Washington Post
October 17, 2001

House Approves Money Laundering Bill

By Kathleen Day

WASHINGTON -- The House passed a money laundering bill today without including a controversial provision to limit Internet gambling that the FBI favored but the credit-card industry opposed.

The House voted 412-to-1 in favor of the bill, which the House Republican leadership altered in a last-minute move last night to strike the Internet gambling provision that the House Financial Services Committee had included.

Passage of the bill clears the way for the House and Senate to reconcile counter-terrorism legislation and include in it new provisions intended to make it easier for federal regulators and law enforcement officials to monitor and disrupt funding to terrorists.

Congressional staffers say the legislation could be passed within a week or two, although it depends on how long the anthrax scare disrupts Congress.

The Senate's anti-terrorism bill, which was passed last week, includes money laundering provisions. With today's vote, the House has passed separate terrorist and money laundering measures, although the deletion of the controversial Internet gambling ban eliminates most opposition to combining the two as the Senate did, congressional staffers said.

The White House has said President Bush wants terrorism legislation to include money-laundering.

The FBI testified two weeks ago that agency officials believe organized crime uses Internet gambling to launder money and that the potential exists for terrorists to use those techniques as a "model."

The credit-card industry, which profits from Internet gambling because much of the activity is paid for with credit cards, lobbied hard against it.

The provision would have barred the use of credit cards in connection with "illegal Internet gambling," but the industry said that provision was too broad and unwieldy.

The White House has refused to comment on the Internet gambling provision. Some credit-card industry lobbyists, however, said administration officials actively lobbied with them against the measure which proponents of the provision said enabled the House leadership to kill it. Visa, MasterCard, BankOne and Bank of America are among the companies that fought the provision.

The new version was worked out by Majority Leader Dick Armey (R-Tex.) and House Speaker Dennis Hastert (R-Ill.), in consultation with key House Democrats, including Rep. John LaFalce of New York.

One Democratic source said the new version contains about 85 percent of the financial committee's original bill.

Money laundering is the use of complicated financial transactions to mask the source of funds that come from or are intended for illegal activities, including drug sales or hijackings.

Until recently efforts to combat money laundering have focused mainly on drug cartels, allowing other activities to fall under the government's radar, officials said. Some lawmakers have criticized the banking industry, including Citigroup, J.P. Morgan Chase & Co. and other big companies, for lobbying against portions of the bill. In addition to the Internet gambling provision, banks have objected to a provision still in the bill that would require banks to actively monitor transactions they conduct for their wealthiest clients "private banking" customers and for clients of other banks through correspondent banking services.

And they have lobbied so far unsuccessfully to soften a provision that would make it harder for U.S. banks to do business with some offshore banks, including offshore shell banks that have no physical office and no affiliation with an established bank.

The banks want to include language that would give the secretary of the Treasury the authority to exempt U.S. banks from having to exercise enhanced oversight when doing business with banks from countries that have weak money-laundering laws, an industry lawyer familiar with the lobbying effort said.

Copyright 2001, Washington Post Company. All rights reserved.

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