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ORAL STATEMENT OF WILLIAM J. FOX, DIRECTOR
FINANCIAL CRIMES ENFORCEMENT NETWORK
UNITED STATES DEPARTMENT OF THE TREASURY
BEFORE THE
SENATE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
SEPTEMBER 28, 2004
Chairman Shelby, Senator Sarbanes, and distinguished Members of the
Committee, I appreciate the opportunity to appear before you to discuss the issues and
challenges before us as we establish an effective and comprehensive anti-money
laundering regulatory regime for two diverse and important sectors in the financial
industry – money services businesses and casinos. We applaud your leadership Mr.
Chairman, as well as the leadership of Senator Sarbanes and the other members of this
Committee on these issues. We also appreciate the direct and personal support you have
shown the Financial Crimes Enforcement Network, over the past year in particular. We
are honored by this support and we are doing all we can to live up to the faith you have
put in us. The issues we deal with – including the specific issues we are addressing today
– are critically important to the health of our nation’s financial system and, indeed, our
national security. I have extended remarks that we are submitting for the record. I will
keep this statement brief.
I am pleased to be here today with Superintendent Diana Taylor of the New York
Banking Department and Commissioner Kevin Brown of the Internal Revenue Service’s
Small Business / Self-Employed division. Superintendent Taylor and I have begun what
I believe to be a very good dialogue between our two agencies. We have high hopes that
this dialogue will lead to a much closer and deeper relationship with the New York
Banking Department that will prove to be mutually beneficial across the spectrum of
financial institutions, but particularly the challenging sector of money services
businesses. I am also pleased to be here today with Commissioner Brown. As you know,
the Secretary of the Treasury has delegated Bank Secrecy Act examination authority to
the Internal Review Service for a variety of non-bank financial institutions including
money services businesses and casinos. Commissioner Brown’s division is responsible
for this program. Kevin and I are both relatively new to our respective jobs. When it
comes to his office’s work, I consistently remind Kevin that we are “in the foxhole”
together, with no pun intended. In the short time I have worked with him, he has
demonstrated that he and his people are dedicated to this effort are taking their
responsibilities under the Bank Secrecy Act quite seriously.
Today’s hearing is focused on two very different sectors of the financial industry,
each presenting its own set of challenges from a regulatory perspective. I would like to first briefly address casinos. All casinos, including tribal casinos, with gross annual
gaming revenue in excess of $1,000,000 are subject to regulation under the Bank Secrecy
Act. Today, there are approximately 800 casinos and card clubs operating in at least
thirty (30) jurisdictions in the United States and its territories, while ten or fifteen years
ago, the vast majority of casinos were located in Nevada and New Jersey. The past few
years, we have seen explosive growth of riverboat and tribal casino gaming across the
country. While casinos are no strangers to comprehensive regulation, casinos are at risk
to be used by money launderers and others engaging in illicit finance, including terrorist
financiers. Casinos are high volume cash businesses vulnerable to manipulation by
criminals and, possibly, terrorists. Casinos also often offer customers a broad array of
financial services, such as deposit or credit accounts; funds transfers; check cashing and
currency exchange services that are similar to services offered by money services
businesses. These risks mandate that we implement an efficient and effective regulatory
regime for casinos that includes a robust examination program.
Money services businesses present a deeper and broader challenge for us in
implementing a meaningful regulatory regime under the Bank Secrecy Act. This industry
includes the following service providers: currency dealers or exchangers; check cashers;
issuers of traveler’s checks, money orders or stored value products; and money
transmitters. We are facing significant challenges in implementing the Bank Secrecy
Act’s regulatory regime for this industry. I have outlined those challenges in my written
testimony. This industry is incredibly diverse; ranging from Fortune 500 companies with
world-wide reach to mom and pop convenience stores in inner city neighborhoods where
English is rarely spoken. The services provided can be particularly susceptible to
terrorists and persons financing terrorist operations. In fact, in my view, money services
businesses – because of their diverse nature and because of the products and services that
are offered – represent the most significant risk of any financial industry sector under the
Bank Secrecy Act. We believe this risk must be addressed with a multi-faceted approach
– a combination of aggressive outreach and education; targeted compliance examinations;
development of international standards and regulatory approaches; and, appropriate civil
and criminal enforcement all coupled with extremely close coordination between law
enforcement and regulators at both the State and Federal level.
We are fortunate that a large majority of both the casino and money services
business industry are striving to be compliant. This majority, like other sectors of the
financial services industry, has expended large amounts of money, time and effort to
develop anti-money laundering programs that ensure compliance with the recordkeeping
and reporting requirements of our regulations. This majority is starving for guidance and
education on how to better comply with these regulations, and we must collectively be
there to answer the call. We are also listening to these industries to better understand
their needs for guidance and feedback and to see if we can collectively figure out ways to
achieve better and less burdensome compliance. We meet regularly with representatives
from these industries and we attend and participate in conferences and seminars relevant
to these topics. Also, both industries have representative members on the Bank Secrecy
Act Advisory Group, which is a very important dialogue among the regulators, regulated
industry and law enforcement on these issues.
We are working more closely with Commissioner Brown’s people at the IRS than
we have in the past, and we need to work more closely with law enforcement and the
state regulators of these sectors to ensure we are leveraging resources as best we can to
meet the challenges posed by these diverse and dynamic industries. We have taken steps
at FinCEN – such as creating a new “Office of Compliance” and devoting, for the first
time, analytic muscle to our regulatory programs – which will make a difference. We are
building better and smarter technology – our BSA Direct Project – that will assist all
players in this arena to approach these challenges in a better and smarter way. But let me
be clear Mr. Chairman, notwithstanding all of that good work, a robust and properly
resourced examination function for non-bank financial institutions is the keystone to the
success of our efforts to ensure well educated, properly compliant industry sectors. This
is even more important as we bring other industries into the regulatory fold, which we are
currently poised to do. We cannot afford the cynicism that breeds from a regulatory
paper tiger. The issues are too important. I want to assure you Mr. Chairman that we are
keenly aware of the importance of our task before us – we know full well that it is critical
to our national security. We are committed to move as far and as fast as we can with the
resources we have been given to implement this regulatory regime in the best way
possible.
We appreciate your kind attention Mr. Chairman, and I am happy to answer any
questions you may have.
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