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> Understanding the Russian MafiaTreasury Secretary Lawrence H. Summers: Testimony
> Before the House Banking CommitteeSeptember 21, 1999
>
> Chairman Leach, Ranking Member LaFalce, Members of the Committee, I welcome this
> opportunity to discuss our financial policies towards Russia in light of recent
> reports and allegations regarding corruption, capital flight, and money
> laundering. Given the crucial law enforcement challenges these issues pose, and
> given our significant national security and economic interests in Russia, it is
> certainly timely for this Committee to hold a hearing on these matters.
>
> Let me say at the outset, in the wake of recent allegations of money laundering
> through a U.S. bank, that safeguarding the integrity of the American financial
> system is an absolute priority for this Administration. We are committed to the
> full investigation of these allegations, to the prosecution of any crimes
> uncovered, and to strengthening our capacity to combat future abuses. We will
> continue to press Russia and other countries to put in place the laws and
> enforcement capacity to combat money laundering and other cross-border crimes.
>
> I would like to cover four topics in my remarks this morning: first, the broad
> context of our economic and financial engagement with Russia; second, Russian
> corruption, capital flight, and international money laundering; third, our
> financial policy towards Russia going forward; and fourth, our policies
> generally to combat global corruption and money laundering.
>
> I. Russia’s Economic Transition and American Engagement
>
> It would be difficult to overestimate the seriousness of the problems facing
> Russia today in the wake of the monetary and financial collapse of August 1998 –
> a collapse that was itself the consequence of long-standing Russian failures to
> finally establish and implement comprehensive reforms against the background of
> a deterioration in the international economic environment. These difficulties
> are of grave concern to the United States and will shape the terms of our
> engagement with Russia in the months ahead. But even as we recognize the
> enormity of Russia’s problems, it is important to see them in their broader
> context.
>
> After the collapse of the Soviet Union in 1991, Russia faced four difficult
> transitions: the transition from empire to state; the transition from
> totalitarianism to democracy; the transition from the law of force to the force
> of law; and the transition from a command economy to a market economy. The
> American people had then, and continue to have, an enormous stake in Russia’s
> making these transitions peacefully and successfully:
>
> It is a stake that derives from our national security interests, made all the
> more important by the large number of nuclear weapons that remain on Russian
> soil.
>
> It is a stake that derives from our interest in a strong and stable global
> economy and international financial system in which Russia becomes a healthy
> participant.
>
> And it is a stake that derives from our interest in protecting the integrity of
> our markets and our financial institutions from the scourge of corruption and
> money laundering – be it in Russia or any other country.
>
> The United States has pursued these critical interests bilaterally in a number
> of ways: through far-reaching arms control and military cooperation with Russia;
> through extensive formal and informal mechanisms and contacts; through bilateral
> aid programs; and through direct linkages between American and Russian law
> enforcement agencies.
>
> Along with technical assistance, the aspect of Russia’s transformation in which
> the Treasury Department has been, and continues to be, most heavily involved is
> Russia’s interaction with the international financial institutions. We have
> supported that interaction because of our assessment of the strong U.S. interest
> in Russia’s constructive evolution.
>
> Conditioned financial support
>
> From the start, the overarching economic objective of the international
> financial institutions in their operations in Russia has been to help Russia
> develop the policies and institutions of a functioning market economy as the
> route to stability and growth, an objective that the United States has supported
> as the major shareholder in these institutions. Economic instability in Russia
> raises important concerns for our national security, given Russia’s pivotal and
> continuing role with respect to nuclear security, the battle against terrorism,
> the stability of Eurasia, and conflict resolution in global hot spots like the
> Balkans.
>
> The crucial tool of the international financial institutions to support economic
> reform in Russia has been conditioned finance. At every step, we have been
> clear-headed in endeavoring to strike a careful balance:
>
> Between conditionality that requires what is best economically and is also
> politically realistic.
>
> Between the desire to effect meaningful reform and the need to avoid excessive
> intrusion in decisions that Russia must ultimately embrace for itself.
>
> Between the goal of creating investor confidence in Russia and attracting
> foreign capital and the need to avoid moral hazard problems that would result
> from large amounts of unconditional finance.
>
> Between the goal of dismantling the apparatus of communism and the need to
> cushion the impacts of the process of change.
>
> Our support for official financing for Russia has been grounded in the
> application of conditionality and in the recognition that we cannot want
> successful market reform in Russia more than Russia’s government and its people
> do. America’s interest lies in making reasonable, informed judgments on what we
> believe to be the right direction for Russia, and in conveying these views
> clearly to Russia’s government and its people.
>
> Providing assistance in a way that puts the integrity of the international
> financial institutions at risk serves neither American interests, nor those of
> Russia or the international community. It is critical that countries respect the
> conditions of programs reached through negotiations with the International
> Monetary Fund or World Bank. The IMF and World Bank must hold Russia accountable
> for its performance, both in implementing agreed-upon policy actions and in
> ensuring that multilateral financing is used for its intended purposes.
>
> A review of the record of lending to Russia by the IMF and World Bank shows that
> these institutions have tailored their support to the circumstances. For
> example, in 1996, the IMF took the then-unprecedented step of introducing
> monthly monitoring of Russian policy performance in its 1996 program. In
> addition, the IMF withheld financing when previously agreed-upon conditions were
> not met.
>
> In 1996, monthly IMF tranches were delayed eight times, including twice before
> the summer elections, and two tranches were never disbursed.
>
> Under Russia’s 1996-97 EFF program, actual disbursements were $1.6 billion, or
> 28%, less than originally planned because of shortcomings in Russian policy
> performance.
>
> After the August 1998 monetary and financial collapse, the IMF ceased lending to
> Russia for a year until Russia began implementing a new economic program focused
> on restoring financial stability.
>
> Similar failures to follow through on policy commitments have also constrained
> World Bank lending to Russia.
>
> Russia’s record since 1992
>
> No one, here in the United States and certainly in Russia, can be satisfied with
> developments in Russia during the past decade. Growth has been stagnant,
> corruption has been all too prevalent, and a law-based market economy has not
> been established. Since August 1998, Russia has struggled, albeit with more
> success than most expected, to avoid the perils of hyperinflation and economic
> collapse. There have been some positive signs; for example, industrial
> production in August was 16% above its level a year ago. But the fact remains
> that the Russian government has failed to implement some of the most basic and
> critical reforms, and enormous challenges remain.
>
> At the same time, the record also demonstrates that Russia today is in many ways
> a very different country than it was a decade ago:
>
> Russian nuclear weapons are no longer targeted at our cities; 1,500 nuclear
> warheads have been deactivated, and over 300 bombers, silos, and launchers have
> been destroyed.
>
> Russian military spending has dropped dramatically in real terms to about one
> tenth of its Soviet-era peak in 1988; Russian troops have been withdrawn from
> the Baltics and Eastern Europe; and Russians are working side-by-side with NATO
> in the Balkans.
>
> Russia is now more open; Russians can learn what happens in the markets and
> societies beyond their borders, have access to the ideas and products that the
> world has to offer, and have unprecedented personal freedoms, even if the
> capacity to exercise civil liberties is far from perfect.
>
> With 70% of the Russian economy’s output now generated by the private sector,
> the communist system has been essentially dismantled and the state’s tentacles
> of central control have been largely dislodged.
>
> Economic distortions created by energy prices that were once held far below
> world prices and the easy availability of subsidized credits have been greatly
> reduced.
>
> Russia’s performance reflects the policies that Russia has chosen. If not all
> our goals for Russia have been fulfilled, it is certainly equally true that not
> all the fears for Russia that were common a decade ago – or even a year ago –
> have materialized.
>
> As we look at the current environment in Russia, we must be aware that Russia
> will shape its own destiny. What is most constructive going forward is a focus
> on pursuing policies toward Russia based on our national interests.
>
> II. Corruption, Capital Flight, and International Money Laundering in Russia
>
> Mr. Chairman, let me turn now to the separate, though often interlocking, issues
> of corruption, capital flight, and international money laundering, which have
> been critically important to our policy toward Russia for many years. Our
> longstanding concern about these problems has only been further underlined by
> the recent investigations.
>
> Corruption
>
> Corruption is a problem of great concern for the United States, whether in
> Russia or elsewhere in the world. Those who disobey Russian laws are unlikely to
> demonstrate any more deference to the laws of the United States or any other
> country. This gives us a deep interest in doing as much as we feasibly can to
> encourage the development of a fully functioning rule of law in Russia.
>
> To be sure, Russia inherited profound corruption problems from the Soviet era.
> In the 1980s and early 1990s, for example, the Soviet system allowed the elite
> to profit from its access to cheap commodities and credits and to foreign
> markets. As Anders Aslund has pointed out, in 1990 the state-controlled price of
> a ton of crude oil was the same as the free-market price of a pack of Marlboros
> in Moscow. This distortion created opportunities for quick fortunes to be made
> by those able to purchase oil domestically and resell it overseas. Aslund has
> estimated that at least 79 percent of GDP was lost in this type of distortion in
> 1992. These flaws in the economic system that Russia inherited from the Soviet
> Union explain why a crucial piece of our efforts to combat corruption in Russia
> has been to push for the elimination of subsidies and price controls. An equally
> important concern has been Russia’s failure to establish the rule of law and the
> inability of Russians to rely on a fair enforcement of laws and contracts. In
> policies toward public and private enterprises, in the collection of taxes, and
> in the formulation and implementation of banking regulation, there have been far
> too many instances of corruption in which private interests, rather than the
> public interest, have been protected.
>
> A particularly problematic result of Russia’s failure to establish the rule of
> law and a credible law enforcement system has been the growth of organized crime
> during the past decade. Russian organized crime has emerged as a powerful
> corrupting force – a force that challenges Russia’s political and economic
> development. It has also become a global threat, one that poses a challenge to
> the integrity of our financial system. Clearly our efforts to combat the
> activities of Russian organized crime here in the United States would be
> bolstered by substantial progress in the establishment of the rule of law in
> Russia.
>
> The first phase of Russia’s privatization process was directed principally at
> dismantling the mechanisms of the failed centrally planned economy. Although it
> is reasonable to debate the specifics of that program, there is broad agreement
> that it accomplished its objective. Much more serious questions about a lack of
> transparency and competition surround a later phase of privatization, the
> Russian government’s so-called "loans-for-shares" program. We shared those
> concerns. As early as April 1995, several months before the deals ultimately
> took place, the U.S. Executive Director at the IMF detailed our strong
> misgivings regarding such transactions and emphasized the need for transparency
> and competition in the privatization process. The international financial
> institutions also expressed profound concerns.
>
> The Clinton Administration has consistently urged the Russian government to
> combat corruption through structural and institutional reforms and the rule of
> law. President Clinton made clear our concerns in strong public statements in
> Moscow in 1995, as well as subsequently. As the President said to Russian Prime
> Minister Putin in a meeting 10 days ago, corruption and money laundering "could
> eat the heart out of Russian society" unless the government acts aggressively to
> combat these problems. That is why, for example, we have repeatedly encouraged
> Russia to adopt a simpler, more efficient tax code and to enforce the collection
> of taxes – a process that is at present woefully inadequate and subject to
> rampant corruption.
>
> In addition, we have regularly supported placing specific conditions, aimed at
> reducing corruption and strengthening Russia’s economic and legal system, on
> loans to Russia by international financial institutions.
>
> These conditions have included:
>
> Tax systems designed to reduce bribery and tax evasion by politically
> well-connected energy companies and other large firms.
>
> The elimination of tax offsets – for example, trading tax payments for payments
> for goods and services – which act as a major contributor to corruption, lack of
> budgetary discipline, and tax evasion.
>
> The creation of a Russian treasury and budgetary control system to cut
> expenditure leakages for corrupt purposes.
>
> The decontrolling of prices to eliminate corrupt, bribe-ridden distribution
> systems and reduce enormously costly insider arbitrage opportunities, in which
> traders buy commodities at low controlled prices and sell them abroad at higher
> market prices.
>
> The reduction of subsidies, which have destroyed budget discipline and created
> additional insider arbitrage opportunities.
>
> Trade liberalization to introduce more foreign competition and, thereby, reduce
> monopoly power and opportunities for corruption.
>
> Reductions in government wage and pension arrears.
>
> Better bankruptcy laws and improved enforcement to reduce asset stripping and
> induce the honoring of contracts.
>
> The strengthening of minority shareholder rights to avert deals that benefit
> insiders at the expense of the rest.
>
> Capital flight
>
> If corruption is often indicative of a vote of "no confidence" in a state’s
> capacity to establish and enforce the rule of law, capital flight is a vote of
> "no confidence" in a country’s economic policies. Much of the enormous flight of
> capital out of Russia reflects Russians’ lack of confidence in the ruble, in the
> banking system, in the economic consequences of political uncertainty, and in
> the capacity and willingness of the government and the parliament to work
> together to implement the structural reforms necessary to build a strong
> economy.
>
> The most obvious manifestation of this lack of confidence is the $35-40 billion
> in U.S. currency that is estimated to lie outside the financial system, largely
> beneath Russian mattresses. During the transition period, capital flight has
> drained perhaps $15 billion a year from the Russian economy. Russia’s current
> account surplus may reach 8 percent of GDP this year, yet foreign exchange
> reserves remain low, and the country has fallen behind on a substantial part of
> its external financial obligations. The simple explanation for this phenomenon
> is the withdrawal of capital from Russia.
>
> History teaches us that the best way to stem capital flight and encourage money
> to return is to create a healthy business environment, one that provides the
> sorts of investment opportunities that will attract capital back. That is why we
> have pressed, and will continue to press, Russia – both through our own
> bilateral interactions and through the IMF and other international financial
> institutions – to implement policies that support competition; tax reform;
> improved corporate governance; greater transparency and disclosure in the
> private and public sectors; stronger bank supervision; and restraints on the
> discretion and scope of government regulation.
>
> International money laundering
>
> Money laundering requires neither official corruption nor capital flight.
> However, the three often come together where the rule of law is weak and
> confidence in the economy is low. Money laundering is the process of converting
> ill-gotten gains into "usable" funds by routing it through what appear to be
> legitimate transactions. Money laundering is therefore predicated on a previous
> crime. Money laundering through cross-border transactions can become part of
> capital flight.
>
> Wherever it occurs, international money laundering poses a threat to the
> integrity of financial institutions both here and abroad. The current
> allegations involving money laundering through major American financial
> institutions have only reinforced our recognition that widespread corruption in
> another country can pose a significant danger to our interests.
>
> In this context, a test of Russia’s seriousness in its effort to combat its
> money laundering problems will be its ability to establish an adequate legal
> framework and implement effective enforcement mechanisms. To further this
> effort, Treasury has been assisting Russian authorities to enact and implement
> effective anti-money laundering programs. For instance, Treasury has actively
> participated in bilateral training and technical assistance programs to help
> Russia build its anti-corruption and anti-money laundering infrastructure.
> Treasury has also participated in the work of the G-8 Lyon Group of law
> enforcement experts, in connection with that group’s project to identify and
> pursue Russian and Eastern European organized crime groups. A team of Russian
> law enforcement officials visited Washington last week and met with officials
> from the Justice Department, the State Department, and many parts of the
> Treasury Department, including the Internal Revenue Service, the Customs
> Service, the Financial Crimes Enforcement Network (FinCEN) and the Secret
> Service, as well as other government agencies, to discuss money laundering
> issues. The Russian officials also met with officials from the Federal Reserve
> to discuss banking supervision and regulation. Such dialogue represents a step
> in the right direction, but it must be followed up with concrete actions.
>
> Administration officials have urged the Russian government to pass comprehensive
> anti-money laundering legislation. We have stated publicly that President
> Yeltsin should not have vetoed such legislation. In a telephone conversation
> earlier this month, President Clinton stressed to President Yeltsin the
> importance of swiftly designing and enacting a strong anti-money laundering law.
> President Yeltsin assured President Clinton that this was indeed his intent. In
> the context of ongoing IMF engagement with Russia, the United States and other
> major IMF shareholders will be monitoring developments in this area closely.
>
> III. Our Financial Policy Toward Russia
>
> Following the economic and financial collapse of August 1998, Russian economic
> policy and our own financial policy toward Russia moved to a very different
> phase. The International Monetary Fund ceased lending to Russia and did not
> provide any financial assistance for about a year.
>
> Our interaction with Russia through the international financial institutions,
> however, is only part of our efforts to promote stability, economic progress,
> and Russia’s integration into the global economic and political systems.
> Certainly it is in our interest to remain engaged with the Russian people.
>
> The United States is continuing to help the Russian people develop democratic
> and legal institutions, start private businesses, and improve social services.
> We have supported the development of NGOs; of the 65,000 NGOs that have been
> created during the past decade, USAID programs have supported more than 15%. The
> Department of Commerce and USAID are assisting thousands of small and
> microbusinesses through a variety of programs, including loan programs. And
> through USAID-sponsored programs, we are training thousands of doctors and
> nurses and helping Russia improve drug therapy and care for diabetics, a disease
> that currently affects seven million people in Russia.
>
> The technical assistance we provide Russia has long emphasized building the
> legal and regulatory infrastructure necessary for a market economy. Treasury
> technical assistance has focused in particular on the essential task of
> constructing a fair, predictable, law-based federal tax system. As part of a
> broad array of efforts to strengthen the rule of law, USAID has worked to
> promote judicial independence and ethics, providing training for close to a
> thousand judges and court personnel.
>
> A new approach to financial assistance after 1998
>
> In the difficult environment that has resulted from Russia’s economic collapse
> in August of last year, the approach of the international financial institutions
> with the support of the G-7 has shifted from providing net new funds to Russia
> in order to promote economic reform to partially refinancing debt coming due to
> the IMF as part of an attempt to support economic stability in Russia. We and
> the international financial institutions have insisted that their support be
> based on adequate accounting and adequate safeguards.
>
> The IMF program approved in July 1999 was very different from all of Russia’s
> prior IMF programs. The first disbursement under the new IMF program – as well
> as any subsequent disbursements – was predicated on the imposition of new
> safeguards to protect the use of that money. The funds were provided in the form
> of Special Drawing Rights, were paid into an account at the IMF, and can be used
> only to repay Russian obligations to the Fund. In addition, approval of the
> program required a satisfactory independent investigation of the Russian Central
> Bank’s investment in Fimaco and of the July 1998 IMF disbursement.
>
> Our decision to support this new program for Russia – as has been true of all of
> our policies toward Russia since 1993 – involved a difficult balance: between
> the need for engagement and the need for conditionality; and between what was
> economically necessary for Russia and what was politically feasible. Going
> forward, it will be as important as ever that we remain hardheaded and
> clear-eyed, and ensure that any support that is provided for Russia is used for
> its intended purpose and for that purpose alone.
>
> Russia’s new IMF program will be complemented by limited and measured support
> through financing from the World Bank and the European Bank for Reconstruction
> and Development for particular projects and targeted reform efforts. As in the
> past, any lending will depend on Russia’s adherence to the conditions of these
> programs. Last summer, the World Bank restructured its three key structural
> adjustment loans to Russia to encourage greater progress toward reforms in the
> financial and coal sectors and in the country's pension and welfare systems. It
> also canceled parts of other loans amounting to $228 million because of poor
> performance, largely as a result of the financial crisis. This measured approach
> has also informed our support for a rescheduling of Russia’s bilateral Paris
> Club Soviet-era debt that is limited both in scope and duration.
>
> Under the new IMF agreement, Russia is to repay about $2 billion of its
> obligations to the IMF, and is refinancing the remaining $4.5 billion coming due
> during the program period. This will have the consequence of reducing Russia’s
> debt to the IMF as Russia meets its obligations. Accounting for all the
> operations of the international financial institutions, there will be a net
> financial flow from Russia to the international financial institutions as a
> group between July 1999 and December 2000.
>
> Loans conditioned by adequate accounting and adequate safeguards
>
> Our continued support for IMF or World Bank engagement with Russia is predicated
> on Russia’s compliance with crucial conditions to ensure financial integrity and
> to safeguard any assistance provided in refinancing. These include:
>
> The completion of an investigative report on all offshore operations of the
> Central Bank of Russia.
>
> Procedures at the Central Bank of Russia (CBR) to strengthen internal controls
> on the management of reserves, exchange market intervention, and extension of
> credit to commercial banks. Each disbursement of IMF financing will be
> conditional on a determination that the CBR’s reserve management since the prior
> disbursement has been appropriate.
>
> A regime of regular external audits of the CBR that are reviewed by the IMF.
> These audits should be made public.
>
> New procedures to strengthen safeguards on the use of the resources of the
> international financial institutions for budgetary support.
>
> These conditions and considerations will govern our support of additional
> disbursements to Russia from the IMF and World Bank.
>
> We have supported continued IMF engagement with Russia, based on these
> safeguards, not because we expected that Russia would be rapidly transformed
> into a market economy or that corruption would be eliminated overnight, but
> rather on the view that to quarantine, contain, or write off Russia as too
> corrupt would ill serve our national interest. Acting on that view would limit
> our ability to support Russian economic and financial stability; it would
> inhibit our ability to promote democratization; and it would raise the risk that
> the United States and the West would be labeled as scapegoats for Russia’s
> failure to address its problems.
>
> IV. Combating Global Corruption and Money Laundering
>
> Finally, as we work to promote the adoption of sound economic reforms in Russia
> and in other countries around the world, fighting corruption and pursuing
> policies to reduce crime will be essential components of those efforts. We will
> pursue these measures, as we have done in the past, both through our bilateral
> relationships and within multinational organizations.
>
> For example, building on the U.S.-led efforts to conclude the OECD Anti-Bribery
> Convention and the Vice President’s Anti-Corruption conference last February, we
> have been pressing, and will continue to press, for the complete ratification
> and implementation of the OECD Convention by all signatories. In addition, the
> United States is working with its G-7 partners and others to coordinate
> anti-corruption efforts and assistance, complete a WTO agreement on transparency
> in government procurement, and seek ways to institutionalize international
> measures to identify, block and seize illicit funds gained through criminal
> acts.
>
> Anti-corruption initiatives within the international financial institutions
>
> The IMF is increasingly giving explicit consideration to addressing weak
> governance and corruption in all its country programs. The Fund has developed a
> code of fiscal transparency, which calls for governments to accurately track and
> disclose expenditures and thereby make them more accountable for their spending
> decisions. It has also consistently supported open and transparent markets,
> price decontrol, and trade liberalization, each of which will reduce the
> opportunity for bribery and corruption.
>
> The IMF’s approach to its 1997 programs with Thailand, Korea, and Indonesia
> included provisions aimed at reducing "crony capitalism," and other forms of
> corruption. For example, in the case of the Reforestation Fund in Indonesia,
> used by former President Suharto and his colleagues for inappropriate purposes,
> the IMF required that the Reforestation Fund be accounted for as part of the
> national budget, and required a full audit by internationally acceptable experts
> that is to be published upon its completion this fall. More recently, the IMF
> has suspended funding to Indonesia in connection with accusations of corruption
> relating to Bank Bali.
>
> The World Bank, with the strong support of the United States, is also paying
> increased attention to the problems of corruption in its member countries. The
> Bank has developed programs to combat corruption problems in individual
> countries, initiatives to enhance transparency and accountability in public
> finances, and approaches to strengthen public institutions and the rule of law
> with regard to investment and property. The Bank has also developed new
> methodologies and techniques for analysis of the nature and extent of corruption
> in specific countries.
>
> Since 1996, more than two dozen countries in East Asia, Eastern Europe, Latin
> America, and Africa have sought the Bank’s assistance in anti-corruption work.
> Specific country programs include: technical assistance for procurement reform
> in Tajikistan and Lebanon; anti-corruption seminars in Georgia, Ghana, India and
> Korea; Supreme Court modernization in Venezuela; and educational workshops to
> improve public expenditure management in Gambia.
>
> In the IDA-12 replenishment agreement, the United States led the effort to
> include a strengthened linkage between new lending and borrower performance,
> with explicit consideration to be given to good governance and efforts to combat
> corruption. IDA-12 also requires the World Bank and its borrowers to undertake
> public expenditure reviews, procurement assessments and financial capacity
> assessments and to identify follow-up actions. The United States will also
> continue to urge the Multilateral Development Banks to give priority attention
> to developing uniform procurement rules and documents which can help countries
> combat corruption and decrease opportunities for corruption in World Bank and
> regional development bank projects.
>
> Going forward, these issues will be the focus of attention and the international
> meetings over the next ten days. We and the G-7 will be calling for
> authoritative reviews by the IMF and the World Bank to identify ways to
> strengthen safeguards on the use of IMF and World Bank funds, especially in
> cases where there is heightened risk of diversion or misappropriation of funds.
>
> National Money Laundering Strategy
>
> This Thursday, the Treasury Department and the Justice Department will release
> the Administration’s first National Money Laundering Strategy report. The
> Strategy will set forth a broad-based domestic and international program to
> combat money laundering, including several dozen proposed action items aimed at
> bolstering international cooperation in the fight against money laundering;
> strengthening domestic enforcement; enhancing the regulation of banks and other
> financial institutions; and building stronger partnerships with state and local
> governments.
>
> The Strategy will contain a series of recommendations intended to combat the
> types of criminal activity we are discussing here today. For example, it calls
> for legislation to make U.S. money laundering laws applicable to a broader range
> of international criminals – including corrupt foreign officials. It calls for
> rules to extend requirements for filing suspicious activity reports (SARs) to
> money service businesses, broker/dealers and casinos, as well as enhanced use
> and analysis of SARs by Treasury’s Financial Crimes Enforcement Network and
> other federal law enforcement agencies. The Strategy calls for designating
> high-risk money laundering zones toward which to direct coordinated law
> enforcement efforts. And it proposes that we intensify pressure on nations that
> lack adequate counter-money laundering controls to adopt them.
>
> The implementation of these recommendations will take time, but with hundreds of
> billions of dollars laundered each year, it is clear that we must make long-term
> commitments while moving forward quickly.
>
> V. Concluding Remarks
>
> Mr. Chairman, during the past six and a half years we have faced very difficult
> choices with respect to Russia even as we have sought to intensify our efforts
> to combat global corruption and money laundering. There are clearly no simple
> answers on how best to support perhaps the most complex economic transformation
> of our time, and the process of change in Russia is still ongoing. In many
> respects, the challenge has been to find the best economic policy when
> confronted with difficult choices. The difficulty of those choices has hardly
> diminished in the wake of developments that have taken place in Russia since
> August 1998. As I have described, since the economic and financial collapse at
> that time, the financial aspect of our engagement with Russia has been pursued
> on very different terms and with much constrained objectives. The present
> program, built around the very rigorous safeguards that restrict how Russia can
> use any financing that the IMF makes available, implies a continued reduction in
> Russian debt to the IMF.
>
> It has always been clear that Russia’s complex transformation from a centrally
> planned communist empire to a democratic market-based economy would take a great
> deal of time. And it has been equally clear that the United States has a great
> stake in the success of this process. As Russia’s transformation proceeds, we
> will need to continually assess and adjust our strategy in light of our
> interests as events in Russia evolve. Discussions like the one we are having
> here today will be important to help guide our thinking on this crucial national
> issue as Russia’s transition continues.
>
> Thank you. I would now welcome the Committee’s questions.
>
>
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A<>E<>R
~~~~~~~~~~~~~~~
The only real voyage of discovery consists not in seeking
new landscapes but in having new eyes. -Marcel Proust
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"Believe nothing, no matter where you read it, or who said
it, no matter if I have said it, unless it agrees with your
own reason and your common sense." --Buddha
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A merely fallen enemy may rise again, but the reconciled
one is truly vanquished. -Johann Christoph Schiller,
German Writer (1759-1805)
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It is preoccupation with possessions, more than anything else, that
prevents us from living freely and nobly. -Bertrand Russell
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"Everyone has the right...to seek, receive and impart
information and ideas through any media and regardless
of frontiers."
Universal Declaration of Human Rights
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"Always do sober what you said you'd do drunk. That will
teach you to keep your mouth shut."
--- Ernest Hemingway
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Forwarded as information only; no endorsement to be presumed
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In accordance with Title 17 U.S.C. section 107, this material
is distributed without charge or profit to those who have
expressed a prior interest in receiving this type of information
for non-profit research and educational purposes only.
DECLARATION & DISCLAIMER
==========
CTRL is a discussion and informational exchange list. Proselyzting propagandic
screeds are not allowed. Substance—not soapboxing! These are sordid matters
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frauds is used politically by different groups with major and minor effects
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gives no endorsement to the validity of posts, and always suggests to readers;
be wary of what you read. CTRL gives no credeence to Holocaust denial and
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Let us please be civil and as always, Caveat Lector.
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