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A rule proposed today by the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) would require the reporting of a certain class of foreign bank drafts brought into or out of the United States. The rule was proposed under the terms of the Bank Secrecy Act (BSA), one of the Treasury's key tools in fighting money laundering.
Regulations issued under the BSA have long required that the transportation into or out of the United States of currency or certain monetary instruments exceeding $10,000 must be reported to the Treasury Department. (The reporting, for example, is required of individuals entering or leaving the country with more than $10,000 in cash.) The reports, along with other kinds of information, are useful to law enforcement when investigating money laundering and other kinds of financial crime. The reporting requirement is administered by the U.S. Customs Service.
The proposed rule would expand the class of reportable instruments to include drafts issued or made out by a foreign bank on a dollar account maintained by or in the name of the foreign bank in the United States. The drafts could be in the form of cashier's checks, bank checks or similar instruments, so long as they are drawn on a foreign bank's dollar account in the United States.
Congress granted the Treasury authority to expand the definition in the manner proposed today, as part of the Money Laundering Suppression Act of 1994.
"Foreign bank drafts have long served legitimate commercial purposes," said Stanley E. Morris, Director of the Financial Crimes Enforcement Network, which administers the BSA. "Correspondent banking relationships are a vital part of the banking system, both domestically and internationally. However, like other aspects of the financial system, foreign bank drafts are vulnerable to manipulation and misuse by money launderers."
"The new authority was explicitly sought by the Department of the Treasury and reflects Congressional concern that this change was needed to help detect the transportation of illicit proceeds across our borders. The reporting of foreign bank drafts is one more way for criminal investigators to follow the money trail," said Morris.
The required report is U.S Customs Service form 4790, Report of International Transportation of Currency or Monetary Instruments. (The reporting procedure is usually referred to as the "CMIR" requirement.)
FinCEN issued an Advisory to banks in September 1996 which focused specifically on Mexican bank drafts and factored third party checks. The Advisory asked banks to give enhanced scrutiny to these instruments and report suspicious activity to law enforcement when warranted. This proposed regulation would require the reporting of all such bank drafts, just as cash and other instruments are reported by persons who bring them into or out of the country. It does not alter the obligation of banks to report suspicious activities involving such foreign bank drafts.
Failures to report transportation of currency and instruments (now to include foreign bank drafts) can result in civil and criminal penalties, as well as seizure and forfeiture of the assets that were subject to the reporting requirement. The U.S. Customs Service investigates violations of the reporting requirement.
The proposed rule was sent to the Federal Register today and will be published in accordance with the Register's schedule.