Leading House Democrats Introduce Bills to Deter Money Laundering and Hold Executives Responsible

Press Release

n the wake of massive money laundering scandals at U.S. banks that allowed terrorist, drug and other illicit money to flow through the economy, two leading Democratic lawmakers introduced two measures to crack down on misconduct and help clean up the system.

Rep. Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, and Rep. Carolyn Maloney (D-NY), the ranking member on the Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, each introduced bills that together would strengthen U.S. anti-money laundering laws, close loopholes, encourage the flow of information, and give financial regulators enhanced civil powers to hold bank executives accountable for misconduct on their watch.

A key aim of Waters' bill, entitled the "Holding Individuals Accountable and Deterring Money Laundering Act," is to strengthen the government's ability to go after individuals for violations of the Bank Secrecy Act, which requires U.S. financial institutions to work with government agencies to detect and prevent money laundering. Among other provisions, the bill makes bank executives personally liable for misconduct and gives regulators the tools to remove or permanently ban from the industry top bankers who violate the law.

Recent enforcement actions against a number of banks revealed how some systematically violated the Bank Secrecy Act in order to increase profits. Although a number of record fines were levied against some of these institutions, no bank executives have been held responsible for any violations.

"A number of recent, high-profile cases show how several multinational banks actively turned off anti-money laundering controls to accommodate terrorist financing and drug cartels," said Waters.

"The Justice Department and federal agencies have levied a number of record-breaking fines against these banks, but not a single individual has been held accountable," Waters added. "And yet thousands of men and women -- many non-violent offenders who played no role in drug cartels -- remain in prison today for drug offenses far less serious than the banks that allowed hundreds of millions in drug proceeds to flow through the U.S. economy. My bill, in part, seeks to correct that injustice by making it easier to go after unscrupulous bankers and mandating punishments as strict as those the imposed on the drug dealers themselves."

The second piece of the Democratic package, introduced by Rep. Carolyn Maloney (D-NY), is the "Incorporation Transparency and Law Enforcement Assistance Act." Maloney's bill would help identify the true ownership of legal corporations and deter the use of shell companies for illegal purposes.

Recent studies and investigations have shown that untraceable shell companies are often the vehicles of choice for money launderers, drug dealers, tax evaders and financiers of terrorism.

"My bill would require that the true ownership of a corporation be identified when papers are filed," Maloney said. "This will help stop criminal enterprises that are exploiting weaknesses in incorporation law to engage in money-laundering, drug trafficking, securities fraud and terrorist financing. This will give law enforcement officials the tools they need to root out criminal and terrorist organizations."

In August, the Senate introduced a companion measure to crack down on the use of shell corporations with hidden owners that hide and facilitate criminal activity.

Also, G-8 leaders recently agreed to tackle the misuse of shell companies used to facilitate the illicit financial flows stemming from corruption, tax evasion, and other crimes by requiring companies to identify the beneficial owner -- the individual who ultimately controls, owns and profits from them.

"My legislation would enable the U.S. to meet its international commitment to improve the transparency of companies, and along with Congresswoman Waters' bill, significantly advance U.S. efforts to fight money laundering," Maloney added.

Both Democratic measures are supported by a number of investor and civil society organizations, including labor unions, financial watchdog and good governance groups. These include AFL-CIO, Citizens for Responsibility and Ethics in Washington (CREW), Global Financial Integrity, Global Witness, Government Accountability Project, Human Rights Watch, Jubilee USA Network, Oxfam America, U.S. Public Interest Research Group (U.S. PIRG).

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