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09/22/99 Text: Justice Dept. Official on Russian Organized Crime Sept. 22 (Robinson testimony to House Banking Committee) The U.S. House of Representatives Committee on Banking and Financial Services continued its inquiry into alleged Russian money laundering with a hearing September 22 on the nature and threat of Russian organized crime. The main Administration witness was Assistant Attorney General James K. Robinson. Robinson first provided an overview of organized crime activities in Imperial Russia, the former Soviet Union, and the Russian Federation and the Newly Independent States (NIS), and the effect of these activities on the United States. He then discussed some of the ways in which U.S. law enforcement agencies have been attempting to combat international organized crime in general and Russian organized crime in particular. Robinson said of special interest today is the connection between Russian organized crime groups and the massive outflow of capital from the former Soviet Union, in light of media reports that Russian money has been laundered through the Bank of New York. While noting that Justice Department officials are under "severe legal restrictions" that prevent them from commenting publicly on pending criminal investigations, he did discuss some of the difficulties in investigating and prosecuting allegations such as those made in the Bank of New York case. "In order to prove a charge of money laundering under federal law," Robinson told the committee, "one of the elements we must allege and prove beyond a reasonable doubt is that at least one of the Specified Unlawful Activities (SUAs) listed in the money laundering statutes (Title 18, United States Code, Sections 1956 and 1957), gave rise to the illegal proceeds...However, only a very limited number of foreign offenses -- namely trafficking in narcotics, murder, kidnapping, robbery, extortion, destruction of property by means of explosives, and fraud against a foreign bank -- qualify as SUA's under the money laundering statute. Unless we can prove that the funds in question resulted from one of these very limited list of overseas illegal activities, we cannot bring U.S. money laundering charges against the people who moved the money into the U.S." Despite these difficulties, Robinson said, the United States continues to investigate "vigorously" signs of suspicious financial activity in U.S. banks emanating from former Soviet countries. "We do not want to become the world's repository of foreign criminal proceeds." To enhance law enforcement efforts in this area, the Justice Department official said, new legislative provisions are needed because current laws "are not keeping up" with the techniques used by international criminals to evade detection. He added that most of these legislative provisions are contained in a proposed bill - the Money Laundering Act of 1999 - which the Clinton Administration will soon submit to Congress. Among other things, Robinson said, the bill would add additional foreign crimes such as fraud to the list of permissible Specified Unlawful Activities for U.S. money laundering charges, make it easier for federal prosecutors to gain access to foreign business records, and improve the ability of enforcement agencies to prosecute money transmitters who knowingly accept criminal proceeds. Following is the text of Robinson's statement, as prepared for delivery plus attachments 1) explaining recent prosecutions of Russian organized crime; 2) provisions for obtaining legal assistance from other countries and a list of Mutual Legal Assistance Treaties (MLATs) in force or pending; and 3) a description of selected provisions of The Money Laundering Act of 1999 which the Clinton Administration will soon submit to Congress. (begin text) STATEMENT OF JAMES K. ROBINSON, ASSISTANT ATTORNEY GENERAL, CRIMINAL
DIVISION TESTIMONY OF JAMES ROBINSON SEPTEMBER 22, 1999 Chairman Leach, Ranking Member LaFalce, members of the Committee, thank you for the opportunity to discuss the nature and scope of the threat posed by Russian organized crime groups and the steps that the Department of Justice is taking to combat that threat. This morning I intend to give a brief overview of the problem of organized crime in the United States emanating from the former Soviet Union and some of the measures on which we in law enforcement have been working on to combat international organized crime in general and Russian organized crime in particular. In this context I will discuss, albeit necessarily briefly, some of the allegations that have appeared in the media regarding possible money laundering at the Bank of New York. Finally, I will close with some suggestions for legislative action which would help us in our continuing efforts to respond to international crime, especially money laundering. As stated in the Chairman's letter inviting us here today, I know that you are all interested in the recent allegations that have appeared in the press involving possible Russian money laundering at the Bank of New York. However, as the Chairman recognized and agreed with us prior to today's testimony, it would potentially prejudice the criminal investigation to discuss the details of that investigation. While I will try to give you some idea of the structure of that investigation, I will not be able to disclose the details of the investigation or what it has uncovered so far. Background - Scope of the Problem The roots of organized crime in Russia reach back to the days of the Soviet Union and even back to Imperial Russia. Among the criminals incarcerated in the vast Soviet prison system, certain hardened criminals who won the respect and obedience of their fellow inmates were termed "thieves in law." The "thieves in law" formed a loose organization across the criminal element in Russian cities, bound together more by mutual respect than by any rigid organizational structure. Since the fall of the Soviet Union, Russian criminal groups have become more open and more organized. We have identified several dozen fairly well-organized crime groups operating in Russia and other countries of the former Soviet Union. For convenience I will refer collectively to these groups as "Russian organized crime" although in fact they originate and often operate simultaneously in many countries of the former Soviet bloc. Their activities run the gamut of traditional organized crime activities, from protection rackets to prostitution to white collar fraud to extortion to murder for hire. These groups have a much more hierarchical structure than the thieves in law, with ordinary members assigned to "brigades" whose leaders in turn answer to the bosses of the organization. Some of these groups have hundreds of members. Russian organized crime groups have seized upon the opportunities offered by Russia's brand of "Wild West" capitalism, and they have in some cases forged close ties with corrupt Russian businessmen. In addition, organized crime groups in Russia have been implicated in the corruption of current and former Russian government officials, a problem that is certainly not unique to Russia but that appears to be a serious problem there. Russian organized crime groups provide corrupt businessmen and government officials with protection, muscle, assassination teams and lines of communication to other groups of criminals, government officials and businessmen. The president's International Crime Control Strategy of May of last year recognized that: Increasingly powerful organized crime groups in Russia, the other Newly Independent States of the former Soviet Union (NIS), and Central and Eastern Europe have infiltrated many key industries. These syndicates have demonstrated a willingness to use violence, corruption and other illicit tactics to maintain and expand their criminal empires. I think it is fair to say that organized crime groups in Russia play a direct or indirect role in much of the criminal activity that unfortunately pervades almost all aspects of Russian life and society today. Russian organized crime is beginning to make itself felt abroad as well. At the present time much of the so-called "Russian" organized crime in the U.S. is being disrupted through our proactive investigations and prosecutions, or is at best organized only at the local level. However, we are beginning to see evidence that the larger Russian organized crime groups in the former Soviet Union are deliberately extending the scope of their illegal activities to other countries including the United States, as well as to Europe and a variety of offshore money centers. Of particular interest to today's discussion is the fact that Russian organized crime groups may be playing a role in the massive outflow of capital from the former Soviet Union. Allow me to explain. We know that, since the collapse of the Soviet Union, billions of dollars have flowed out of Russia every year to foreign bank accounts. These outflows resist comprehensive analysis. Some of the activity may result from Russian individuals and businesses sending their legitimate assets abroad for safe keeping, or from their conducting business with western companies and paying for western goods. Neither of these activities are per se illegal under U.S. law. However, this activity could violate Russian currency, tax, or other laws. Russian organized crime groups play two important roles in this capital flight out of Russia. First, Russian organized crime groups use western financial institutions to launder the proceeds of their own illegal activities in Russia. Second, we believe that Russian organized crime groups may assist Russian businesses and individuals to move their own assets out of Russia in a manner that evades the scrutiny of Russian law enforcement and tax officials. Both of these forms of activity are extremely dangerous in that they enhance the power of Russian organized crime and weaken the authority of and respect for the law in Russia. Furthermore, the flow into the U.S. and other countries of large amounts of Russian money connected with illegal activities threatens to undermine and/or corrupt financial institutions and markets in these countries. We do not want to become the world's repository of foreign criminal proceeds. Before I detail our strategy against Russian money laundering and Russian organized crime generally, I would like to make a point about the difficulties that we face in prosecuting Russian organized crime money laundering cases of this sort in the U.S. In order to prove a charge of money laundering under federal law, one of the elements we must allege and prove beyond a reasonable doubt is that at least one of the Specified Unlawful Activities (SUAs) listed in the money laundering statutes, Title 18, United States Code, Sections 1956 and 1957, gave rise to the illegal proceeds. The money laundering statute lists dozens of federal crimes which can serve as the predicate SUA, and we have found the money laundering laws to be powerful tools for attacking organized crime activity occurring within the U.S. However, only a very limited number of foreign offenses, namely: trafficking in narcotics, murder, kidnapping, robbery, extortion, destruction of property by means of explosives, and fraud against a foreign bank, qualify as SUA's under the money laundering statute. Unless we can prove that the funds in question resulted from one of these very limited list of overseas illegal activities, we cannot bring U.S. money laundering charges against the people who moved the money into the U.S. So, for example, under current law, we would be precluded from bringing money laundering charges in a situation where a corrupt foreign government official embezzled foreign government funds and laundered them through a U.S. bank. In such situations, of course, we also consider the possibility of bringing other federal charges which may apply to the activity, such as the interstate transportation of stolen property. As a practical matter, our prosecutions of possible Russian money laundering have also been hampered by the considerable difficulty in obtaining evidence from Russia and other countries that would show these funds to have been generated by the particular offenses specified in the money laundering statutes. This is a continuing problem where we are constantly trying to improve our cooperation with other countries. Despite these difficulties, we continue to investigate vigorously signs of suspicious financial activity in our banks emanating from former Soviet bloc countries. Strategy Our strategy in attacking Russian organized crime is embedded in the president's comprehensive International Crime Control Strategy issued in May of 1998. That strategy, in turn, derives from Presidential Decision Directive 42, which designated international organized crime as a threat to national security, and in which the president ordered U.S. law enforcement, diplomatic and intelligence agencies to intensify their international organized crime-fighting efforts. The International Crime Control Strategy sets out eight broad goals, such as countering international financial crime and responding to emerging threats such as high-tech and computer-related crime, and proposes various steps to achieve them, including possible new legislative provisions. In the area of international organized crime the Department has worked to consult and coordinate more closely with other agencies, including the Departments of State and Treasury and the intelligence community, to assess the threat posed by particular organized crime groups and develop long-term strategies to combat those groups. One aspect of this cooperation is the writing of the classified comprehensive threat assessment called for in the International Crime Control Strategy, which is the joint product of the intelligence and law enforcement agencies. In general, the Department of Justice has recognized that other organs of the executive branch have extensive experience and a wealth of information on overseas crime and law enforcement issues, and we are moving to take full advantage of this resource. In addition, the Department and other law enforcement agencies are aggressively expanding our own presence in other countries and building new relationships with foreign governments. U.S. law enforcement officials posted overseas work closely with foreign counterparts to investigate crimes against Americans and American businesses committed overseas. The FBI has 35 overseas offices and is considering establishing several new offices. To complement the increasing number of U.S. law enforcement personnel overseas, the Department of Justice also is seeking to augment its cadre of overseas attorneys. Their role includes facilitating requests for mutual legal assistance and extradition, providing substantive legal guidance on international law enforcement and treaty matters, and increasing cooperation between U.S. and foreign prosecutors. Currently, the Department has attorneys in Brussels, Paris, Rome, Mexico City, Geneva and London. In addition, the Department has stationed Resident Legal Advisors, who provide training and technical assistance to foreign prosecutors, judges and police in a number of other countries, including Russia, Ukraine, Latvia and Georgia. These measures complement an aggressive policy of investigating and prosecuting Russian organized crime activity in the United States. As of December 1998, the FBI alone had approximately 260 pending investigations targeting Russian and Eastern European criminal enterprises. The cases resulting from these investigations are prosecuted by highly experienced prosecutors in the twenty-four Organized Crime Strike Forces attached to U.S. Attorneys Offices around the nation. The Organized Crime and Racketeering Section in the Criminal Division in Washington coordinates both our investigative and prosecution efforts. Our work in this area has already scored some notable successes, as in the conviction in 1996 on extortion charges in Brooklyn of Vyacheslav Kirillovich Ivankov, at that time the most powerful Russian organized crime leader in the United States. Currently, Organized Crime Strike Forces in every major city from New York and Philadelphia to San Francisco and Los Angeles are engaged in significant Russian organized crime investigations and prosecutions, including the ongoing Bank of New York inquiry. The Ivankov and other recent cases are described in more detail in exhibit A attached to my testimony. In the past few years we have seen with increasing frequency suspicious financial transactions emanating from the countries of the former Soviet Union, which naturally raise the question of money laundering. The Bank Secrecy Act and the money laundering provisions of the Criminal Code are our major weapons in the war against the laundering of proceeds of organized crime. The three most frequently used statutes are sections 1956 and 1957 of Title 18, and the anti-structuring provision found in 5324 of Title 31. This latter statute is used to prosecute persons who structure or "smurf" currency into financial institutions in a manner designed to avoid the filing of a Currency Transaction Report. The numbers of defendants charged under these statutes for the past three years are as follows: Year 18 USC 1956 18 USC 1957 31 USC 5324 FY1996 1627 341 170 As you can see, over the past three years, the Department of Justice has charged and prosecuted more than 2,000 defendants each year for violations of these money laundering statutes. Approximately 50 percent of these cases involved the proceeds of drug trafficking. The remainder involve the proceeds of white collar crimes such as health care fraud and telemarketing fraud, as well as the proceeds of organized crime activity such as prostitution, gambling, extortion and interstate transportation of stolen property. While the Department uses the money laundering statutes to prosecute the movements of illegal proceeds, when we have probable cause we also use our forfeiture statutes to forfeit the proceeds of criminal activity and the property used to facilitate criminal activity. Indeed, because the money launderer is often a fugitive, or a person whose identity remains unknown, an effective way to enforce the money laundering laws is often to confiscate the money. Before I address the question of additional assistance and legislative proposals that we offer for your consideration as important aids in the fight against Russian organized crime, let me briefly address the ongoing inquiry into possible money laundering transactions at the Bank of New York. In most cases, as you know, the Department faces a number of severe legal restrictions which prevent us from commenting publicly on pending criminal investigations. In addition, we are sensitive to a number of significant policy considerations which make us extremely reluctant to make any public comment on a case even where we arguably have the legal authority to do so. Among these are the need to protect the identity and safety of witnesses and prevent the subjects of the inquiry from learning the progress of the investigation against them. Premature disclosure of the investigation can cause subjects of the investigation to destroy, alter and manufacture evidence and deter potential witnesses from coming forward. Also present is the need to prevent the unfair damage to reputations that would result if we were to prematurely accuse persons of crimes. In addition, especially in complex, fast-moving matters, there is the very real danger that any comment that I might make about the investigation on Day 1 may be disproved or significantly altered by new evidence on Day 2. To make matters worse, the new evidence disproving my earlier comment might be obtained through the grand jury or other channels which legally restrict any disclosure of the new information. Under such circumstances, I would be forced to stand idly by while my earlier comment, now proven incorrect by subsequently obtained evidence, continued to contribute to and maintain a false impression in the minds of policymakers and the American public. With these restrictions in mind, I can tell you that the inquiry into the suspicious transactions at the Bank of New York is being conducted by agents from the FBI's New York office and prosecutors from the U.S. Attorney's Office for the Southern District of New York. Analysts from the Federal Reserve Bank of New York and the Internal Revenue Service are working with the investigative team and are bound by the same nondisclosure rules that bind the prosecutors and FBI agents. This has been and will continue to be a complex and painstaking investigation. Significant investigative resources have been and will continue to be expended in an effort to ensure that we uncover the full story behind those transactions and bring any merited criminal charges. Last week, as part of the inquiry, I, other prosecutors and agents, and representatives of the State and Treasury Departments met with a team of Russian law enforcement officials in Washington. We discussed ways to cooperate with each other consistent with applicable law and our respective law enforcement policies and practices, and we agreed on improved procedures for requesting assistance as necessary. As I am sure you realize, given the fact that much of activity giving rise to these transactions occurred in Russia, we have no choice but to request extensive cooperation from the Russians if we are to discover the true facts of this matter. A brief description of the means by which we seek to obtain legal assistance from other countries is attached as exhibit B to my remarks. Finally, while the inquiry is still in progress, we will be unable to make any definitive statements concerning the facts of the case. Measures While we are making great progress in dealing with Russian organized crime, the laws which we use to wage this effort, particularly in the area of money laundering, are not keeping up with developments in the techniques of international crimes being used by the criminals. With the addition of some new legislative provisions, our efforts in this fight would be much enhanced. Most of these legislative provisions are contained in a bill that will shortly be submitted to Congress as the Money Laundering Act of 1999. These provisions, among other things, would add additional foreign crimes such as fraud to the list of permissible SUAs for U.S. money laundering charges, make it easier for federal prosecutors to gain access to foreign business records, and enhance our ability to prosecute money transmitters who knowingly accept criminal proceeds. In this regard, I understand that you, Mr. Chairman, are preparing legislation to achieve many of these objectives. We welcome the tenor of your legislation, as we understand it, and we look forward to working with you on these issues. A more detailed description of the provisions of the Money Laundering Act of 1999 is attached as exhibit C to my testimony. In addition, last year, the Administration sent to Congress the International Crime Control Act of 1998, a package of more than 50 new legislative measures to help us fight international crime and to implement the objectives of the International Crime Control Strategy. The package included measures that would provide new authority to investigate and punish acts of violence committed against U.S. nationals abroad; to strengthen our air, land, and sea border security; to deny safe haven to international criminals; to seize and forfeit the assets of international criminals; to respond to emerging international crime problems such as international computer crimes; and to promote global cooperation. A number of the provisions in the International Crime Control Act were passed by the Senate last year. We plan to resubmit them to Congress again this year as part of the Administration's crime bill, and I would urge the Members here to pass these important and much-needed provisions that will give law enforcement the tools we need to fight international crime. As I have noted, we also are seeking to expand the FBI's Legal Attache [Legats] program and the stationing overseas of additional Department of Justice attorneys. In many key countries, such as Russia, FBI Legats are stretched very thin and the Justice Department has no operational presence at all. We feel strongly that additional FBI Legats and Justice Department attorneys would greatly enhance our effective cooperation with those countries. While many U.S. governmental bodies contribute to U.S. law enforcement cooperation with other countries, at the messy day-to-day, operational level, where actual cases are made, there is simply no substitute for "cop to cop" and "prosecutor to prosecutor" links between affected nations. We therefore would ask for your support of these crucial programs. Mr. Chairman, for many years now the Department has been engaged in the struggle against Russian organized crime, both at home and abroad. We are still in a steep learning curve, and clearly much remains to be done. However I am confident that, with your help, we will strike heavy blows against the power of Russian organized crime wherever it is found and succeed in driving its influence from our shores. Thank you, I would now welcome the Committee's questions. Exhibit A Recent Prosecutions of Russian Organized Crime 1. United States v. Vyacheslav Kirillovich Ivankov, prosecuted in the United States District Court for the Eastern District of New York, involved a prosecution of a high ranking organized crime figure who emigrated from Russia to the United States in late 1989. Ivankov was convicted of violating the Hobbs Act in relation to his exploitation of his fearful reputation as an organized crime figure to attempt to extort money from other immigrants from Russia. The facts of the case presented at trial showed that a banker who had taken money from the now defunct Charra bank in Russia for investment in the United States employed Ivankov and his organization to collect more than two million dollars from these immigrants after they had invested the money in losing ventures. Ivankov was sentenced to serve approximately 10 years in prison as a result of his conviction. 2. United States v. Alex Mishulovich, et al., being prosecuted in the Northern District of Illinois, involves an allegation that the defendants obtained fraudulent visas to import Latvian women to work as prostitutes in Chicago area strip tease clubs. The defendants are charged with conspiracy, peonage and visa fraud. Two defendants have entered guilty pleas to charges of visa fraud, one defendant is a fugitive and the other two defendants are currently scheduled for trial on November 29, 1999. 3. United States v. Oleg Kirillov, et al., prosecuted in the Southern District of Florida, involved interstate transportation of stolen money and drug trafficking from South America through the United States to Eastern Europe by a Russian organized crime group from Nizhny-Novgorod, Russia. This group, led by Kirillov, had relationships with the Solntsevskaya and other major Russian organized crime groups, as well as Colombian drug gangs. The defendants were convicted of all charges in April 1999 and are awaiting sentencing. 4. United States v. Alexander Lushtak, being prosecuted in the Northern District of California, alleges a multi-million dollar investment fraud scheme and the subsequent laundering of nearly two million dollars of the proceeds of that scheme by depositing moneys involved in the fraud in an account at the Bank of New York. The indictment in the case was returned on September 1, 1999. A trial date has not yet been set. 5. Operation Gas Gangsters was an investigative project in which a series of ten indictments were returned in the Central District of California resulting in more than 40 convictions of various persons associated with Armenian ethnic organized crime enterprises. The defendants in these various cases participated in a scheme involving evasion of diesel fuel excise taxes. This scheme was first uncovered in prosecutions involving the Colombo LCN family in the 1980's. 6. United States v. Dimitri Gufield, et al., a prosecution being conducted in the Eastern District of New York, is a RICO case in which kidnapping, prostitution, Medicaid fraud, extortion, arson, by members of an organization known as "the Gufield/Kutsenko brigade," is alleged. All of the defendants entered guilty pleas. The leader of the brigade, Dimitri Gufield pled guilty to arson, conspiracy to extort and the use of violence in aid of racketeering. Sentencing has not yet been set, but preliminary sentencing guidelines calculations indicate lengthy prison sentences ranging up to twenty years in prison. 7. United States v. Dominick Dionisio, et al., is a case being prosecuted in the Eastern District of New York, in which two persons alleged to be associated with the Colombo family of La Cosa Nostra and an alleged member of the "Bor" Russian organized crime group are alleged to have operated a multi-million dollar investment fraud and to have laundered the proceeds of the scheme. The indictment was returned in June 1999, but no trial date has yet been set. 8. United States v. Alexander Spitchenko, et al., is an ongoing prosecution in the Southern District of New York of members of a Russian organized crime brigade involved in extortion, murder, money laundering, and drug trafficking and controlled by the highest levels of Russian organized crime. Exhibit B Obtaining International Mutual Legal Assistance As in any major investigation with international aspects, it will be essential to obtain swift, effective international cooperation from foreign governments. Right now, there are several legal mechanisms through which the United States may seek mutual legal assistance in criminal matters from a foreign country. Three such legal tools that are frequently utilized are (1) mutual legal assistance treaties (MLATs), (2) executive agreements, and (3) formal requests pursuant to letters rogatory. In addition, of course, law enforcement agencies can obtain international cooperation through their attaches posted at the various U.S. Embassies overseas, through foreign nations' liaison officer posted to foreign Embassies in Washington, or via INTERPOL. Mutual Legal Assistance Treaties Some of the most effective and efficient international cooperation is achieved under a mutual legal assistance treaty (MLAT). Over the past twenty years, the MLAT channel has proven very useful in transnational financial investigations, such as the BCCI investigation, the investigation of Banco Nationale de Lavoro (BNL), and the money laundering aspects of the "Pizza Connection" heroin trafficking case. The United States currently has MLATs in force with 26 countries, including several foreign countries that may have evidence relevant to Russian money laundering and Russian organized crime. These include Switzerland, Antigua, and the United Kingdom. (A complete list of the 26 MLAT countries is attached hereto). There is no MLAT in force between the U.S. and Russia yet, but an MLAT with Russia was signed on June 17, 1999, and it should be submitted to the Senate for advice and consent soon. Under the MLATs, each party is obliged to assist the other in the investigation, prosecution, and other proceedings related to criminal matters. Assistance may include taking testimony or statements, obtaining documents or items, serving documents, transferring persons in custody, conducting searches and seizures, assistance in forfeiture proceedings (and in the repatriation of all or part of confiscated assets, in accordance with the laws of the Party having custody over them), and any other assistance not prohibited by the Requested State's laws. MLATs usually provide for assistance without regard to whether the matter under investigation would be a crime in both countries, and are especially helpful in assuring that the evidence produced is in a form that is admissible at trial in the Requesting State. Typical provisions found in MLATs include: (1) a designation of a "Central Authority" or implementing official, in each State, permitting direct communication between law enforcement communities for purposes of the MLAT; (2) a limited number of agreed bases for denying assistance (e.g., a request related to a political or military offense or a request that would prejudice the sovereignty, security or similar essential interests of the Requested State); and (3) a description of the form and contents of a request, the manner in which requests shall be executed, and the costs that each side will assume in connection with NEAT matters. The MLATs usually specify clearly upon request, the Requesting, State may use or reveal the evidence produced pursuant to NEAT requests only for the purpose for which it was requested. MLATs have proven to be an especially useful mechanism for processing a large number of requests for law enforcement assistance in complex financial investigations. Executive Agreements on Mutual Assistance Another means by which the United States may obtain international legal assistance is via a bilateral executive agreement. As I indicated, there is no MLAT in force with Russia, but there is an Agreement Between the Government of the United States of America and the Government of the Russian Federation on Cooperation in Criminal Law Matters, signed June 30, 1995, which entered into force in February, 1996. This U.S.-Russia Agreement is an interim arrangement that is intended to serve as a legal vehicle for mutual legal assistance until such time as the bilateral MLAT, signed on June 17, 1999, enters into force. The Agreement somewhat resembles an MLAT, in that it provides for assistance in obtaining evidence in a form admissible at trial. However, the Agreement is much narrower in scope than an MLAT, as the Agreement only applies to nine categories of crime listed in an Annex attached to the Agreement. Russian and U.S. authorities have exchanged diplomatic notes that expand the list of covered offenses to include tax and customs offenses. Once the MLAT enters into force and replaces the Agreement, the offenses for which assistance may be sought will greatly expand to include any offense that is an offense in both the United States and in Russia. Article 1 of the executive agreement provides that the Central Authority for the United States is the Attorney General and the Central Authority for Russia is the Office of the Procurator General. While the article provides further that the Central Authorities may communicate directly for purposes of the executive agreement, as a practical matter, the Russian authorities have failed to designate and consistently maintain a single point-of-contact with whom U.S. authorities can cooperate. U.S. authorities have brought this to the attention of high-level Russian authorities, who have acknowledged this as a problem and stated that the Procurator General's Office has been considering establishing an office, similar to our Office of International Affairs in the Criminal Division, in order to alleviate this problem and enhance the level of our cooperation. Currently, there are numerous requests for assistance pending from Russia to the United States, and from the United States to Russia. The majority of the executive agreement requests currently pending involve various fraud offenses and seek such assistance as requests for bank records, company documents, and interviews of witnesses. Letters rogatory In the absence of a bilateral treaty or agreement, the United States may seek assistance from a foreign country through submission of a letter rogatory. A letter rogatory essentially is a formal request for legal assistance from a judicial authority in one country to a judicial authority in another country. Typically, letters rogatory are transmitted via the diplomatic channel, which can be a slow and time-consuming process. The Requested State has no obligation to provide assistance, but, as a matter of comity, generally does so if possible under its domestic laws. The letters rogatory process enables us to seek evidence from virtually any country in the world for use in an investigation, trial or proceeding in the U.S. UNITED STATES MUTUAL LEGAL ASSISTANCE TREATIES (MLATs) - September 17,1999 MLAT with (entity): Signed; Entered into Force; Citation (if
any): The U.S.-Cayman Island MLAT was extended to Anguilla, the British Virgin Islands, and the Turks and Caicos Islands on Nov. 9, 1990, and to Montserrat on April 26, 1991. Several additional MLATs have been signed but are not yet in force, with: South Africa: Sept. 16, 1999 [BOLDFACE indicates a new treaty approved by the U.S. Senate on October 21, 1998.] Exhibit C Description of Selected Provisions of The Money Laundering Act of 1999 Stopping the flow of cash drug proceeds out of the United States 1. Expand the Bank Secrecy Act to make bulk cash smuggling of amounts exceeding $10,000 a crime, and provide for confiscation of the smuggled currency as part of the penalty. We believe this is an enormously important provision to the law enforcement community, and will do all possible to work with this Committee to enact this provision. 2. Make it an offense for a currency courier, who knows that the money is unlawfully derived, to transport more than $10,000 in currency in interstate commerce. 3. Enhance our ability to prosecute money transmitters who knowingly accept criminal proceeds. 4. Enact penalties for violating "geographic targeting orders" that require the filing, in specified geographic areas, of reports by money transmitters and vendors of money orders when cash transactions exceed a threshold amount. Holding foreign banks and other entities liable 5. Enact a long-arm statute allowing federal courts to exercise jurisdiction over foreign banks and other entities that violate the federal money laundering laws by conducting transactions in the United States so that they may be subject to civil penalties. Thwarting "black market" transactions 6. Require persons who purchase drug dollars on the black market to prove -- when they challenge our attempts to confiscate the money -- that they were bona fide purchasers for value with no reason to know that the dollars were derived from unlawful activity. 7. Give federal prosecutors greater access to foreign business records that may be used to trace the money sold in specified circumstances by providing sanctions for those who hide behind the bank secrecy laws of other countries. 8. Close a loophole in the federal money laundering statute, 18 U.S.C. 1956, by making it clear that it applies to both parts of a parallel transaction when one part involves criminal proceeds. For example, if a person sends drug money from account A to account B, and then replenishes account A with the same amount of money from account C, the latter transaction would constitute a money laundering offense. Confiscating the assets of criminal defendants 9. Bar fugitives from contesting confiscation orders unless they surrender on criminal charges. 10. Authorize federal courts to order the repatriation of criminal proceeds from abroad, and authorize pre-trial restraint of all property subject to criminal forfeiture. 11. Bar incarcerated prisoners from waiting until the statute of limitations has run to file challenges to confiscation orders. Prisoners should have to file their challenges within two years after the orders are final. Encouraging cooperation with foreign governments 12. Provide for freezing of U.S. assets of defendants who have been arrested in a foreign country, and for the confiscation of the proceeds of specified foreign crimes under federal law. 13. Create a procedure for enforcing foreign confiscation orders against the property of foreign criminals when the property is found in the United States. 14. Make it a crime to launder the proceeds of additional specified foreign crimes in the United States. 15. Authorize the sharing of confiscated property with co-operating foreign governments in cases where that authority does not currently exist. (end text)
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