1997 Congressional Hearings
Intelligence and Security

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Opening Comments From Chairman Kolbe

    Mr. KOLBE. We will call next Mr. Stanley Morris, Director of the Financial Crimes Enforcement Network, FinCEN.

    Mr. Director, we have already made our opening statements, and your statement, will be placed in the record. We hope you would summarize it so that we can have some time for questions.

    Mr. MORRIS. Thank you, Mr. Chairman, Mr. Hoyer, members of the subcommittee. I appreciate very much the opportunity to discuss our mission and the '98 budget request for the Financial Crimes Enforcement Network.

    I have with me Dave Gilles, who is our Assistant Director for Information Technology, who does more than click the ''mouse'', which he will do here in a little bit. He also designs what I think are some of the most interesting applications of technology in the effort to deal with financial crimes anywhere in the world. Mr. Hoyer's visit to us not too long ago, was a great morale booster for a small law enforcement agency located outside the beltway. I might point out—with all the criticisms of organizations inside the beltway, we are just barely out—I would invite you, Mr. Chairman, at some point in time to also come out.

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    Mr. KOLBE. We will do that.

    Mr. MORRIS. It is a different kind of organization and seeing, I hope, is believing.

    The theme of this hearing——

    Mr. HOYER. Excuse me, Mr. Director. If you would yield, you came in late, but I did mention to the Chairman my visit there, and the extraordinary capability of you and your staff and how impressed I was with the technical ability that we have to track money now, which makes it much more difficult to hide illegal transactions. I wanted to reiterate that I mentioned that before you came in. I really was impressed by my visit.

    Thank you, Mr. Chairman.

    Mr. MORRIS. Thank you very much. Again, as I said, it was a great morale booster for a small agency with a funny name, that not a lot of people have heard of.

    As I said, the subject of the hearing, innovation and technology, describes in large part what FinCEN is all about. Law enforcement has to use every weapon in its arsenal to ensure the best offense and defense against financial criminals. Technology is one such weapon, and innovation is critical to its effectiveness.

    As our name states, FinCEN is a network, a link between law enforcement, regulatory and financial communities. Our goal, therefore, is to maximize information sharing among our partners in these communities and to find new ways to create cost-effective and efficient measures to prevent and detect money laundering.

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    In addition to employing creative uses of technology to provide case support to over 150 Federal, state and local law enforcement agencies, we also administer the Bank Secrecy Act, which is the Government's anti-money laundering regulatory statute. This Act requires banks and other financial institutions to take steps to help deter and, if unsuccessful in deterring, detect money laundering and other financial crimes through various reporting and record-keeping measures.

    My testimony today will illustrate the value to law enforcement of the information collected through our regulatory programs. The kind of thing we could show Mr. Hoyer actually in place, we will try to show you, Mr. Chairman, through the application of a little technology in presenting our testimony and trying to describe it.

    Let me turn to an example of the type of case we help law enforcement develop. Such a case could be generated by FinCEN's proactive analysis on its own, or it could be developed in response to a law enforcement request.

    We start here with a mid-sized city in the United States, bustling with financial activity. Within this city we will be discussing three grocery stores run by five family members. Their financial dealings have come to our attention because their business practices don't fit within the normal financial activity of other small grocery stores in this city. The cash activity is unusual and their bank has reported that some of their transactions are suspicious.

    How did we arrive at this information and how will it help us in law enforcement develop a case? The answers are found in FinCEN's toolbox. Now, it looks like a traditional toolbox, but it's filled with anything but traditional tools. Its tools are state-of-the-art technology. In this case we will demonstrate four of our most important tools that we utilize to develop case information.

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    First, one of the most innovative devices in the toolbox is FinCEN's artificial intelligence, or AI system. Let me digress for just a moment to describe it.

    Under the Bank Secrecy Act, financial institutions are required to file reports on cash transactions over $10,000. At present, more than eleven million such reports, called Currency Transaction Reports, or CTRs, are filed every year. Information on each of those reports, such as name of the transactor, bank account numbers, amount of transaction, names of the users of the accounts, addresses, are all included. As you can imagine, with over 100 bits of information on each of eleven million reports, the amount of information available in the database is staggering.

    Although this data contains valuable clues to suspicious activity, they are much like needles buried in a haystack. Fortunately, we have found a way to use technology to get at those needles.

    AI is a complex computer system that provides the ability to process vast amounts of data, enabling our analysts to explore the sets of links it has established.

    As illustrated in the next several screens, the customized programs and algorithms developed by FinCEN's computer scientists allow the AI's KDD, or Knowledge Discovery Databases, to pull in relevant information from the universe of CTR data. The system then connects disparate pieces of information, such as banking transactions and accounts, and this linking process reveals patterns of financial transactions that we know are used to launder money or to perpetrate other crimes. Thus, we can find potential suspects during the AI analysis who might have gone undetected.

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    Let me show you how the AI system worked in our case example. What you see on the screen is a graphic representation of relationships revealed in the data. The AI system has linked together common elements from 90 different currency transaction reports. The system has honed in on these particular CTRs because the activity reveals a suspicious pattern of cash deposits which simply do not fit the normal profile of a small grocery store.

    This wheel represents the application of our data visualization software which is extracted from that CTR data. It's one of the ways our systems visually link those CTR filings.

    These spokes represent the interwoven and overlapping relationship of transactions to suspect businesses and people, and the total of these CTRs makes up nearly two million dollars.

    This next wedge highlighted in green displays the three accounts associated with these CTRs. The wheel continues to build as the system identifies our three grocery stores connected to the accounts.

    Finally, the last element identifies nine individuals making the transactions.

    At this point we have culled the needles out of millions of records in a haystack and zeroed in on an organization with a highly questionable degree of financial activity.

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    Since the wheel is not necessarily the most ''user friendly'' way to explain what we've developed, FinCEN's customized software allows us, literally with the click of a mouse, to quickly convert the AI system information into a more easily understandable link chart. This chart then becomes the foundation of our case analysis.

    As you will see, our analysts can untangle the lines to show how the transactions relate to each other, and the colors and lines become commonly used law enforcement symbols.

    Now let's return to the toolbox. The second tool that we have used to develop our case is the Suspicious Activity Reporting System, SARS. It is our newest tool and a very important device in our toolbox.

    SARS merged two older paper-based regulatory requirements for banks to report criminal activity. These systems had been in place for years. We eliminated these separate and overlapping filings, thereby easing the reporting burden on the banks. In sum, it reduced the amount of required flow of paper by over two million pieces, while at the same time significantly improving the quality of the information.

    I have heard, Mr. Chairman, that Federal agencies are sometimes criticized by some of your colleagues up here as being awash in data, from which we extract a tiny bit of information and generate absolutely no wisdom. We hope our systems here are adding a little bit of wisdom to an extraordinary amount of data.

    Under SARS, banks report criminal activity to one collection point—that's FinCEN—which then provides the appropriate information electronically to its users, both regulators and law enforcement. This single filing point provides for easier compliance by the banking industry and more comprehensive information for use by law enforcement and regulatory agencies.

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    SARS was implemented less than a year ago by us and by the bank regulatory agencies. It provides a single, centralized system for banks to report to law enforcement all criminal activities such as bank fraud, money laundering, embezzlement, check kiting, or misdeeds by bank officials, as you can see from the point on the screen.

    Most significantly, SARS provides valuable detailed information that is received first hand from the bank, and therefore, this data can help us to identify money laundering trends and patterns which can be vital to law enforcement and to the bank industry who have to develop countermeasures.

    This system proves to be very useful in the case example we're working on.

    As you can see on the SARS form, a bank has identified the subject, as did our AI system. In fact, during a five-month period, the bank filed numerous SARS on this business. All are for amounts suspiciously just under the CTR reporting threshold of $10,000, as you can see on the screen.

    Finally, many of the transactions occurred on successive days. This is a clear indication of what we call ''structuring''; that is, breaking down the transactions into smaller amounts to avoid FinCEN's currency reporting requirements. So we now can add that information obtained from the SARS to the information originally derived from our AI system.

    The information contained in these two systems validates the partnership that we have fostered with the financial community to create an efficient and workable regulatory and reporting structure. The information provided by the banks has enhanced the overall picture of the grocery store's irregular financial activity. But we have a couple more tools as well.

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    We spend two million dollars a year for the purchase of databases from commercial vendors. Information from commercially available sources plays an increasingly vital role in criminal investigations.

    Commercial database products include information such as state corporations, property records, people locator records, professional licenses, vehicle registration and the like. From these records our analysts were able to identify numerous luxury purchases—a large yacht, a couple of expensive vehicles and other items which are clearly beyond the means of the owners of a small, family-run grocery store.

    In addition, we discovered a corporate record that identifies an as yet unknown additional owner of the stores. Now you can see that the assets of the subjects, as well as a new name, are added to the mix.

    As a repository of more Federal databases than any other agency, FinCEN uses a fourth tool, law enforcement databases—Customs, DEA, Postal Service, INS, DOD and others. These databases provide the status of current or closed investigations, as well as information gathered from informants, surveillances and other sources. They also include customs, trade, and travel information.

    The subjects of our case have been very busy. Law enforcement databases revealed repeated travel to and from a money laundering haven. We now find that the additional owner, first discovered in our commercial database, has a criminal record for marijuana smuggling. In addition, there is an investigative report linking our subjects to cocaine smuggling.

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    The information from our law enforcement database has further enhanced the overall view of our subjects and their activity, and the mining of these data from these four sources yields a more complete picture, a picture that would be unavailable without the resources, the tools of FinCEN.

    So what does all this mean? Since an investigative report on one of the owners indicated involvement with narcotics trafficking, the suspicious financial activity may be related to laundering drug money. Another owner's history of narcotics smuggling and international air travel to a money laundering center would fit a narcotics organization.

    The recurring and structured deposits of cash are contrary to the level of business these small stores would usually generate, and the overt attempt to avoid reporting requirements indicates an effort to disguise the transactions from Federal authorities.

    We would, at this juncture, routinely provide our case findings to Federal law enforcement and work closely with the agents to provide the further support that they needed.

    Finally, the investigation can begin, but it finally has to be done in the streets by the men and women who make up Federal and state law enforcement.

    Financial investigations like this one are essential if we are to beat criminals at their game, whether it's related to narcotics trafficking, health care fraud, or public corruption. FinCEN's tools are key to following the money, but, of course, our tools are no ordinary tools. The support of this Committee in the past has allowed us to assemble a highly advanced client server computer environment to help FinCEN stay on top of the ever evolving world of high tech financial crime.

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    Moreover, our computer savvy analysts are adept at exploiting emerging technologies and data sources, such as the Internet, to predict and counter the use of technology by organized crime and criminals.

    In addition, as we informed the committee last year, electronic money, although in its infancy, stands to alter the way criminals conduct their financial business. Our expertise in the area of new technologies permits us to prepare for the changing global financial world.

    Mr. Chairman, Mr. Hoyer, I hope this brief demonstration gives a somewhat better idea of how we try to use technology and innovation to help law enforcement. To keep up with the increasingly sophisticated activities of today's financial criminals, we must ensure that the contents of our toolbox are replenished and updated as changing circumstances warrant. Imagination and unconventional thinking are key to keeping money launderers in check. Our 181 FTE carry out our many domestic and international programs, and we try very hard to use our resources in ways which cross traditional bureaucratic lines. For example, we have pioneered a platform concept, offering office space and database access and training to employees of other Federal agencies who need to conduct research using some of the tools that you just saw. At the moment, database access is provided to 43 platform participants from 21 different agencies.

    Within FinCEN, approximately 55 percent of our resources support cases to law enforcement, just as you have seen. Another 20 percent is devoted to our regulatory program, and 25 percent to strengthening our network in international partnerships and relationships.

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    Our '98 budget request of 181 FTE and $23,006,000 reflects this approach. In addition, we're proposing that two one-time initiatives be funded from the Violent Crime Reduction trust fund, a million dollars for the secure Communications Outreach Program for us and the Treasury agencies, and two million dollars and four FTE in support of the President's efforts to encourage money laundering countries to institute internationally accepted anti-money laundering measures.

    These programs are designed to improve secure communications among Treasury's bureaus and strengthen our country's ability to surround the borderless world of money laundering with a global network of nations working together to combat financial crime.

    We appreciate the committee's consideration for giving us a little time here to do a ''show and tell'' on one aspect of our mission. I look forward to questions from you and Mr. Hoyer.

    [The information follows:]

    Offset folios 615 to 642 insert here

    Mr. KOLBE. Thank you very much.

     It was an interesting presentation. We discussed your work recently, and this gave an even better illustration of it.

    I have just a couple of questions. This subcommittee, the Treasury, and the Federal Government in general are very interested in performance measurements. You are a support organization, and it seems to me that it would be very difficult to link directly the work that you do to the solution of cases, the breakthroughs in investigations, or specific rates of convictions. Do you attempt to do this indirectly? What kind of measurements, indirect or otherwise, do you try to use to measure your performance?

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    Mr. MORRIS. Well, this is probably the best and probably the hardest question you could ask, Mr. Chairman. We have been struggling with this for some time because we are primarily a prevention-oriented agency. Indeed, if arrest and seizures and money-laundering go up, it probably means we are doing something wrong. So we need to be very careful in what we examine.

    The one piece of comfort I have is that there are now some 25 nations that have created FinCEN-like agencies. Cloning is not illegal in the area of bureaucratic assimilation, and a number of countries have created organizations like ours that are quite new. All of them are struggling with the same issue.

    There are some indirect measures, as you suggest, that we think at least give us some comfort. Whether it will provide the committee comfort, I am not sure, but at least it provides us some comfort.

    First, as I mentioned, as we move additional countries to meet international standards, which we didn't devote a lot of time to, criminalizing, money-laundering, creating mechanisms for reporting suspicious activities from financial institutions, I think we can say each of those actions is making it more difficult for money-laundering abroad.

    We can look at and we do examine what, in fact, is going on in the underworld, essentially. We know, for example, in 1990 and 1991, the average cost of money-laundering, that is, if you wanted to get money into a bank anonymously or through a special account, was running about 8 percent. It runs about 25 percent now.

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    [CLERK'S NOTE.—The agency later indicated that the phrase ''1990 and 1991'' should be changed to ''the mid-1980s''; ''8 percent should be 6 percent.'']

    Now, FinCEN can't take exclusive credit because there is a whole range of elements, but our regulatory programs have had an impact. Nobody brings satchels of cash any longer into the bank because they will show up in the SAR system as we have described, and so we made the challenge of money-laundering more difficult. So that deals a little bit with the regulatory aspect.

    We think we can come up with indirect measures in that regard. We do a lot of surveys, of course, with our colleagues in the private sector.

    As it relates to the support of law enforcement, which is more than half of our resources, in this area, we have tried to avoid, as you point out in your question, arrests because that's not what we do, but instead have built customer surveys into the materials.

    [CLERK'S NOTE.—The agency later changed the phrase ''have tried to avoid'' to ''do not make.'']

    So, when we send a case file out, we ask the law enforcement what the value of it was. Now, I had previous experiences in law enforcement, and cops don't spend a lot of time worrying about that aspect. So we only get about 25 percent offered, but we also go and do surveys within the law enforcement community. We could make some of those available to the committee. But as I said, what we are driven to is the long-term goal would be to come up with a reasonable estimate of the size of the problem and then demonstrate what our progress towards that is, but we are some distance from being able to do that.

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    Mr. KOLBE. Along those lines, the committee last year asked you to increase your efforts at outreach and education. Can you tell us more about what you have done to increase that capability?

    Mr. MORRIS. Yes. We have set up an ongoing set of meetings with the Treasury components. We have now visited, I think, and met with all of our customers in 11 cities, 11 major cities from coast to coast. We are looking and continue to look at ways of following on. We have made, I think, 145, 150, if my memory is correct, separate special requests for feedback, essentially, on performance, and I think probably one important measure is how successful our tools are. We have doubled the number of agencies in the last year and a half who have taken their own resources and come out to use some of the things that Dave Gillis and our people have designed, but again, those are indirect measures.

    The clear purpose of a lot of this is to get the best—be involved in the best and most significant cases. This allows us to do our other job, which is extract information about the trends and changing nature of the criminal activity we are dealing with, so that we can alert the banks to report it when they see it, and we can alert law enforcement to identify it as a part of their investigations.

    So this is important to us, both in terms of good customer relations, as well as making sure that we are engaged in the most significant matters.

    Mr. KOLBE. Would you say, then, that the financial institutions and State and local law enforcement agencies are aware of your work and your capabilities?

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    Mr. MORRIS. Yes.

    Mr. KOLBE. Okay. You are requesting a million dollars in the violent crime reduction trust fund for a secure outreach program. Would this be a one-time thing for hardware, for equipment, or would this get added to the base?

    Mr. MORRIS. It is a one-time for equipment and planning to do that.

    Just a quick brief anecdote to explain to you what we are trying to accomplish here. We underwent an evaluation by the Financial Action Task Force who came in and assessed U.S. performance against the 40 recommendations of the FATF, which was completed in December, and I will make a copy of their report available to the committee staff. It is very interesting and identifies some strengths and weaknesses in our system.

    We had helped the Financial Action Task Force set up an e-mail system that could directly transmit what is, in fact, a 50-paged product. So I got a call at 8:30, Paris time, from the person who had completed the report and said to check my screen, that he was going to e-mail it immediately.

    In about a minute and a half, I had a 50-paged report that I could download. Then I had to go out and essentially xerox it and get a driver to run around and deliver it to the Government Agencies in Washington. So I could get it from Paris to here in a matter of seconds, and it took me a day and a half to run it around town.

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    What we are trying to do is help set up systems that will allow us to communicate like that securely and use some of the capabilities of the Internet for law enforcement within Treasury.

    Mr. KOLBE. Thank you. I have a couple of other questions, but I will submit them for the record.

    Mr. Hoyer.

    Mr. HOYER. Thank you, Mr. Chairman.

    Mr. Morris, I am not sure I followed one of your answers. You indicated that one of the indications of success would be that caseloads went down and not up. Now, we want to get people off the street so they are no longer committing crimes. I understand that. But let us assume for the minute, as I do, that we are presently, even with our capability here, probably catching a pretty small percentage of the folks that are laundering money and doing all sorts of things that they shouldn't be doing in the financial field.

    As we increase in technological capability to follow that grocery story to find its compound incidents and report that to Secret Service, FBI, and local officials, wouldn't we see a spikeup at least in the short run? Perhaps in the next 5 years?

    Mr. MORRIS. Yes.

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    Mr. HOYER [continuing]. In terms of successful arrests and convictions of people participating in this money-laundering business?

    Mr. MORRIS. Well, Mr. Hoyer, you are quite right. Forgive me for trying to be a tad bit provocative and facetious, but I was thinking in the long term, obviously.

    Clearly, we do not have, in my own personal judgment, the investment at all levels of law enforcement that I would consider adequate to deal in financial crimes for a range of reasons being driven by other matters, and so that the better we get and the more tools we provide, the limited resources, the more cases that they will be able to make, and then the issue becomes adequate, prosecutorial and court time.

    In an ideal world, I was trying to make the point that our goal, really, is prevention. In the ideal world, we would push all the money-laundering activity outside of the United States because it was too risky and difficult to conduct that activity inside the United States, but we are not there for a long time, and you are quite correct, in the near term, arrests and seizures should go up as we become more effective.

    Mr. HOYER. And I would think that in answer to the chairman's first question, obviously the 4 months of evidence is an objective of the administration's, of Vice President Gore, and of the Congress on both sides of the aisle. Clearly as we have constraints in resources available, we need to make sure we are spending them smart and having an effect.

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    It would be useful to the committee as we consider your budget to have any data which indicates that an upswing in successful prosecutions of money-laundering, is the result of better identification. We find out that the grocery store money is, A, very high for a local grocery store and, B, going to an awful lot of different places and, C, that there are nine other grocery stores acting similarly, and then we do those prosecutions.

    So it seems to me that, in the short run, we are going to have a clear performance indicator that what we are doing here, the investment we are making, the people that are doing their job, getting the information, and therefore, are getting the bad guys off the street.

    Now, let me make another observation, which ties into my next question. You mentioned 43 platforms, with 21 agencies participating. Platforms, I guess, are the technical hardware?

    Mr. MORRIS. Yes.

    Mr. HOYER. Okay. Then 21 agencies——

    Mr. MORRIS. Right.

    Mr. HOYER [continuing]. Sharing their information and pooling it and coming up with the greatest wealth of information that can then be accessed and through our smart technology weed out the bad guys.

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    Driving offshore will not be the solution. It is sort of like driving crime out of Prince George's County, or better yet, driving crime out of the District of Columbia. As we beef up the District of Columbia Police Department, they become more effective. The criminals simply go to Prince George's, probably first choice, then Fairfax, and, the surrounding area.

    My point is this. Mexico recently had certification. How cooperative are they? I cite Mexico, but how cooperative is the rest of the world in dealing with this problem. They have platforms themselves. These are international criminals, for the most part. The Cali cartel, billions and billions of dollars. They are trying to get money back into legitimate circulation. It seems to me, we need that kind of cooperation. What are we doing there? Specifically, can you comment on Mexico, what they are doing to work with us on this money-laundering issue? Because it is an international issue, with worldwide financial transfers. You know, you talked about getting data from Paris to your office in Washington. You can make a deposit in Hong Kong as quickly as you can make a deposit in District Heights, which is 10 or 15 minutes from here.

    Mr. MORRIS. Absolutely. Finance is global. The nation's state lines are meaningless. There are no visas and there are no mechanisms.

    [CLERK'S NOTE.—The agency later changed ''The nations state lines'' to ''A nation's borders.'']

    We have been focussing at Treasury, not just FinCEN and not just enforcement, but more broadly at what the dimensions of this really are.

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    There is increasing world commitment. We have been very active with the Financial Action Task Force, for example, and we just readjusted under Treasury's leadership last year, the 40 major recommendations, toughened them, broadened them, deepened them in a number of, I think, important ways.

    As I mentioned, just a couple of years ago, there were only three or four organizations like FinCEN. There are now over 25.

    I just left—when I should have been preparing for the tough question on performance measures that the Chairman asked me—a meeting with the Finance Minister from Romania and his deputy. Romania is very much concerned about organized crime, very much wanting to establish and have us try to help them establish some mechanisms there because, while they don't have a vital economic system at present, they can certainly build one.

    As it relates to Mexico, all of us have different relations, depending on who they deal with, of course. We have been dealing with the Secretary and Assistant Secretary Johnson, specifically, with Hacienda. They have passed some important laws in the last 6 months that require—move them towards international standards. We have provided them some computers, and some material and some training, and we will continue to provide that training to try to build up the infrastructure necessary for them to develop the same kind of deterrence mechanisms that we have developed here.

    It is absolutely true that the more effective we are, the bad guys are going to go to the area that is of least resistance, and right now, Mexico has a 1,900-mile border and relatively unresistant.

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    We had similar problems in Panama, a dollar-denominated economy with lots of cash sloshing around in there. Dave had people down, helping them set up the computer systems, and I have got five people—in the amazing world that we live in—five people from Panama all week long, including the lead of their—what they call their financial analysis unit, again, trying to give them the expertise and knowledge that we have developed and also tell them the things that we have done well and the things we have not done very well. Clearly, the international element to this is very, very important, and they will go to the weakest link.

    Last year, there was a major conference in the Caribbean of the various countries there because of the history of the tax havens and the like. I quip the Caymans have passed a major money-laundering law in the last year, not because of any strong pressure by the United States, but because of John Grisham and the film, ''The Firm,'' when he tainted them a little bit, and that was not good for the fifth-largest banking center in the world, the Cayman Islands, but you are quite correct, and I think this becomes very important.

    On the other hand, while it might not make some people happy, we have just pushed the problem outside the United States. That is progress.

    Mr. HOYER. It is progress in one sense. It is caution. If you push it outside the United States and they can't cope with it outside the United States, you have a festering cancer that will ultimately infect us because we are involved with the rest of the world more and more. We are not insular.

    I think the bottom line is your international outreach, an inclusion of as many financial centers around the world. Such as the Far East and Central South America, Europe, and Russia where there is a big crime problem, as we know.

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    Mr. MORRIS. Yes, sir.

    Mr. HOYER. We read about Moscow and the burgeoning economy there, and a lot of that is underground. So, if you give a criminal a haven——

    Mr. MORRIS. That is right.

    Mr. HOYER [continuing]. It is a little bit like the Vietnam War. If you give them Hanoi and they can organize there all the time, you are just going to get your head beaten in continually, even though you may control the area.

    In any event, I think you are doing an outstanding job. I have some other questions. I will submit them for the record, Mr. Chairman, and I appreciate Mr. Morris' leadership in this agency. I know he is doing an outstanding job, and I believe this committee wants to be supportive.

    Mr. MORRIS. Thank you.

    Mr. KOLBE. I concur with that, and we thank you very much for coming today and participating.

    Mr. MORRIS. Thank you, Mr. Chairman.

    Mr. KOLBE. The subcommittee is adjourned.

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    [Questions and answers submitted for the record and budget justifications follow:]

    "The Official Committee record contains additional material here."




Opening Comments From Chairman Kolbe

    Mr. KOLBE. This meeting of the Subcommittee on Treasury, Postal Service and General Government will come to order. We're here this afternoon to hear from two agencies, to discuss the budgets of two agencies, the Federal Law Enforcement Training Center, or FLETC, and the Financial Crimes Enforcement Network.

    Under Secretary Kelly was here this morning, so I presume he is not going to be with us this afternoon. His testimony covered all the agencies today.

    I am pleased to welcome Director Rinkevich and Director Morris, who will be with us in the next part of this hearing today. This afternoon we are going to be reviewing these two arms of Treasury that carry out essential law enforcement missions to train Federal and other law enforcement officers to meet high standards of professionalism and sophistication required of police organizations in this last part of the twentieth century, and to lead Treasury's battle against money laundering, which is a key weapon in undercutting narcotics trafficking and other forms of organized crime.

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    We will begin with Director Rinkevich, about his fiscal year 1998 request for the Federal Law Enforcement Training Center. I am particularly interested in hearing about the progress of the Center and its efforts to meeting increasing demands for its services brought on by the recent surge in the number of INS officers. Following that, we will hear from Director Morris about his request for the Financial Crimes Enforcement Network. For this agency, we are very interested in hearing about the recent progress that FinCEN has been making in developing a computerized database on money laundering and financial crime and making that information available to law enforcement officers nationwide.

    I did want to mention a moment ago that Representative Kingston is not on this subcommittee any more, but he did ask me to offer a welcome on his behalf. In fact, he had planned to sit in—he still remains a member of the full committee—but was detained in his district for personal reasons.

    I look forward to hearing from our witnesses this afternoon, and now would ask if the distinguished ranking member, Mr. Hoyer, has some comments.

Opening Comments from Mr. Hoyer

    Mr. HOYER. Thank you very much, Mr. Chairman. I, too, want to welcome Mr. Rinkevich, who is the Director of FLETC. I have had the privilege of visiting with him in Georgia at this site. They do outstanding work.


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    One of the real challenges for this committee, Mr. Chairman, is to make sure that the resources that we have centralized at Glynco remain a Federal Government resource, not just a Treasury resource and not just a limited law enforcement resource, but a resource for law enforcement across the board. Because there are obviously other training centers. The FBI has its own training center. There is an inclination of almost every agency to have its own training center, and with that comes the inefficiency, obviously, of decentralization. There is always a pull to do that.

    I don't know whether you have been down to Glynco or not, Mr. Chairman——

    Mr. KOLBE. I have not been to Glynco.

    Mr. HOYER. Maybe you ought to take the opportunity, on one of our trips to Florida, on the customs perspective, maybe we could possibly stop at Glynco, just to get a feel for the synergy and the way in which the agencies utilize this centralized facility. It really is an outstanding facility and is very well-equipped. Some of the facilities were really hurting, particularly the living quarters were pretty dismal. We're getting at that problem and rehabilitating them.

    In any event, welcome, Mr. Rinkevich. We look forward to your testimony.


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    Rather than make another statement to Director Morris, let me say I had the opportunity to visit with FinCEN at their headquarters over in Virginia, and was extraordinarily impressed by the competency of their personnel and the technical capability they have in terms of tracking dollars from an individual deposit to the geometric explosion of that deposit as it goes from institution to institution, deposit to deposit.

    We heard the Secret Service testify, and in response to my question, Director Bowron indicated how closely the Secret Service works with FinCEN on all the money laundering efforts that the Secret Service has as it relates to the integrity of our currency. So I look forward to hearing their testimony as well.

    I might add that they are extraordinarily well served by one of the members of their staff who used to be a member of my staff, Miss Hafner, who not only was a member of my staff but also practiced law with me and is an outstanding attorney. She made my look good, which is very hard to do. So I welcome her here as well.

    Thank you.