AntiMoneyLaundering Plan Hit
Financial Service Firms Call Treasury's Proposed Rules Too Strict

By Jill Dutt
Washington Post Staff Writer

NEW YORK, July 28—Treasury officials are treading gingerly as they push
forward on a set of rule proposals that would, for the first time, subject
about 158,000 nonbank financial service providers to federal oversight.

In an effort to crack down on illegal money laundering, the Treasury
Department proposed in May that sellers of money orders and traveler's
checks, as well as money transmitters and checkcashing and currency
exchange firms, be required to register with the government. The firms,
which often serve immigrants who have no bank accounts, also would be
required to keep tabs on any suspicious customer activity, including
asking for photo identification and filing reports to Treasury on all
cash transactions of more than $750.

Although money service providers say they support the goal of reducing
illegal money transfers, several questioned at a meeting here whether the
proposals were too stringent. "I haven't seen where the $750 limit has been
justified," said David T. Wittman, vice president for compliance at Western
Union. Wittman added that the costs of training and supervising thousands of
agents in the effort to have them fill out the required forms would be
"significant."

Western Union handled 81 percent of the money wired overseas last year,
according to a study released today that was prepared by Coopers & Lybrand
LLP for the Treasury Department. The $10.8 billion moneytransmitting
business is the most profitable and fastestgrowing of the various financial
services targeted by the proposals. In total, the firms that would be subject
to Treasury's new rules handled about $200 billion in transactions last year,
according to the study.

"We support this industry and we want it to flourish," Raymond W. Kelly,
Treasury's undersecretary for enforcement, said during a break in today's
hearing, one of four the department is holding to field industry comments.
Treasury also extended by 40 days, until Sept. 30, the deadline for written
comments on the rules.

Kelly denied charges that the rules would hurt immigrants disproportionately,
noting that the average overseas money transfer is just $300 well below
the proposed reporting limit. Although several industry officials complained
the $750 limit is too low, Kelly said "at this junction, the $750 threshold
seems reasonable."

Treasury officials suggested the $750 level because it worked well in a joint
federal, state and local enforcement operation in New York City that
eventually targeted 22 money transmitters suspected of wiring drug money to
Colombia. The operation, launched last August, required the transmitters to
ask for identification and to report any suspicious activity and all cash
transactions of more than $750.

That operation initially targeted a dozen money transmitters; of those 12,
three have stopped sending funds to Colombia, Treasury said. Three people
have been arrested and others are under investigation for trying to structure
transactions to avoid the $750 limit. Meanwhile, Treasury has seized about
$50 million in illegal cash elsewhere on the Eastern Seaboard in the past
year, about four times as much as in previous periods, citing the New York
City operation for forcing money launderers to resort to more risky bulk
currency smuggling to move their funds.

Although the new rules might seem overly strict for some remote communities,
Stanley E. Morris, director of Treasury's financial crimes enforcement
network, said the rules should be applied evenly throughout the United States
to prevent launderers from simply moving their operations to another city or
state to escape the added oversight.

© Copyright 1997 The Washington Post Company