government satisfied burden
prove that travelers were on notice of currency
of proving notification of reporting requirement as
reporting requirement. United States ¥ Warren
well as defendant's knowing and willful violation
(1980, CA5 Fla) 612 F2d 887.
of such requirement. United States V Rodriguez
7. Fifth Amendment
(1979, CA9 Wash) 592 F2d 553.
Disclosure requirements of 31 USC § 1101 do
Although defendants left United States without
not violate USCS Constitution Amendment 5. US
passing through any regular border checkpoints,
Dichne (1979 CA2) 612 F2d 632.
$ 1102. Forfeiture
INTERPRETIVE NOTES AND DECISIONS
1. Generally
ture under 31 USCS I 1102 despite provision in 31
Since forfeiture under 31 USCS § 1102 is per-
USCS $ 1101 providing that persons transporting
missive only, doctrine of relation back does not
monetary instruments in amounts exceeding $5,-
apply because statute provides only for possibility
000 file reports; $5,000 amount merely triggers
of subsequent forfeiture. United States V Currency
reporting requirement and once triggered all
Totalling $48318.08 (1980, CA5 Tex) 609 F2d
amounts transported are required to be reported,
210.
and since entire amount should have been reported
and was not, entire amount is subject to forfeiture.
5. Amount in forfeiture
United States V One 1964 MG (1978, CA9 Wash)
Entire amount of currency is subject to forfei- 584 F2d 889.
15
II
WHITE HOUSE LIBRARY
AND
RESEARCH CENTER
97TH CONGRESS
1ST SESSION
S.1907
To amend the Currency and Foreign Transactions Reporting Act and section
1961(1) of title 18, United States Code, to improve enforcement, and for
other purposes.
IN THE SENATE OF THE UNITED STATES
DECEMBER 3 (legislative day, NOVEMBER 30), 1981
Mr. ROTH (for himself, Mr. RUDMAN, Mr. COHEN, Mr. NUNN, and Mr. CHILES)
introduced the following bill; which was read twice and referred to the
Committee on the Judiciary
A
BILL
To amend the Currency and Foreign Transactions Reporting
Act and section 1961(1) of title 18, United States Code, to
improve enforcement, and for other purposes.
1
Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3 That (a) section 207(a) of the Currency and Foreign Transac-
4 tions Reporting Act (31 U.S.C. 1056(a)) is amended by strik-
5 ing out "a civil penalty not exceeding $1,000" and inserting
6 in lieu thereof "a civil penalty not exceeding $10,000".
2
1
(b) Section 209 of such Act (31 U.S.C. 1058) is amend-
2 ed by striking out "$1,000, or imprisonment not more than
3 one year, or both" and inserting in lieu thereof "$50,000, or
4 imprisonment not more than five years, or both".
5
(c) Section 231(a) of such Act (31 U.S.C. 1101(a)) is
6 amended-
7
(1) by inserting ", or attempts to transport or
8
cause to be transported," after "transports or causes to
9
be transported" in paragraph (1); and
10
(2) by striking out "in an amount exceeding
11
$5,000" and inserting in lieu thereof "in an amount
12
exceeding $10,000".
13
(d) Section 232(a) of such Act (31 U.S.C. 1102(a)) is
14 amended by inserting before the period at the end thereof the
15 following: ", except that in the case of a failure to file a
16 required report, this subsection shall apply only if the person
17 required to file the report knowingly fails to file the report".
18
(e) Section 235 of such Act (31 U.S.C. 1105) is amend-
19 ed-
20
(1) by redesignating subsection (b) as subsection
21
(c); and
22
(2) by inserting the following new subsection after
23
subsection (a):
24
"(b) A customs officer may stop and search, without a
25 search warrant, a vehicle, vessel, aircraft, or other convey-
S. 1907-is
4
1
(2) The table of contents of such chapter is amended by
2 adding the following new item after the item relating to sec-
3 tion 213:
"214. Rewards for informants.".
4
SEC. 2. Section 1961(1) of title 18, United States Code,
5 is amended-
6
(1) by striking out "or" after "(relating to embez-
7
zlement from union funds),"; and
8
(2) by inserting before the semicolon at the end
9
thereof the following: ", or (E) any act which is indict-
10
able under the Currency and Foreign Transactions Re-
11
porting Act".
O
S. 1907-is