Should the Treasury Report to Congress on Banking Services Provided to State Sponsors of Terrorism & Sanctioned Persons? (H.R. 1037)
Do you support or oppose this bill?
What is H.R. 1037?
(Updated May 21, 2019)
This bill — the Banking Transparency for Sanctioned Persons Act of 2019 — would require the Treasury Dept. to report semiannually on financial services provided to benefit a state sponsor of terrorism or specified sanctioned persons. Treasury may waive these reporting requirements for a foreign financial institution if: 1) the institution credibly assures Treasury that it will cease conducting transactions for such persons, or 2) the waiver is important to the national interest.
Argument in favor
The use of international banking infrastructure to move money for funding terrorism makes the world less safe for everyone. Ensuring that Congress knows when state sponsors of terrorism or specific sanctioned persons are able to use international banks will help combat this problem.
Argument opposed
The Treasury Dept. is already empowered to fight international terrorists’ and state sponsors of terrorisms’ uses of the international banking system. If anything, the U.S. is already being too aggressive about prosecuting these cases, potentially offending allies in the campaign against terrorism.
Impact
Treasury Dept.; foreign banks and financial institutions; state sponsors of terrorism; and specified sanctioned persons.
Cost of H.R. 1037
When this bill was introduced in the 115th Congress, the CBO estimated that implementing it wouldn’t impose a significant administrative burden, and thus wouldn’t have a significant cost.
Additional Info
In-Depth: Rep. Denver Riggleman (R-VA) reintroduced this bill from the 115th Congress as part of a package of four bills to address the issues of money laundering and criminal financing of terrorism. When he introduced these bills, Rep. Riggleman said:
“It is important for me to hit the ground running and start working on legislation that can attack some of the very real problems of terrorist financing and criminal money laundering. These four bills are serious measures designed to remedy real issues in our financial system and make an immediate impact.”
Last Congress, Rep. Mia Love (R-UT) introduced this bill as the Banking Transparency for Sanctioned Persons Act of 2018 (H.R. 6751). At that time, Rep. Love explained that even though U.S. banks are prohibited from doing business with a sanctioned person, banks in other countries can do business with them without penalty. Thus, she introduced this bill to put foreign banks on alert that Congress will be watching their dealings with human rights abusers and corrupt officials. Rep. Love said:
“Sharing this kind of information with Congress should be automatic, as licenses represent exemptions to our sanctions programs. Congressional oversight of sanctions is limited without visibility into the transactions Treasury is authorizing.”
This bill doesn’t have any cosponsors in the 116th Congress. Last Congress, this bill was sponsored by Rep. Mia Love (R-UT) without any cosponsors and passed the House by voice vote but didn’t receive a Senate committee vote.
Of Note: After 9/11, the U.S. and its allies launched an all-out effort to disrupt the international financial infrastructure supporting terrorists and international criminals. This campaign focused on international banks, which are the gateways of the global financial system, and relied on a handful of new authorities granted to U.S. agents in the days after 9/11. Those new authorities, signed into law by President George W. Bush, included giving Treasury Dept. officials far-reaching authority to freeze the assets and financial transactions of individuals and other entities suspected of supporting terrorism (E.O. 13224) and giving the Treasury Dept. broad powers to designate foreign jurisdictions and financial institutions as ‘primary money laundering concerns’ (under Section 311 of the PATRIOT Act).
Experts say these measures fundamentally reshaped the financial regulatory environment, sharply raising the risks for banks and other institutions engaged in suspicious activity, even unwittingly. This is due to the fact that penalties for sanctions violations can be huge in terms of fines, lost business, and reputational damage. Since 2009, U.S. federal and state authorities have been particularly rigorous in prosecuting banks, setting at least fifteen cases with fines over $100 million.
In a record settlement in 2014, France’s largest lender, BNP Paribas, pled guilty to processing billions of dollars for blacklisted Cuban, Iranian, and Sudanese entities and was fined nearly $9 billion (by far the largest such penalty in history) and lost the right to convert foreign currency into dollars for certain types of transactions for one year. In another case, in September 2005, Treasury officials labeled Banco Delta Asia a primary money laundering concern, alleging that the Macau-based bank was a “willing pawn for the North Korean government.” Within a week of Treasury’s allegation, Banco Delta Asia customers withdrew $133 million, representing 34% of the bank’s deposits, and other international banks severed ties with Pyongyang.
In recent years, the reach of U.S. sanctions has drawn criticism from some allies. French leadership criticized the U.S. prosecution of BNP Paribas as “unfair” and indicated there’d be “negative consequences” on bilateral, as well as U.S.-E.U., relations. At the time, French Finance Minister Michel Sapin said, “The extraterritoriality of American standards, linked to the use of the dollar, should drive Europe to mobilize itself to advance the use of the euro as a currency for international trade.”
Media:
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Sponsoring Rep. Denver Riggleman (R-VA) Press Release
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CBO Cost Estimate (115th Congress)
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Financial Regulation News (Coverage, 115th Congress)
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Council on Foreign Relations (CFR) Backgrounder (Context)
Summary by Lorelei Yang
(Photo Credit: iStockphoto.com / pfongabe33)
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