The USA PATRIOT Act: A Legal Analysis

Congressional research reportApr 15, 2002

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The USA PATRIOT Act: A Legal Analysis

April 15, 2002

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Senior Specialist

American Law Division

Congressional Research Service ˜ The Library of Congress

The USA PATRIOT Act: A Legal Analysis

Summary

The USA PATRIOT Act passed in the wake of the September 11 terrorist

attacks. It flows from a consultation draft circulated by the Department of Justice,

to which Congress made substantial modifications and additions. The stated purpose

of the Act is to enable law enforcement officials to track down and punish those

responsible for the attacks and to protect against any similar attacks.

The Act grants federal officials greater powers to trace and intercept terrorists’

communications both for law enforcement and foreign intelligence purposes. It

reenforces federal anti-money laundering laws and regulations in an effort to deny

terrorists the resources necessary for future attacks. It tightens our immigration laws

to close our borders to foreign terrorists and to expel those among us. Finally, it

creates a few new federal crimes, such as the one outlawing terrorists’ attacks on

mass transit; increases the penalties for many others; and institutes several procedural

changes, such as a longer statute of limitations for crimes of terrorism.

Critics have suggested that it may go too far. The authority to monitor e-mail

traffic, to share grand jury information with intelligence and immigration officers, to

confiscate property, and to impose new book-keeping requirements on financial

institutions, are among the features troubling to some.

The Act itself responds to some of these reservations. Many of the wiretapping

and foreign intelligence amendments sunset on December 31, 2005. The Act creates

judicial safeguards for e-mail monitoring and grand jury disclosures; recognizes

innocent owner defenses to forfeiture; and entrusts enhanced anti-money laundering

powers to those regulatory authorities whose concerns include the well being of our

financial institutions.

This report, stripped of its citations and footnotes, is available in an abbreviated

form as The USA PATRIOT Act: A Sketch, CRS REP.NO. RS21203. In addition,

much of the information contained here may also be found under a different

arrangement in a report entitled, Terrorism: Section by Section Analysis of the USA

PATRIOT Act, CRS REP.NO. RL31200 (Dec. 10, 2001). A wider array of terrorismrelated analysis appears on the CRS terrorism electronic briefing book page.

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Criminal Investigations: Tracking and Gathering Communications . . . . . . . 2

Pen Registers and Trap and Trace Devices . . . . . . . . . . . . . . . . . . . . . 5

Communications Records and Stored E-Mail . . . . . . . . . . . . . . . . . . . 6

Electronic Surveillance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Criminal Investigators’ Access to Foreign Intelligence Information . . . 8

Protective Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Foreign Intelligence Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

FISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Access to Law Enforcement Information . . . . . . . . . . . . . . . . . . . . . 19

Increasing Institutional Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Money Laundering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

International Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Crimes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Alien Terrorists and Victims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Border Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Detention and Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Victims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Other Crimes, Penalties, & Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

New crimes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

New Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Other Procedural Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Victims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Increasing Institutional Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

The USA PATRIOT Act: A Legal Analysis

Introduction

Congress passed the USA PATRIOT Act (the Act) in response to the terrorists’

attacks of September 11, 2001.1 The Act gives federal officials greater authority to

track and intercept communications, both for law enforcement and foreign intelligence

gathering purposes. It vests the Secretary of the Treasury with regulatory powers to

combat corruption of U.S. financial institutions for foreign money laundering

purposes. It seeks to further close our borders to foreign terrorists and to detain and

remove those within our borders. It creates new crimes, new penalties, and new

procedural efficiencies for use against domestic and international terrorists. Although

it is not without safeguards, critics contend some of its provisions go too far.

Although it grants many of the enhancements sought by the Department of Justice,

others are concerned that it does not go far enough.

The Act originated as H.R.2975 (the PATRIOT Act) in the House and S.1510

in the Senate (the USA Act).2 S.1510 passed the Senate on October 11, 2001, 147

Cong.Rec. S10604 (daily ed.). The House Judiciary Committee reported out an

amended version of H.R. 2975 on the same day, H.R.Rep.No. 107-236. The House

passed H.R. 2975 the following day after substituting the text of H.R. 3108, 147

Cong.Rec. H6775-776 (daily ed. Oct. 12, 2001). The House-passed version

incorporated most of the money laundering provisions found in an earlier House bill,

H.R. 3004, many of which had counterparts in S.1510 as approved by the Senate.3

The House subsequently passed a clean bill, H.R. 3162 ( under suspension of the

rules), which resolved the differences between H.R. 2975 and S.1510, 147 Cong.Rec.

H7224 (daily ed. Oct. 24, 2001). The Senate agreed, 147 Cong.Rec. S10969 (daily

P.L. 107-56, 115 Stat. 272 (2001); its full title is the “Uniting and Strengthening America

by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA

PATRIOT ACT).”

H.R. 2975 was introduced by Representative Sensenbrenner for himself and Representatives

Conyers, Hyde, Coble, Goodlatte, Jenkins, Jackson-Lee, Cannon, Meehan, Graham, Bachus,

Wexler, Hostettler, Keller, Issa, Hart, Flake, Schiff, Thomas, Goss, Rangel, Berman and

Lofgren; S.1510 by Senator Daschle for himself and Senators Lott, Leahy, Hatch, Graham,

Shelby and Sarbanes.

H.R. 3004 was introduced by Representative Oxley for himself and Represenatives LaFalce,

Leach, Maloney, Roukema, Bentsen, Hooley, Bereuter, Baker, Bachus, King, Kelly, Gillmore,

Cantor, Riley, Latourette, Green (of Wisconsin), and Grucci; and reported out of the House

Financial Services Committee with amendments on October 15, 2001, H.R.Rep.No. 107-250.

H.R. 3004, as reported out, included Internet gambling amendments that were not included

in H.R. 2975/H.R.3108.

CRS-2

ed. Oct. 24, 2001), and H.R. 3162 was sent to the President who signed it on October

26, 2001.

Criminal Investigations:

Communications

Tracking

and

Gathering

A portion of the Act addresses issues suggested originally in a Department of

Justice proposal circulated in mid-September.4 The first of its suggestions called for

amendments to federal surveillance laws, laws which govern the capture and tracking

of suspected terrorists’ communications within the United States. Federal law

features a three tiered system, erected for the dual purpose of protecting the

confidentiality of private telephone, face-to-face, and computer communications while

enabling authorities to identify and intercept criminal communications.5

The tiers reflected the Supreme Court’s interpretation of the Fourth

Amendment’s ban on unreasonable searches and seizures.6 The Amendment protects

private conversations, Berger v. New York, 388 U.S. 41 (1967); Katz v. United States,

389 U.S. 347 (1967). It does not cloak information, even highly personal

information, for which there is no individual justifiable expectation of privacy, such

as telephone company records of calls made to and from an individual's home, Smith

v. Maryland, 442 U.S. 735 (1979), or bank records of an individual's financial

dealings, United States v. Miller, 425 U.S. 435 (1976).

Congress responded to Berger and Katz, with Title III of the Omnibus Crime

Control and Safe Streets Act of 1968, 18 U.S.C. 2510-2522 (Title III). Title III, as

amended, generally prohibits electronic eavesdropping on telephone conversations,

face-to-face conversations, or computer and other forms of electronic

communications, 18 U.S.C. 2511.7 At the same time, it gives authorities a narrowly

defined process for electronic surveillance to be used as a last resort in serious

The Department’s proposal, dated September 20, 2001, came with a brief section by section

analysis. Both the proposal (Draft) and analysis (DoJ) were printed as an appendix in

Administration's Draft Anti-Terrorism Act of 2001, Hearing Before the House Comm. on

the Judiciary, 107th Cong., 1st Sess. 54 (2001).

For a general discussion of federal law in the area prior to enactment of the Act, see,

Stevens & Doyle, Privacy: An Overview of Federal Statutes Governing Wiretappping and

Electronic Eavesdropping, CRS REP.NO. 98-327A (Aug. 8, 2001); Fishman & McKenna,

WIRETAPPING AND EAVESDROPPING (2d ed. 1995 & 2001 Supp.).

“The right of the people to be secure in their persons, houses, papers, and effects, against

unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but

upon probable cause, supported by Oath or affirmation, and particularly describing the place

to be searched, and the persons or things to be seized,” U.S. Const. Amend. IV.

Although there are technical differences, the interception processes are popularly known as

wiretapping, electronic eavesdropping, or electronic surveillance. The terms are used

interchangeable here for purposes of convenience, but strictly speaking, wiretapping is limited

to the mechanical or electronic interception of telephone conversations, while electronic

eavesdropping or electronic surveillance refers to mechanical or electronic interception of

communications generally.

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criminal cases. When approved by senior Justice Department officials,8 law

enforcement officers may seek a court order authorizing them to secretly capture

conversations concerning any of a statutory list of offenses (predicate offenses), 18

U.S.C. 2516.9

“The Attorney General, Deputy Attorney General, Associate Attorney General, or any

Assistant Attorney General, any acting Assistant Attorney General, or any Deputy Assistant

Attorney General or acting Deputy Assistant Attorney General in the Criminal Division

specially designated by the Attorney General, may authorize an application to a Federal judge

of competent jurisdiction for, and such judge may grant in conformity with section 2518 of

this chapter an order authorizing or approving the interception of wire or oral communications

by the Federal Bureau of Investigation, or a Federal agency having responsibility for the

investigation of the offense as to which the application is made, when such interception may

provide or has provided evidence of” one or more predicate offense, 18 U.S.C. 2516.

The predicate offense list includes (a) felony violations of 42 U.S.C. 2274 through 2277

(enforcement of the Atomic Energy Act of 1954), 42 U.S.C. 2284 (sabotage of nuclear

facilities or fuel), or of 18 U.S.C. ch. 37 (espionage), ch. 90 (protection of trade secrets), ch.

105 (sabotage), ch. 115 (treason), ch. 102 (riots), ch. 65 (malicious mischief), ch. 111

(destruction of vessels), or ch. 81 ( piracy); (b) a violation of 29 U.S.C. 186 or 501(c)

(restrictions on payments and loans to labor organizations), or any offense which involves

murder, kidnapping, robbery, or extortion, and which is punishable under title 18 of the United

States Code; (c) any offense which is punishable under 18 U.S.C. 201 (bribery of public

officials and witnesses), 215 (bribery of bank officials), 224 (bribery in sporting contests),

844 (d), (e), (f), (g), (h), or (i) (unlawful use of explosives), 1032 (concealment of assets),

1084 (transmission of wagering information), 751 (escape), 1014 (loans and credit

applications generally; renewals and discounts), 1503, 1512, and 1513 (influencing or injuring

an officer, juror, or witness generally), 1510 (obstruction of criminal investigations), 1511

(obstruction of State or local law enforcement), 1751 (presidential and presidential staff

assassination, kidnaping, or assault), 1951 (interference with commerce by threats or

violence), 1952 (interstate and foreign travel or transportation in aid of racketeering

enterprises), 1958 (use of interstate commerce facilities in the commission of murder for hire),

1959 (violent crimes in aid of racketeering activity), 1954 (offer, acceptance, or solicitation

to influence operations of employee benefit plan), 1955 (prohibition of business enterprises

of gambling), 1956 (laundering of monetary instruments), 1957 (engaging in monetary

transactions in property derived from specified unlawful activity), 659 (theft from interstate

shipment), 664 (embezzlement from pension and welfare funds), 1030 (computer abuse

felonies), 1343 (fraud by wire, radio, or television), 1344 ( bank fraud), 2251 and 2252

(sexual exploitation of children), 2312, 2313, 2314, and 2315 (interstate transportation of

stolen property), 2321 (trafficking in certain motor vehicles or motor vehicle parts), 1203

(hostage taking), 1029 (fraud and related activity in connection with access devices), 3146

(penalty for failure to appear), 3521(b)(3) (witness relocation and assistance), 32 (destruction

of aircraft or aircraft facilities), 38 (aircraft parts fraud), 1963 (violations with respect to

racketeer influenced and corrupt organizations), 115 (threatening or retaliating against a

Federal official), 1341 (mail fraud), 351 (violations with respect to congressional, Cabinet,

or Supreme Court assassinations, kidnaping, or assault), 831 (prohibited transactions

involving nuclear materials), 33 (destruction of motor vehicles or motor vehicle facilities), 175

(biological weapons), 1992 (wrecking trains), a felony violation of 1028 (production of false

identification documentation), 1425 (procurement of citizenship or nationalization

unlawfully), 1426 (reproduction of naturalization or citizenship papers), 1427 (sale of

naturalization or citizenship papers), 1541 (passport issuance without authority), 1542 (false

statements in passport applications), 1543 (forgery or false use of passports), 1544 (misuse

of passports), or 1546 (fraud and misuse of visas, permits, and other documents); (d) any

CRS-4

Title III court orders come replete with instructions describing the permissible

duration and scope of the surveillance as well as the conversations which may be

seized and the efforts to be taken to minimize the seizure of innocent conversations,

18 U.S.C. 2518. The court notifies the parties to any conversations seized under the

order after the order expires, 18 U.S.C. 2518(8).

Below Title III, the next tier of privacy protection covers some of those matters

which the Supreme Court has described as beyond the reach of the Fourth

Amendment protection – telephone records, e-mail held in third party storage, and the

like, 18 U.S.C. 2701-2709 (Chapter 121). Here, the law permits law enforcement

access, ordinarily pursuant to a warrant or court order or under a subpoena in some

cases, but in connection with any criminal investigation and without the extraordinary

levels of approval or constraint that mark a Title III interception, 18 U.S.C. 2703.

Least demanding and perhaps least intrusive of all is the procedure that governs

court orders approving the government’s use of trap and trace devices and pen

registers, a kind of secret “caller id”, which identify the source and destination of

calls made to and from a particular telephone, 18 U.S.C. 3121-3127 (Chapter 206).

The orders are available based on the government's certification, rather than a finding

of the court, that the use of the device is likely to produce information relevant to the

investigation of a crime, any crime, 18 U.S.C. 3123. The devices record no more than

the identity of the participants in a telephone conversation,10 but neither the orders nor

the results they produce need ever be revealed to the participants.

The Act modifies the procedures at each of the three levels. It:

offense involving counterfeiting punishable under 18 U.S.C. 471, 472, or 473; (e) any offense

involving fraud connected with a case under title 11 or the manufacture, importation,

receiving, concealment, buying, selling, or otherwise dealing in narcotic drugs, marihuana, or

other dangerous drugs, punishable under any law of the United States; (f) any offense

including extortionate credit transactions under 18 U.S.C. 892, 893, or 894; (g) a violation

of 31 U.S.C. 5322 (dealing with the reporting of currency transactions); (h) any felony

violation of 18 U.S.C. 2511 and 2512 (interception and disclosure of certain communications

and to certain intercepting devices); (i) any felony violation of 18 U.S.C. ch. 71 (obscenity);

(j) 49 U.S.C. 60123(b) (destruction of a natural gas pipeline), 46502 (aircraft piracy); (k) 22

U.S.C. 2778 (Arms Export Control Act); (l) the location of any fugitive from justice from an

offense described in this section; (m) a violation of 8 U.S.C. 1324, 1327, or 1328; (n) any

felony violation of 18 U.S.C. 922, 924 (firearms); (o) any violation of 26 U.S.C. 5861

(firearms); (p) a felony violation of 18 U.S.C. 1028 (production of false identification

documents), 1542 (false statements in passport applications), 1546 (fraud and misuse of visas,

permits, and other documents) or a violation of 8 U.S.C. 1324, 1327, or 1328 (smuggling of

aliens); (p) 229 (chemical weapons), 2332 (terrorist violence against Americans overseas),

2332a (weapons of mass destruction), 2332b (multinational terrorism), 2332d (financial

transactions with countries supporting terrorism), 2339A (support of terrorist), 2332B

(support of terrorist organizations); (r) any conspiracy to commit any of these, 18 U.S.C.

2516(1)(crimes added by the Act in italics). Other than telephone face to face conversations

(i.e., electronic communications), the approval of senior Justice Department officials is not

required and an order may be sought in any felony investigation, 18 U.S.C. 2516(3).

Or more precisely, they reveal no more than the identity of the numbers assigned to the

telephone lines activated for a particular communication.

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• permits pen register and trap and trace orders for electronic communications

(e.g., e-mail)

• authorizes nationwide execution of court orders for pen registers, trap and

trace devices, and access to stored e-mail or communication records

• treats stored voice mail like stored e-mail (rather than like telephone

conversations)

• permits authorities to intercept communications to and from a trespasser within

a computer system (with the permission of the system’s owner)

• adds terrorist and computer crimes to Title III’s predicate offense list

• reenforces protection for those who help execute Title III, ch. 121, and ch. 206

orders

• encourages cooperation between law enforcement and foreign intelligence

investigators

• establishes a claim against the U.S. for certain communications privacy

violations by government personnel

• terminates the authority found in many of the these provisions and several of

the foreign intelligence amendments with a sunset provision (Dec. 31, 2005).

Pen Registers and Trap and Trace Devices. In section 216, the Act

allows court orders authorizing trap and trace devices and pen registers to be used to

capture source and addressee information for computer conversations (e.g., e-mail)

as well as telephone conversations, 18 U.S.C. 3121, 3123. In answer to objections

that e-mail header information can be more revealing than a telephone number, it

creates a detailed report to the court, 18 U.S.C. 3123(a)(3).11

“Where the law enforcement agency implementing an ex parte order under this subsection

seeks to do so by installing and using its own pen register or trap and trace device on a packetswitched data network of a provider of electronic communication service to the public the

agency shall ensure that a record will be maintained which will identify – (i) any officer or

officers who installed the device and any officer or officers who accessed the device to obtain

information from the network; (ii) the date and time the device was installed, the date and time

the device was uninstalled, and the date, time, and duration of each time the device is accessed

to obtain information; (iii) the configuration of the device at the time of its installation and any

subsequent modification thereof; and (iv) any information which has been collected by the

device. To the extent that the pen register or trap and trace device can be set automatically

to record this information electronically, the record shall be maintained electronically

throughout the installation and use of the such device.

“(B) The record maintained under subparagraph (A) shall be provided ex parte and

under seal to the court which entered the ex parte order authorizing the installation and use

of the device within 30 days after termination of the order (including any extensions thereof),”

section 216(b)(1).

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The use of pen registers or trap and trace devices was limited at one time to the

judicial district in which the order was issued, 18 U.S.C. 3123 (2000 ed.). Under

section 216, a court with jurisdiction over the crime under investigation may issue an

order to be executed anywhere in the United States, 18 U.S.C. 3123(b)(1)(C),

3127(2).12

Communications Records and Stored E-Mail. With respect to chapter

126, relating among other things to the content of stored e-mail and to

communications records held by third parties, the law permits criminal investigators

to retrieve the content of electronic communications in storage, like e-mail, with a

search warrant, and if the communication has been in remote storage for more than

180 days without notifying the subscriber, 18 U.S.C. 2703(a),(b). A warrant will also

suffice to seize records describing telephone and other communications transactions

without customer notice, 18 U.S.C. 2703(c). In the absence of the probable cause

necessary for a warrant but with a showing of reasonable grounds to believe that the

information sought is relevant to a criminal investigation, officers are entitled to a

court order mandating access to electronic communications in remote storage for

more than 180 days or to communications records, 18 U.S.C. 2703(b),(c). They can

obtain a limited amount of record information (subscribers' names and addresses,

telephone numbers, billing records and the like) using an administrative, grand jury,

or trial court subpoena, 18 U.S.C. 2703(c)(1)(C). There is no subscriber notification

in record cases. Elsewhere, the court may delay customer notification in the face of

exigent circumstances or if notice is likely to seriously jeopardize the investigation or

unduly delay the trial, 18 U.S.C. 2705.

In order to streamline the investigation process, the Act, in section 210, adds

credit card and bank account numbers to the information law enforcement officials

may subpoena from a communications service provider’s customer records, 18 U.S.C.

2703(c)(1)(C).13

Another streamlining amendment, section 220, eliminates the jurisdictional

restrictions on access to the content of stored e-mail pursuant to a court order.

The Justice Department urged the change in the name of expediency, “At present, the

government must apply for new pen trap orders in every jurisdiction where an investigation

is being pursued. Hence, law enforcement officers tracking a suspected terrorist in multiple

jurisdictions must waste valuable time and resources by obtaining a duplicative order in each

jurisdiction,” DoJ at §101. Here and throughout citations to the United States Code (U.S.C.)

without reference to an edition refer to the current Code; references to the 2000 edition of the

Code refer to the law prior to amendment by the Act.

Prior to the amendment, “investigators [could] not use a subpoena to obtain such records

as credit card number or other form of payment. In many cases, users register with Internet

service providers using false names, making the form of payment critical to determining the

user's true identity. . . . this information [could] only be obtained by the slower and more

cumbersome process of a court order. In fast-moving investigation[s] such as terrorist

bombings – in which Internet communications are a critical method of identifying conspirators

and in determining the source of the attacks – the delay necessitated by the use of court orders

can often be important. Obtaining billing and other information can identify not only the

perpetrator but also give valuable information about the financial accounts of those

responsible and their conspirators,” DoJ at §107.

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Previously, only a federal court in the district in which the e-mail was stored could

issue the order. Under section 220, federal courts in the district where an offense

under investigation occurred may issue orders applicable “without geographic

limitation,” 18 U.S.C. 2703.14

The Act, in section 209, treats voice mail like e-mail, that is, subject to the

warrant or court order procedure, rather than to the more demanding coverage of

Title III once required, United States v. Smith, 155 F.3d 1050, 1055-56 (9th Cir.

1998).

Finally, the Act resolves a conflict between chapter 121 and the federal law

governing cable companies. Government entities may have access to cable company

customer records only under a court order following an adversary hearing if they can

show that the records will evidence that the customer is or has engaged in criminal

activity, 47 U.S.C. 511(h). When cable companies began offering telephone and other

communications services the question arose whether the more demanding cable rules

applied or whether law enforcement agencies were entitled to ex parte court orders

under the no-notice procedures applicable to communications providers.15 The Act

makes it clear that the cable rules apply when cable television viewing services are

Speaking of the law before amendment, DoJ explained, “Current law requires the

government to use a search warrant to compel a provider to disclose unopened e-mail. 18

U.S.C. §2703(a). Because Federal Rule of Criminal Procedure 41 requires that the ‘property’

to be obtained ‘be within the district’ of the issuing court, however, the rule may not allow the

issuance of §2703(a) warrants for e-mail located in other districts. Thus, for example, where

an investigator in Boston is seeking electronic e-mail in the Yahoo! account of a suspected

terrorist, he may need to coordinate with agents, prosecutors, and judges in the Northern

District of California, none of whom have any other involvement in the investigation. This

electronic communications information can be critical in establishing relationships, motives,

means, and plans of terrorists. Moreover, it is equally relevant to cyber-incidents in which a

terrorist motive has not (but may well be) identified. Finally, even cases that require the

quickest response (kidnappings, threats, or other dangers to public safety or the economy) may

rest on evidence gathered under §2703(a). To further public safety, this section accordingly

authorizes courts with jurisdiction over investigations to compel evidence directly, without

requiring the intervention of their counterparts in other districts where major Internet service

providers are located,” DoJ at §108.

See e.g., DoJ at §109 (“Law enforcement must have the capability to trace, intercept, and

obtain records of the communications of terrorists and other criminals with great speed, even

if they choose to use a cable provider for their telephone and Internet service. This section

amends the Cable Communications Policy Act (‘Cable Act’) to clarify that when a cable

company acts as a telephone company or an Internet service provider, it must comply with the

same laws governing the interception and disclosure of wire and electronic communications

that apply to any other telephone company or Internet service provider. The Cable Act,

passed in 1984 to regulate various aspects of the cable television industry, could not take into

account the changes in technology that have occurred over the last seventeen years. Cable

television companies now often provide Internet access and telephone service in addition to

television programming. Because of perceived conflicts between the Cable Act and laws that

govern law enforcement's access to communications and records of communications carried

by cable companies, cable providers have refused to comply with lawful court orders, thereby

slowing or ending critical investigations”).

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involved and that the communications rules of chapter 121 apply when a cable

company or anyone else provides communications services, section 211.

Electronic Surveillance. To Title III's predicate offense list, the Act adds

cybercrime (18 U.S.C. 1030) and several terrorists crimes, sections 201, 202.16 A

second cybercrime initiative, section 217, permits law enforcement officials to

intercept the communications of an intruder within a protected computer system (i.e.,

a system used by the federal government, a financial institution, or one used in

interstate or foreign commerce or communication), without the necessity of a warrant

or court order, 18 U.S.C. 2511(2)(i). Yet only the interloper's intruding

communications, those to or from the invaded system, are exposed under the section.

The Justice Department originally sought the change because the law then did not

clearly allow victims of computer trespassing to request law enforcement assistance

in monitoring unauthorized attacks as they occur.17

Criminal Investigators’ Access to Foreign Intelligence Information.

The Act clearly contemplates closer working relations between criminal investigators

and foreign intelligence investigators, particular in cases of international terrorism.18

It amends the Foreign Intelligence Surveillance Act (FISA) to that end. As originally

enacted, the application for a surveillance order under FISA required certification of

the fact that “the purpose for the surveillance is to obtain foreign intelligence

information,” 50 U.S.C. 1804(a)(7)(B)(2000 ed.) (emphasis added), although it

anticipated that any evidence divulged as a result might be turned over to law

enforcement officials. Defendants often questioned whether authorities had used a

FISA surveillance order against them in order to avoid the predicate crime threshold

for a Title III order. Out of these challenges arose the notion that perhaps “the

purpose” might not always mean the sole purpose. The case law indicated that, while

an expectation that evidence of a crime might be discovered did not preclude a FISA

order, at such time as a criminal prosecution became the focus of the investigation

18 U.S.C. 229 (chemical weapons), 2332(terrorist acts of violence committed against

Americans overseas), 2332a(use of weapons of mass destruction), 2332b(acts of terrorism

transcending national boundaries), 2332d(financial transactions with countries which support

terrorists), 2339A(providing material support to terrorists), and 2339B(providing material

support to terrorist organizations).

“Because service providers often lack the expertise, equipment, or financial resources

required to monitor attacks themselves as permitted under current law, they often have no way

to exercise their rights to protect themselves from unauthorized attackers. Moreover, such

attackers can target critical infrastructures and engage in cyberterrorism,” DoJ at §106.

Elsewhere the Act defines “electronic surveillance” for purposes of the Foreign Intelligence

Surveillance Act (FISA) to emphasize that the law enforcement authority for this intruder

surveillance does not confer similar authority for purposes of foreign intelligence gathering,

section 1003 (50 U.S.C. 1801(f)(2)).

For a general discussion of federal intelligence and law enforcement cooperation, see, Best,

Intelligence and Law Enforcement: Countering Transnational Threats to the U.S., CRS

REP.NO. RL30252 (Dec. 3, 2001).

CRS-9

officials were required to either end surveillance or secure an order under Title III.19

The Justice Department sought FISA surveillance and physical search authority

on the basis of “a” foreign intelligence purpose.20 Section 218 of the Act insists that

foreign intelligence gathering be a “significant purpose” for the request for the FISA

surveillance or physical search order, 50 U.S.C. 1804(a)(7)(B), 1823(a)(7)(B), a more

Before FISA, several lower federal courts recognized a foreign intelligence exception to the

Fourth Amendment's warrant clause. It is here that the “primary purpose” notion originated.

In United States v. Truong Dinh Hung, 629 F.2d 908, 915 (4th Cir. 1980), decided after

FISA on the basis of pre-existing law, the court declared, “as the district court ruled, the

executive should be excused from securing a warrant only when the surveillance is conducted

‘primarily’ for foreign intelligence reasons. We think that the district court adopted the proper

test, because once surveillance becomes primarily a criminal investigation, the courts are

entirely competent to make the usual probable cause determination, and because, importantly,

individual privacy interests come to the fore and government foreign policy concerns recede

when the government is primarily attempting to form the basis for a criminal prosecution.”

Subsequent case law, however, is not as clear as it might be: see e.g., United States v.

Duggan, 743 F.2d 59, 77 (2d Cir. 1984)(“FISA permits federal officials to obtain orders

authorizing electronic surveillance ‘for the purpose of obtaining foreign intelligence

information.’ The requirement that foreign intelligence information be the primary objective

of the surveillance is plain not only from the language of Sec. 1802(b) but also from the

requirements in Sec. 1804 as to what the application must contain. The application must

contain a certification by a designated official of the executive branch that the purpose of the

surveillance is to acquire foreign intelligence information, and the certification must set forth

the basis for the certifying officials’s belief that the information sought is the type of foreign

intelligence information described”); United States v. Pelton, 835 F.2d 1067, 1075-76 (4th

Cir. 1987)(“We also reject Pelton's claim that the 1985 FISA surveillance was conducted

primarily for the purpose of his criminal prosecution, and not primarily for the purpose of

obtaining foreign intelligence information. . . . We agree with the district court that the

primary purpose of the surveillance, both initially and throughout was to gather foreign

intelligence information. It is clear that otherwise valid FISA surveillance is not tainted

simply because the government can anticipate that the fruits of the surveillance may later be

used . . . as evidence in a criminal trial”); United States v. Sarkissian, 841 F.2d 959, 907-8

(9th Cir. 1988)(“Defendants rely on the primary purpose test articulated in United States v.

Truong Dinh Hung. . . . One other court has applied the primary purpose test. Another court

has rejected it . . . distinguishing Truong. A third court has declined to decide the issue. We

also decline to decide the issue”); United States v. Johnson, 952 F.2d 565, 572 (1st Cir.

1991)(“Appellants attack the government's surveillance on the ground that it was undertaken

not for foreign intelligence purposes, but to gather evidence for a criminal prosecution. FISA

applications must contain, among other things, a certification that the purpose of the requested

surveillance is the gathering of foreign intelligence information. . . . Although the evidence

obtained under FISA subsequently may be used in criminal prosecutions, the investigation of

criminal activity cannot be the primary purpose of the surveillance”).

“Current law requires that FISA be used only where foreign intelligence gathering is the sole

or primary purpose of the investigation. This section will clarify that the certification of a

FISA request is supportable where foreign intelligence gathering is ‘a’ purpose of the

investigation. This change would eliminate the current need continually to evaluate the

relative weight of criminal and intelligence purposes, and would facilitate information sharing

between law enforcement and foreign intelligence authorities which is critical to the success

of anti-terrorism efforts,” DoJ at §153.

CRS-10

demanding standard than the “a purpose” threshold proposed by the Justice

Department, but a clear departure from the original “the purpose” entry point. FISA

once described a singular foreign intelligence focus prerequisite for any FISA

surveillance application. Section 504 of the Act further encourages coordination

between intelligence and law enforcement officials, and states that such coordination

is no impediment to a “significant purpose” certification, 50 U.S.C. 1806(k),

1825(k).21

Protective Measures. The Act reenforces two kinds of safeguards, one set

designed to prevent abuse and the other to protect those who assist the government.

The sunset clause is perhaps the best known of the Act’s safeguards. Under the

direction of section 224, many of the law enforcement and foreign intelligence

authorities granted by the Act expire as of December 31, 2005.22 The Act also fills

some of the gaps in earlier sanctions available for official, abusive invasions of

privacy. Prior law made it a federal crime to violate Title III (wiretapping), chapter

“(k)(1) Federal officers who conduct electronic surveillance to acquire foreign intelligence

information under this title may consult with Federal law enforcement officers to coordinate

efforts to investigate or protect against – (A) actual or potential attack or other grave hostile

acts of a foreign power or an agent of a foreign power; (B) sabotage or international terrorism

by a foreign power or an agent of a foreign power; or (C) clandestine intelligence activities

by an intelligence service or network of a foreign power or by an agent of a foreign power.

(2) Coordination authorized under paragraph (1) shall not preclude the certification required

by section 104(a)(7)(B) or the entry of an order under section 105.” FISA defines “foreign

power” and “agent of a foreign power” broadly, see note 33, infra, quoting, 50 U.S.C. 1801.

“(a) Except as provided in subsection (b), this title and the amendments made by this title

(other than sections 203(a)[sharing grand jury information], 203(c)[procedures for sharing

grand jury information], 205 [FBI translators], 208 [seizure of stored voice-mail],

210[subpoenas for communications provider customer records], 211[access to cable company

communication service records], 213[sneak and peek], 216[pen register and trap and trace

device amendments], 221[trade sanctions], and 222[assistance to law enforcement], and the

amendments made by those sections) shall cease to have effect on December 31, 2005.

“(b) With respect to any particular foreign intelligence investigation that began before

the date on which the provisions referred to in subsection (a) cease to have effect, or with

respect to any particular offense or potential offense that began or occurred before the date

on which such provisions cease to have effect, such provisions shall continue in effect,”

section 224.

The sections which expire are: 201 and 202 (adding certain terrorism crimes to the

predicate list for Title III), 293(b)(sharing Title III information with foreign intelligence

officers), 204 (clarifying the foreign intelligence exception to the law enforcement pen register

and trap and trace device provisions), 206 (roving foreign intelligence surveillance), 207

(duration of foreign intelligence surveillance orders and extensions), 209 (treatment of voice

mail as e-mail rather than as telephone conversation), 212 (service provider disclosures in

emergency cases), 214 (authority for pen registers and trap and trace devices in foreign

intelligence cases), 215 (production of tangible items in foreign intelligence investigations),

217 (intercepting computer trespassers' communications), 218 (foreign intelligence

surveillance when foreign intelligence gathering is “a significant” reason rather than “the”

reason for the surveillance), 219 (nationwide terrorism search warrants), 220 (nationwide

communication records and stored e-mail search warrants), 223 (civil liability and

administrative discipline for violations of Title III, chapter 121, and certain foreign

intelligence prohibitions), and 225 (immunity for foreign intelligence surveillance assistance).

CRS-11

121 (e-mail and communications records), or chapter 206 (pen registers and trap and

trace devices).23 Victims of offenses under Title III and chapter 121 (but not chapter

206) were entitled to damages (punitive damages in some cases) and reasonable

attorneys' fees,24 but could not recover against the United States.25 Chapter 121 alone

insisted upon an investigation into whether disciplinary action ought to be taken when

federal officers or employees were found to have intentionally violated its

proscriptions, 18 U.S.C. 2707.

The Act augments these sanctions by authorizing a claim against the United

States for not less than $10,000 and costs for violations of Title III, chapter 121, or

the Foreign Intelligence Surveillance Act (FISA), by federal officials, and emphasizing

the prospect of administrative discipline for offending federal officials, section 223.

Finally, the Act instructs the Department of Justice's Inspector General to

designate an official to receive and review complaints of civil liberties violations by

DoJ officers and employees, section 1001.

The second category of protective measures applies to service providers and

others who help authorities track and gather communications information. For

example, section 815 immunizes service providers who in good faith preserve

customer records at the government's request until a court order authorizing access

can be obtained.26 Another allows providers to disclose customer records to protect

the provider's rights and property and to disclose stored customer communications

and records in emergency circumstances, section 212. Under pre-existing law

providers could disclose the content of stored communications but not customer

records. The Justice Department recommended the changes in the interests of greater

protection against cybercrimes committed by terrorists and others.27 A third section,

18 U.S.C. 2511, 2701, and 3121 (2000 ed.), respectively.

18 U.S.C. 2520 and 2707 (2000 ed.).

Spock v. United States, 464 F.Supp. 510, 514 n.2 (S.D.N.Y. 1978); Asmar v. IRS, 680

F.Supp. 248, 250 (E.D.Mich. 1987).

Prior law already granted service providers immunity for disclosure of customer records in

compliance with a court access order, 18 U.S.C. 2703(f).

“Existing law contains no provision that allows providers of electronic communications

service to disclose the communications (or records relating to such communications) of their

customers or subscribers in emergencies that threaten death or serious bodily injury. This

section amends 18 U.S.C. §2702 to authorize such disclosures if the provider reasonably

believes that an emergency involving immediate danger of death or serious physical injury to

any person requires disclosure of the information without delay.

“Current law also contains an odd disconnect: a provider may disclose the contents of

the customer's communications in order to protect its rights or property but the current statute

does not expressly permit a provider to voluntarily disclose non-content records (such as a

subscriber's login records). 18 U.S.C. 2702(b)(5). This problem substantially hinders the

ability of providers to protect themselves from cyber-terrorists and criminals. Yet the right

to disclose the contents of communications necessarily implies the less intrusive ability to

disclose non-content records. In order to promote the protection of our nation's critical

infrastructures, this section's amendments allow communications providers to voluntarily

disclose both content and non-content records to protect their computer systems,” DoJ at

CRS-12

section 222 promises reasonable compensation for service providers and anyone else

who help law enforcement install or apply pen registers or trap and trace devices,28

but makes it clear that nothing in the Act is intended to expand communications

providers’ obligation to make modifications in their systems in order to accommodate

law enforcement needs.29

Foreign Intelligence Investigations

Although both criminal investigations and foreign intelligence investigations are

conducted in the United States, criminal investigations seek information about

unlawful activity; foreign intelligence investigations seek information about other

countries and their citizens. Foreign intelligence is not limited to criminal, hostile, or

even governmental activity. Simply being foreign is enough.30

Restrictions on intelligence gathering within the United States mirror American

abhorrence of the creation of a secret police, coupled with memories of intelligence

gathering practices during the Vietnam conflict which some felt threatened to chill

robust public debate. Yet there is no absolute ban on foreign intelligence gathering

in the United States. Congress enacted the Foreign Intelligence Surveillance Act

(FISA),31 something of a Title III for foreign intelligence wiretapping conducted in

this country, after the Supreme Court made it clear that the President's authority to

see to national security was insufficient to excuse warrantless wiretapping of

suspected terrorists who had no identifiable foreign connections, United States v.

United States District Court, 407 U.S. 297 (1972). FISA later grew to include

procedures for physical searches in foreign intelligence cases, 50 U.S.C. 1821-1829,

for pen register and trap and trace orders, 50 U.S.C. 1841-1846, and for access to

records from businesses engaged in car rentals, motel accommodations, and storage

§110.

Chapter 206 had long guaranteed providers and others reasonable compensation, 18 U.S.C.

3124(c), but section 216 of the Act expands the circumstances under which the authorities

may request assistance including requests for the help of those not specifically mentioned in

the court order. Section 222 makes it clear the expanded obligation to provide assistance is

matched by a corresponding right to compensation.

Thus in the name of assisting in the execution of Title III, chapter 121, or chapter 206

order, the courts may not cite the Act as the basis for an order compelling a service provider

to make system modifications or provide any other technical assistance not already required

under 18 U.S.C. 2518(4), 2706, or 3124(c), see, H.R.Rep.No. 107-236, at 62-3 (2001)

(emphasis added) (“This Act is not intended to affect obligations under Communications

Assistance for Law Enforcement Act [which addresses law enforcement-beneficial system

modifications and the compensation to be paid for the changes], nor does the act impose any

additional technical obligation or requirement on a provider of wire or electronic

communication service or other person to furnish facilities or technical assistance”).

E.g., As amended by section 902 of the Act, “‘foreign intelligence’ means information

relating to the capabilities, intentions, or activities of foreign governments or elements thereof,

foreign organizations, or foreign persons, or international terrorist activities,” 50 U.S.C.

401a(2)(language added by the Act in italics).

50 U.S.C. 1801 et seq.

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lockers, 50 U.S.C. 1861-1863 (2000 ed.). Intelligence authorities gained narrow

passages through other privacy barriers as well.32

In many instances, access was limited to information related to the activities of

foreign governments or their agents in this country, not simply relating to something

foreign here. FISA, for example, is directed at foreign governments, international

terrorists, and their agents, spies and saboteurs.33 There were and still are extra

E.g., 18 U.S.C. 2709 (counterintelligence access to telephone toll and transaction records),

12 U.S.C. 3414 (right to financial privacy), 15 U.S.C. 1681u(fair credit reporting).

“As used in this subchapter: (a) ‘Foreign power’ means – (1) a foreign government or any

component thereof, whether or not recognized by the United States; (2) a faction of a foreign

nation or nations, not substantially composed of United States persons; (3) an entity that is

openly acknowledged by a foreign government or governments to be directed and controlled

by such foreign government or governments; (4) a group engaged in international terrorism

or activities in preparation therefor; (5) a foreign-based political organization, not

substantially composed of United States persons; or (6) an entity that is directed and

controlled by a foreign government or governments.

“(b) ‘Agent of a foreign power’ means – (1) any person other than a United States

person, who – (A) acts in the United States as an officer or employee of a foreign power, or

as a member of a foreign power as defined in subsection (a)(4) of this section; (B) acts for or

on behalf of a foreign power which engages in clandestine intelligence activities in the United

States contrary to the interests of the United States, when the circumstances of such person's

presence in the United States indicate that such person may engage in such activities in the

United States, or when such person knowingly aids or abets any person in the conduct of such

activities or knowingly conspires with any person to engage in such activities; or (2) any

person who – (A) knowingly engages in clandestine intelligence gathering activities for or on

behalf of a foreign power, which activities involve or may involve a violation of the criminal

statutes of the United States; (B) pursuant to the direction of an intelligence service or network

of a foreign power, knowingly engages in any other clandestine intelligence activities for or

on behalf of such foreign power, which activities involve or are about to involve a violation

of the criminal statutes of the United States;(C) knowingly engages in sabotage or

international terrorism, or activities that are in preparation therefor, or on behalf of a foreign

power; (D) knowingly enters the United States under a false or fraudulent identity for or on

behalf of a foreign power or, while in the United States, knowingly assumes a false or

fraudulent identity for or on behalf of a foreign power; or (E) knowingly aids or abets any

person in the conduct of activities described in subparagraph (A), (B), or (C) or knowingly

conspires with any person to engage in activities described in subparagraph (A), (B), or (C).

“(c) ‘International terrorism’ means activities that – (1) involve violent acts or acts

dangerous to human life that are a violation of the criminal laws of the United States or of any

State, or that would be a criminal violation if committed within the jurisdiction of the United

States or any State; (2) appear to be intended – (A) to intimidate or coerce a civilian

population; (B) to influence the policy of a government by intimidation or coercion; or (C) to

affect the conduct of a government by assassination or kidnaping; and (3) occur totally outside

the United States, or transcend national boundaries in terms of the means by which they are

accomplished, the persons they appear intended to coerce or intimidate, or the locale in which

their perpetrators operate or seek asylum.

“(d) ‘Sabotage’ means activities that involve a violation of chapter 105 of Title 18, or

that would involve such a violation if committed against the United States.

“(e) ‘foreign intelligence information’ means – (1) information that relates to, and if

concerning a United States person is necessary to, the ability of the United States to protect

against – (A) actual or potential attack or other grave hostile acts of a foreign power or an

CRS-14

safeguards if it appears that an intelligence investigation may generate information

about Americans (“United States persons,” i.e., citizens or permanent resident

aliens).34 The procedures tend to operate under judicial supervision and tend to be

confidential as a matter of law, prudence, and practice.

The Act eases some of the restrictions on foreign intelligence gathering within

the United States, and affords the U.S. intelligence community greater access to

information unearthed during a criminal investigation, but it also establishes and

expands safeguards against official abuse. More specifically, it:

• permits “roving” surveillance (court orders omitting the identification of the

particular instrument, facilities, or place where the surveillance is to occur when

the court finds the target is likely to thwart identification with particularity)

• increases the number of judges on the FISA court from 7 to 11

• allows application for a FISA surveillance or search order when gathering

foreign intelligence is a significant reason for the application rather than the

reason

• authorizes pen register and trap & trace device orders for e-mail as well as

telephone conversations

• sanctions court ordered access to any tangible item rather than only business

records held by lodging, car rental, and locker rental businesses

• carries a sunset provision

• establishes a claim against the U.S. for certain communications privacy

violations by government personnel

• expands the prohibition against FISA orders based solely on an American’s

exercise of his or her First Amendment rights.

agent of a foreign power; (B) sabotage or international terrorism by a foreign power or an

agent of a foreign power; or (C) clandestine intelligence activities by an intelligence service

or network of a foreign power or by an agent of a foreign power; or (2) information with

respect to a foreign power or foreign territory that relates to, and if concerning a United States

person is necessary to – (A) the national defense or the security of the United States; or (B)

the conduct of the foreign affairs of the United States,” 50 U.S.C. 1801.

Strictly speaking for FISA purposes, a United States person “means a citizen of the United

States, an alien lawfully admitted for permanent residence (as defined in section 1101(a)(20)

of Title 8), an unincorporated association a substantial number of members of which are

citizens of the United States or aliens lawfully admitted for permanent residence, or a

corporation which is incorporated in the United States, but does not include a corporation or

an association which is a foreign power, as defined in subsection (a)(1), (2), or (3) of this

section,” 50 U.S.C. 1801(i).

CRS-15

FISA. FISA is in essence a series of procedures available to secure court orders

in certain foreign intelligence cases.35 It operates through the judges of a special court

which prior to the Act consisted of seven judges, scattered throughout the country,

two of whom were from the Washington, D.C. area. The Act, in section 208,

authorizes the appointment of four additional judges and requires that three members

of the court reside within twenty miles of the District of Columbia, 50 U.S.C.

1803(a).

Search and Surveillance for Intelligence Purposes. Unless directed at

a foreign power, the maximum duration for FISA surveillance orders and extensions

was once ninety days and forty-five days for physical search orders and extensions,

50 U.S.C. 1805(e), 1824(d)(2000 ed.). The Act, in section 207, extends the

maximum tenure of physical search orders to ninety days and in the case of both

surveillance orders and physical search orders extends the maximum life of an order

involving an agent of a foreign power to 120 days, with extensions for up to a year,

50 U.S.C. 1805(e), 1824(d). This represents a compromise over the Justice

Department's original proposal which would have set the required expiration date for

orders at one year instead of 120 days, Draft at §151.36

Section 901 of the Act address a concern raised during the 106th Congress

relating to the availability of the FISA orders and the effective use of information

gleaned from the execution of a FISA order.37 It vests the Director of Central

For a general discussion of FISA prior to enactment of the Act, see, Bazan, The Foreign

Intelligence Surveillance Act: An Overview of the Statutory Framework for Electronic

Surveillance, CRS REP.NO. RL30465 (Sept. 18, 2001).

See also, DoJ at §151, “This section reforms a critical aspect of the Foreign Intelligence

Surveillance Act (FISA). It will enable the Foreign Intelligence Surveillance Court (FISC),

which presides over applications made by the U.S. government under FISA, to authorize the

search and surveillance in the U.S. of officers and employees of foreign powers and foreign

members of international terrorist groups for up to a year. Currently, the FISC may only

authorize such searches and surveillance for up to 45 days and 90 days, respectively. The

proposed change would bring the authorization period in line with that allowed for search and

surveillance of the foreign establishments for which the foreign officers and employees work.

The proposed change would have no effect on electronic surveillance of U.S. citizens or

permanent resident aliens.”

Section 314 of the Intelligence Authorization Act for Fiscal Year 2002 (Intelligence

Authorization Act), P.L. 107-108, 115 Stat. 1394, 1402 (2001), further amended some of the

time limits relating to FISA surveillance and physical searches, extending from 24 hours to

72 hours: (a) the time period during which agents might disseminate or use information

secured pursuant to a FISA surveillance or search order but otherwise protected from

dissemination or use by the order’s minimization requirements; and (b) the permissible

duration of emergency surveillance or searches after which surveillance or the search must

stop or a FISA order application filed (50 U.S.C. 1801(h)(4), 1821(4)(D), 1805(f), 1824(e)).

See e.g., S.Rep.No. 106-352, at 3, 6, 7 (2000)(“The Office of Intelligence Policy and

Review (OIPR) in the Department of Justice is responsible for advising the Attorney General

on matters relating to the national security of the United States. As part of its responsibilities,

the OIPR prepares and presents to the Foreign Intelligence Surveillance Court (FISC) all

applications for electronic surveillance and physical searches under the Foreign Intelligence

Surveillance Act . . . . Agencies have informed the Committee that the FISA application

CRS-16

Intelligence with the responsibility to formulate requirements and priorities for the use

of FISA to collect foreign intelligence information. He is also charged with the

responsibility of assisting the Attorney General in the efficient and effective

dissemination of FISA generated information (50 U.S.C. 403-3(c)).

Pen Registers and Trap and Trace Devices for Intelligence

Gathering. Section 214 grants the request of the Department of Justice by dropping

requirements which limited FISA pen register and trap and trace device orders to

facilities used by foreign agents or those engaged in international terrorist or

clandestine intelligence activities, 50 U.S.C. 1842(c)(3)(2000 ed.).38 It is enough that

the order is sought as part of an investigation to protect against international terrorism

or clandestine intelligence activities and is not motivated solely by an American’s

exercise of his or her First Amendment rights. Elsewhere (section 505), the Act drops

a similar limitation for intelligence officials’ access to telephone records, 18 U.S.C.

process, as interpreted by the OIPR is administratively burdensome and, at times, extremely

slow. Many applications undergo months of scrutiny before submission to the court because

the OIPR prescribes standards and restrictions not imposed by the statute. . . . In particular,

the OIPR has been criticized for an overly restrictive interpretation of the FISA ‘currency’

requirement. This is the issue of how recent a subject's activities must be to support a finding

of probable cause that the subject is engaged in clandestine intelligence gathering activities.

. . .While existing law does not specifically address ``past activities,'' it does not preclude, and

legislative history supports, the conclusion that past activities may be part of the totality of

circumstances considered by the FISC in making a probable cause determination. . . . By

definition, information collected pursuant to a court order issued under the Foreign

Intelligence Surveillance Act is foreign intelligence not law enforcement information.

Accordingly, the Committee wants to clarify that the FISA `take' can and must be shared by

the Federal Bureau of Investigation with appropriate intelligence agencies. For the intelligence

mission of the United States to be successful, there must be a cooperative and concerted effort

among intelligence agencies. Any information collected by one agency under foreign

intelligence authorities that could assist another agency in executing its lawful mission should

be shared fully and promptly. Only then can the United States Government pursue

aggressively important national security targets including, for example, counterterrorist and

counternarcotics targets”); see also, 147 Cong.Rec. S799-803 (daily ed. Feb. 24,

2000)(remarks of Sens. Specter, Torricelli and Biden).

“When added to FISA two years ago, the pen register/trap and trace section was intended

to mirror the criminal pen/trap authority defined in 18 U.S.C. §3123. The FISA authority

differs from the criminal authority in that it requires, in addition to a showing of relevance,

an additional factual showing that the communications device has been used to contact an

‘agent of a foreign power’ engaged in international terrorism or clandestine intelligence

activities. This has the effect of making the FISA pen/trap authority much more difficult to

obtain. In fact, the process of obtaining FISA pen/trap authority is only slightly less

burdensome than the process for obtaining full electronic surveillance authority under FISA.

This stands in stark contrast to the criminal pen/trap authority, which can be obtained quickly

from a local court, on the basis of a certification that the information to be obtained is relevant

to an ongoing investigation. The amendment simply eliminates the ‘agent of a foreign power’

prong from the predication, and thus makes the FISA authority more closely track the criminal

authority,” DoJ at §155.

CRS-17

2709(b), and under the Right to Financial Privacy Act, 12 U.S.C. 3414(a)(5)(A), as

well as the Fair Credit Reporting Act, 15 U.S.C. 1681u.39

Section 214 adjusts the language of the FISA pen register-trap and trace

authority to permit its use to capture source and destination information relating to

electronic communications (e.g., e-mail) as well as telephone communications, 50

U.S.C. 1842(d). The section makes it clear that requests for a FISA pen register-trap

and trace order, like requests for other FISA orders, directed against Americans (U.S.

persons) may not be based solely on activities protected by the First Amendment, 50

U.S.C. 1842, 1843.

Third Party Cooperation and Tangible Evidence. As in the case

of criminal investigations, the Act has several sections designed to encourage third

party cooperation and to immunize third parties from civil liability for their assistance.

FISA orders may include instructions directing specifically identified third parties to

assist in the execution of the order, 50 U.S.C. 1805(c)(2)(B). The Act permits

inclusion of a general directive for assistance when the target's activities are designed

to prevent more specific identification, section 206, and immunizes in 50 U.S.C.

1805(h), those who provide such assistance, section 225.40

Except in the case of certain credit information, these are not court procedures, but written

requests for third party records which would otherwise to be entitled to confidentiality.

Section 505, in response to the Justice Department's suggestion, allows FBI field offices to

make the requests, see DoJ at §157 (“At the present time, National Security Letter (NSL)

authority exists in three separate statutes: the Electronic Communications Privacy Act (for

telephone and electronic communications records), the Financial Right to Privacy Act (for

financial records), and the Fair Credit Reporting Act (for credit records). Like the FISA pen

relevance and a showing of links to an ‘agent of a foreign power.’ In this respect, they are

substantially more demanding than the analogous criminal authorities, which require only a

certification of relevance. Because the NSLs require documentation of the facts supporting

the ‘agent of a foreign power’ predicate and because they require the signature of a highranking official at FBI headquarters, they often take months to be issued. This is in stark

contrast to criminal subpoenas, which can be used to obtain the same information, and are

issued rapidly at the local level. In many cases, counterintelligence and counterterrorism

investigations suffer substantial delays while waiting for NSLs to be prepared, returned from

headquarters, and served. The section would streamline the process of obtaining NSL

authority, and also clarify the FISA Court can issue orders compelling production of

consumer reports”).

When it requested the amendment, the Department of Justice explained that the “provision

expands the obligations of third parties to furnish assistance to the government under FISA.

Under current FISA provisions, the government can seek information and assistance from

common carriers, landlords, custodians and other persons specified in court-ordered

surveillance. Section 152 would amend FISA to expand existing authority to allow, ‘in

circumstances where the Court finds that the actions of the target of the application may have

the effect of thwarting the identification of a specified person that a common carrier, landlord,

custodian or other persons not specified in the Court's order be required to furnish the

applicant information and technical assistance necessary to accomplish electronic surveillance

in a manner that will protect its secrecy and produce a minimum of interference with the

services that such person is providing to the target of electronic surveillance.’ This would

enhance the FBI's ability to monitor international terrorists and intelligence officers who are

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Prior to the Act, FISA allowed federal intelligence officers to seek a court order

for access to certain car rental, storage, and hotel accommodation records, 50 U.S.C.

1861 to 1863 (2000 ed.). The Justice Department asked that the authority be

replaced with permission to issue administrative subpoenas for any tangible item

regardless of the business (if any) of the custodian.41 The Act amends the provisions,

preserving the court order requirement. Yet it allows the procedure to be used in

foreign intelligence investigations, conducted to protect against international terrorism

or clandestine intelligence activities,42 in order to seize any tangible item regardless

of who is in possession of the item, and continues in place the immunity for good faith

compliance by third party custodians, section 215.

In a related provision, Section 358 amends the –

• purposes section of the Currency and Foreign Transaction Reporting Act (31

U.S.C. 5311);

• suspicious activities reporting requirements section of that Act (31 U.S.C.

5318(g)(4)(B);

• availability of records section of that Act (31 U.S.C. 5319);

• purposes section of the Bank Secrecy Act (12 U.S.C. 1829b(a);

• the Secretary of the Treasury’s authority over uninsured banks and other

financial institutions under that Act (12 U.S.C. 1953(a);

• access provisions of the Right to Financial Privacy Act (12 U.S.C. 3412(2)(a),

3414(a)(1), 3420(a)(2); and

• access provisions of the Fair Credit Reporting Act (15 U.S.C. 1681u, 1681v;

trained to thwart surveillance by rapidly changing hotel accommodations, cell phones, Internet

accounts, etc., just prior to important meetings or communications. Under the current law,

the government would have to return to the FISA Court for an order that named the new

carrier, landlord, etc., before effecting surveillance. Under the proposed amendment, the FBI

could simply present the newly discovered carrier, landlord, custodian or other person with

a generic order issued by the Court and could then effect FISA coverage as soon as technically

feasible,” DoJ at 152.

Section 314 of the Intelligence Authorization Act immunizes those who assist in the

execution of either a FISA surveillance or physical search order (50 U.S.C. 1805(i)), 115

Stat. 1402.

“The ‘business records’ section of FISA (50 U.S.C. §§ 1861 and 1862) requires a formal

pleading to the Court and the signature of a FISA judge (or magistrate). In practice, this

makes the authority unavailable for most investigative contexts. The time and difficulty

involved in getting such pleadings before the Court usually outweighs the importance of the

business records sought. Since its enactment, the authority has been sought less than five

times. This section would delete the old authority and replace it with a general ‘administrative

subpoena’ authority for documents and records. This authority, modeled on the administrative

subpoena authority available to drug investigators pursuant to Title 21, allows the Attorney

General to compel production of such records upon a finding that the information is relevant,”

DoJ at §156.

Section 314 of the Intelligence Authorization Act further amended the section to permit

orders relating to investigations “to obtain foreign intelligence information not concerning a

United States person” in addition to those conducted to protect against terrorism and

clandestine activities, 50 U.S.C. 1861(a)(1).

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to clarify and authorize access of federal intelligence authorities to the reports and

information gathered and protected under those Acts.43

Access to Law Enforcement Information. Shortly after September

11, sources within both Congress and the Administration stressed the need for law

enforcement and intelligence agencies to more effectively share information about

terrorists and their activities. On September 14, the Senate Select Committee on

Intelligence observed that, “effective sharing of information between and among the

various components of the government-wide effort to combat terrorists is also

essential, and is presently hindered by cultural, bureaucratic, resource, training and,

in some cases, legal obstacles,” H.R.Rep.No. 107-63, at 10 (2001). The Justice

Department’s consultation draft of September 20 offered three sections which would

have greatly expanded the intelligence community's access to information collected

as part of a criminal investigation. First, it suggested that information generated

through the execution of a Title III order might be shared in connection with the

duties of any executive branch official, Draft at §103.44

H.R.Rep.No. 107-205, at 60-1 (2001)(“This section clarifies the authority of the Secretary

of the Treasury to share Bank Secrecy Act information with the intelligence community for

intelligence or counterintelligence activities related to domestic or international terrorism.

Under current law, the Secretary may share BSA information with the intelligence community

for the purpose of investigating and prosecuting terrorism. This section would make clear that

the intelligence community may use this information for purposes unrelated to law

enforcement.

“The provision would also expand a Right to Financial Privacy Act (RFPA) exemption,

currently applicable to law enforcement inquiries, to allow an agency or department to share

relevant financial records with another agency or department involved in intelligence or

counterintelligence activities, investigations, or analyses related to domestic or international

terrorism. The section would also exempt from most provisions of the RFPA a government

authority engaged in investigations of or analyses related to domestic or international

terrorism. This section would also authorize the sharing of financial records obtained through

a Federal grand jury subpoena when relevant to intelligence or counterintelligence activities,

investigations, or analyses related to domestic or international terrorism. In each case, the

transferring governmental entity must certify that there is reason to believe that the financial

records are relevant to such an activity, investigation, or analysis.

“Finally, this section facilitates government access to information contained in suspected

terrorists’ credit reports when the governmental inquiry relates to an investigation of, or

intelligence activity or analysis relating to, domestic or international terrorism. Even though

private entities such as lenders and insurers can access an individual's credit history, the

government is strictly limited in its ability under current law to obtain the information. This

section would permit those investigating suspected terrorists prompt access to credit histories

that may reveal key information about the terrorist’s plan or source of funding--without

notifying the target. To obtain the information, the governmental authority must certify to the

credit bureau that the information is necessary to conduct a terrorism investigation or analysis.

The amendment would also create a safe harbor from liability for credit bureaus acting in

good faith that comply with a government agency's request for information”).

See also, DoJ at §103, “This section facilities the disclosure of Title III information to

other components of the intelligence community in terrorism investigations. At present, 18

U.S.C. §2517(1) generally allows information obtained via wiretap to be disclosed only to the

extent that it will assist a criminal investigation. One must obtain a court order to disclose

Title III information in non-criminal proceedings. Section 109 [103] would modify the

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Second, it recommended a change in Rule 6(e) of the Federal Rules of Criminal

Procedure that would allow disclosure of grand jury material to intelligence officials,

Draft at §354.45

Third, it proposed elimination of all constraints on sharing foreign intelligence

information uncovered during a law enforcement investigation, mentioning by name

the constraints in Rule 6(e) and Title III, Draft at §154.46

The Act combines versions of all three in section 203. Perhaps because of the

nature of the federal grand jury, resolution of the grand jury provision proved

especially difficult. The federal grand jury is an exceptional institution. Its purpose

is to determine if a crime has been committed, and if so by whom; to indict the guilty;

and to refuse to indict the innocent. Its probes may begin without probable cause or

any other threshold of suspicion.47 It examines witnesses and evidence ordinarily

secured in its name and questioned before it by Justice Department prosecutors. Its

wiretap statutes to permit the disclosure of Title III-generated information to a non-law

enforcement officer for such purposes as furthering an intelligence investigation. This will

harmonize Title III standards with those of the Foreign Intelligence Surveillance Act (FISA),

which allows such information-sharing. Allowing disclosure under Title III is particularly

appropriate given that the requirements for obtaining a Title III surveillance order in general

are more stringent than for a FISA order, and because the attendant privacy concerns in either

situation are similar and are adequately protected by existing statutory provisions.”

See also, DoJ at §354, “This section makes changes in Rule 6(e) of the Federal Rules of

Criminal Procedure, relating to grand jury secrecy, to facilitate the sharing of information with

federal law enforcement, intelligence, protective, national defense, and immigration personnel

in terrorism and national security cases. The section is in part complimentary to section 154

of the bill, relating to sharing of foreign intelligence information, and reflects a similar purpose

of promoting a coordinated governmental response to terrorist and national security threats.”

Contrary to the implication here section 154 deals with sharing information gathered by law

enforcement officials not with information gathered by intelligence officers

See also, DoJ at §154, “This section provides that foreign intelligence information obtained

in criminal investigations, including grand jury and electronic surveillance information, may

be shared with other federal government personnel having responsibilities relating to the

defense of the nation and its interests. With limited exceptions, it is presently impossible for

criminal investigators to share information obtained through a grand jury (including through

the use of grand jury subpoenas) and information obtained from electronic surveillance

authorized under Title III with the intelligence community. This limitation will be very

significant in some criminal investigations. For example, grand jury subpoenas often are used

to obtain telephone, computer, financial and other business records in organized crime

investigations. Thus, these relatively basic investigative materials are inaccessible for

examination by intelligence community analysts working on related transnational organized

crime groups. A similar problem occurs in computer intrusion investigations: grand jury

subpoenas and Title III intercepts are used to collect transactional data and to monitor the

unknown intruders. The intelligence community will have an equal interest in such

information, because the intruder may be acting on behalf of a foreign power.”

Blair v. United States, 250 U.S. 273, 281 (1919)(the grand jury “is a grand inquest, a body

with powers of investigation and inquisition, the scope of whose inquiries is not to be limited

narrowly by questions of propriety or forecasts of whether any particular individual will be

found properly subject to an accusation of crime”).

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affairs are conducted in private and outside the presence of the court. Only the

attorney for the government, witnesses under examination, and a court reporter may

attend its proceedings, F.R.Crim.P. 6(d). Matters occurring before the grand jury are

secret and may be disclosed by the attending attorney for the government and those

assisting the grand jury only in the performance of their duties; in presentation to a

successor grand jury; or under court order for judicial proceedings, for inquiry into

misconduct before the grand jury, or for state criminal proceedings, F.R.Crim.P. 6(e).

The Act, in section 203(a), allows disclosure of matters occurring before the

grand jury to “any federal law enforcement, intelligence, protective, immigration,

national defense, or national security” officer to assist in the performance of his

official duties, F.R.Crim.P. 6(e)(3)(C)(i)(V).48

Critics may protest that the change could lead to the use of the grand jury for

intelligence gathering purposes, or less euphemistically, to spy on Americans.49 The

proposal was never among those scheduled to sunset, but earlier versions of the

section followed the path used for most other disclosures of grand jury material: prior

These officers may receive: (1) “foreign intelligence information” that is, information

regardless whether it involves Americans or foreign nationals that “[a] relates to the ability

of the United States to protect against – (aa) actual or potential attack or other grave hostile

acts of a foreign power or an agent of a foreign power; (bb) sabotage or international

terrorism by a foreign power or an agent of a foreign power; (cc) clandestine intelligence

activities by an intelligence service or network of a foreign power;” or [b] “with respect to a

foreign power or foreign territory that relates to – (aa) the national defense or security of the

United States; or (bb) the conduct of the foreign affairs of the United States,” F.R.Crim.P.

6(e)(3)(C)(iv); (2) when the matters involve foreign intelligence or counterintelligence, that

is, [a] “information relating to the capabilities, intentions, or activities of foreign governments

or elements thereof, foreign organizations, or foreign persons, or international terrorist

activities” or [b] “information gathered and activities conducted, to protect against espionage,

other intelligence activities, sabotage, or assassinations conducted on behalf of foreign

governments or elements thereof, foreign organizations, or foreign persons, or international

terrorist activities,” 50 U.S.C. 401a(2),(3)(language added by section 902 of the Act in

italics).

Beale & Felman, The Consequences of Enlisting Federal Grand Juries in the War on

Terrorism: Assessing the USA PATRIOT Act’s Changes to Grand Jury Secrecy, 25

HARVARD JOURNAL OF LAW & PUBLIC POLICY 699, 719-20 (2002)(“There is a significant

danger that the rule permitting disclosure will be treated as the de facto authorization of an

expansion of the grand jury’s investigative role to encompass seeking material relevant only

to matters of national security, national defense, immigration, and so forth. The grand jury’s

awesome powers should not be unwittingly extended to a much wider range of issues. . .

Since the grand jury operates in secret, there are no public checks on the scope of its

investigations, and witnesses are not permitted to challenge its jurisdiction. Only the

supervising court is in a position to keep the grand jury’s investigation within proper bounds.

Requiring judicial approval of foreign intelligence and counterintelligence information

disclosures would provide a natural check against the temptation to manipulate the grand jury

to develop information for unauthorized purposes”); but see, Scheidegger et al., Federalist

Society White Paper on The USA PATRIOT Act of 2001: Criminal Procedure Sections 6

(Nov. 2001)(“The grand jury secrecy rule is a rule of policy which has always had exceptions,

and it has been frequently modified. The secrecy rule has no credible claim to constitutional

stature”).

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court approval, H.R.Rep.No. 107- 236, at 73 (2001). The Act, in section 203(a),

instead calls for confidential notification of the court that a disclosure has occurred

and the entity to whom it was made, F.R.Crim.P. 6(e)(3)(C)(iii). It also insists that

the Attorney General establish implementing procedures for instances when the

disclosure “identifies” Americans (U.S. persons), section 203(c).

Law enforcement officials may share Title III information with the intelligence

community under the same conditions, section 203(b),50 although the grand jury and

Title III sharing provisions differ in at least three important respects. The court need

not be notified of Title III disclosures. On the other hand, the authority for sharing

Title III information expires on December 31, 2005, section 224, and agencies and

their personnel guilty of intentional improper disclosures may be subject to a claim for

damages and disciplinary action, 18 U.S.C. 2520.

The third subsection of section 203 remains something of an enigma. It speaks

in much the same language as its counterparts. It allows law enforcement officials to

share information with the intelligence community, “notwithstanding any other

provisions of law,” section 203(d).51 It either swallows the other subsections, or

supplements them. Several factors argue for its classification as a supplement.

Congress is unlikely to have crafted subsections (a), (b) and (c) only to completely

Information derived from a Title III interception may be shared with any other federal law

enforcement, intelligence, protective, immigration, national defense, or national security

officer if it regards: (1) “foreign intelligence information” that is, information irrespective of

whether it involves Americans or foreign nationals that “[A] relates to the ability of the United

States to protect against – (i) actual or potential attack or other grave hostile acts of a foreign

power or an agent of a foreign power; (ii) sabotage or international terrorism by a foreign

power or an agent of a foreign power; (iii) clandestine intelligence activities by an intelligence

service or network of a foreign power;” or [B] “with respect to a foreign power or foreign

territory that relates to – (i) the national defense or security of the United States; or (ii) the

conduct of the foreign affairs of the United States;” (2) when the matters involve foreign

intelligence or counterintelligence as defined by 50 U.S.C. 401a (as amended by section 902

of the Act), i.e., “As used in this Act: (1) The term ‘intelligence’ includes foreign intelligence

and counterintelligence. (2) The term ‘foreign intelligence’ means information relating to the

capabilities, intentions, or activities of foreign governments or elements thereof, foreign

organizations, or foreign persons, or international terrorist activities. (3) The term

‘counterintelligence’ means information gathered and activities conducted, to protect against

espionage, other intelligence activities, sabotage, or assassinations conducted by or on behalf

of foreign governments or elements thereof, foreign organizations, or foreign persons, or

international terrorist activities” (language added by section 902 in italics).

“Notwithstanding any other provision of law, it shall be lawful for foreign intelligence or

counterintelligence (as defined in section 3 of the National Security Act of 1947 (50 U.S.C.

) or foreign intelligence information obtained as part of a criminal investigation to be disclosed

to any federal law enforcement, intelligence, protective, immigration, national defense, or

national security official in order to assist the official receiving that information in the

performance of his official duties. Any federal official who receives information pursuant to

this provision may use that information only as necessary in the conduct of that person's

official duties subject to any limitations on the unauthorized disclosure of such information,”

§203(d)(1). The subsection goes to define “foreign intelligence information” in the same terms

used to define that phrase in Title III (18 U.S.C. 2510(19)) and in Rule

6(e)(F.R.Crim.P.6(e)(3)(C)(iv)), §203(d)(2).

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nullify them in subsection (d). Without a clear indication to the contrary, the courts

are unlikely to find that Congress intended nullification.52 By gathering the three into

a single section Congress avoided the suggestion that the phrase “notwithstanding any

other provision of law” constitutes surplusage. The Title III and grand jury sharing

procedures are not in other provisions of law, they are now subsections of the same

provision of law. Moreover, Congress seemed to signal an intent for the subsections

to operate in tandem when it dropped the language of the original Justice Department

proposal which expressly identified Title III and Rule 6(e) as examples of the

restrictions to be overcome by the universal sharing language.53

Section 203 deals with earlier legal impediments to sharing foreign intelligence

information unearthed during the course of a criminal investigation. Section 905

looks to dissolve the barriers may be more cultural than legal. Under it, the Attorney

General is to issue guidelines governing the transmittal to the Director of Central

Intelligence of foreign intelligence information that surfaces in the course of a criminal

investigation. The section also instructs the Attorney General to promulgate

guidelines covering reports to the Director of Central Intelligence on whether a

criminal investigation has been initiated or declined based on an intelligence

community referral, 50 U.S.C. 403-5b. To ensure effective use of increased

information sharing, section 908 calls for training of federal, state and local officials

to enable them to recognize foreign intelligence information which they encounter in

their work and how to use it in the performance of their duties, 28 U.S.C. 509 note.

Increasing Institutional Capacity. As noted elsewhere, the Act liberalizes

authority for the FBI to hire translators, section 203, which enhances its capacity to

conduct both criminal and foreign intelligence investigations. The Act also reflects

sentiments expressed earlier concerning coordinated efforts to develop a

Duncan v. Walker, 121 S.Ct. 2120, 2125 (2001)(internal quotation marks and parallel

citations omitted)(“It is our duty to give effect, if possible, to every clause and word of a

statute. United States v. Menasche, 348 U.S. 528, 538-539 (1955) (quoting Montclair v.

Ramsdell, 107 U.S. 147, 152 (1883)); see also Williams v. Taylor, 529 U.S. 362, 404 (2000)

(describing this rule as a cardinal principle of statutory construction); Market Co. v. Hoffman,

101 U.S. 112, 115 (1879)(As early as in Bacon's Abridgment, sect. 2, it was said that a

statute ought, upon the whole, to be so construed that, if it can be prevented, no clause,

sentence, or word shall be superfluous, void, or insignificant). We are thus reluctant to treat

statutory terms as surplusage in any setting. Babbitt v. Sweet Home Chapter, Communities

for Great Ore., 515 U.S. 687, 698 (1995); see also Ratzlaf v. United States, 510 U.S. 135,

140 (1994)”).

It is not possible to conclude that Congress intended the universal subsection (d) to apply

until sunset and the grand jury and Title III subsections (a), (b), and (c) to operate thereafter,

because the Title III subsection expires at the same time as the universal subsection.

Draft at §154, “Notwithstanding any other provision of law, it shall be lawful for foreign

intelligence information obtained as part of a criminal investigation (including, without

limitation, information subject to Rule 6(e) of the Federal Rules of Criminal Procedure and

information obtained pursuant to chapter 119 of title 18, United States Code [i.e. Title III])

to be provided to any federal law enforcement, intelligence, protective, or national defense

personnel, or any federal personnel responsible for administering the immigration laws of the

United States, or to the President and the Vice President of the United States.”

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computerized translation capability to be used in foreign intelligence gathering.54

Section 907 instructs the Director of the Central Intelligence, in consultation with the

Director of the FBI, to report on the creation of a National Virtual Translation

Center. The report is to include information concerning staffing, allocation of

resources, compatibility with comparable systems to be used for law enforcement

purposes, and features which permit its efficient and secure use by all of the

intelligence agencies.

Money Laundering

In federal law, money laundering is the flow of cash or other valuables derived

from, or intended to facilitate, the commission of a criminal offense. It is the

movement of the fruits and instruments of crime. Federal authorities attack money

laundering through regulations, international cooperation, criminal sanctions, and

forfeiture.55 The Act bolsters federal efforts in each area.

Regulation. Prior to passage of the Act, the Treasury Department already

enjoyed considerable authority to impose reporting and record-keeping standards on

financial institutions generally and with respect to anti-money laundering matters in

particular.56

“The Committee is concerned that intelligence in general, and intelligence related to

terrorism in particular, is increasingly reliant on the ability of the Intelligence Community to

quickly, accurately and efficiently translate information in a large number of languages. Many

of the languages for which translation capabilities are limited within the United States

Government are the languages that are of critical importance in our counterterrorism efforts.

The Committee believes that this problem can be alleviated by applying cutting-edge,

internet-like technology to create a ‘National Virtual Translation Center.’ Such a center would

link secure locations maintained by the Intelligence Community throughout the country and

would apply digital technology to network, store, retrieve, and catalogue the audio and textual

information. Foreign intelligence could be collected technically in one location, translated in

a second location, and provided to an Intelligence Community analyst in a third location.

“The Committee notes that the CIA, FBI NSA and other intelligence agencies have

applied new technology to this problem. The Committee believes that these efforts should be

coordinated so that the solution can be applied on a Community-wide basis. Accordingly, the

Committee directs the Director of Central Intelligence, in consultation with the Director of the

FBI, and other heads of departments and agencies within the Intelligence Community, to

prepare and submit to the intelligence committees by June 1, 2002, a report concerning the

feasibility and structure of a National Virtual Translation Center, including recommendations

regarding the establishment of such a center and the funding necessary to do so,” S.Rep.No.

107-63, at 11 (2001).

For a brief overview, see, Murphy, Money Laundering: Current Law and Proposals, CRS

REP.NO. RS21032 (DEC. 21, 2001).

See e.g,, 12 U.S.C. 1829b (retention or records by insured depository institutions), 19511959 (record-keeping by financial institutions); 31 U.S.C. 5311 (“It is the purpose of this

subchapter [31 U.S.C. 5311 et seq.] (except section 5315 [relating to foreign current

transaction reports]) to require certain reports or records where they have a high degree of

usefulness in criminal, tax, or regulatory investigations or proceedings”).

CRS-25

Records and Reports. For instance, under the Currency and Financial

Transaction Reporting Act, a component of the Bank Secrecy Act, anyone who

transports more than $10,000 into or out of the United States must report that fact

to the Treasury Department, 31 U.S.C. 5316. Banks, credit unions, and certain other

financial institutions must likewise report identifying information relating to cash

transactions in excess of $10,000 to the Treasury Department (CTRs), 31 U.S.C.

5313, 31 C.F.R. §103.22. Other businesses are required to report to the Internal

Revenue Service the particulars relating to any transaction involving more than

$10,000 in cash, 26 U.S.C. 6050I. Banks must file suspicious activity reports (SARs)

with the Treasury Department's Financial Crimes Enforcement Network (FinCEN) for

any transactions involving more than $5,000 which they suspect may be derived from

illegal activity, 31 U.S.C. 5318(g), 31 C.F.R. §103.18. Money transmission

businesses and those that deal in traveler's checks or money orders are under a similar

obligation for suspicious activities involving more than $2,000, 31 U.S.C. 5318(g),

31 C.F.R. §103.18.

Among other things, the Act expands the authority of the Secretary of the

Treasury over these reporting requirements. He is to promulgate regulations,

pursuant to sections 356 and 321, under which securities brokers and dealers as well

as commodity merchants, advisors and pool operators must file suspicious activity

reports, 31 U.S.C. 5318 note; 31 U.S.C. 5312(2)(c)(1). Businesses which were only

to report cash transactions involving more than $10,000 to the IRS are now required

to files SARs as well,57 reflecting Congress’ view that the information provided the

IRS may be valuable for other law enforcement purposes.58 This concern is likewise

Section 365, 31 U.S.C. 5331; Sec. 321, 31 U.S.C. 5312.

H.R.Rep.No. 107-250, at 38-9 (2001)(“Most importantly, the Committee found significant

shortcomings in the use of information already in possession of the government. Section

6050I of the Internal Revenue Code requires that any person engaged in a trade or business

(other than financial institutions required to report under the Bank Secrecy Act) file a report

with the Federal government on cash transactions in excess of $10,000. Reports filed pursuant

to this requirement provide law enforcement authorities with a paper trail that can, among

other things, lead to the detection and prosecution of money laundering activity.

“Under current law, non-financial institutions are required to report cash transactions

exceeding $10,000 to the Internal Revenue Service (IRS) on IRS Form 8300. Because the

requirement that such reports be filed is contained in the Internal Revenue Code, Form 8300

information is considered tax return information, and is subject to the procedural and

record-keeping requirements of section 6103 of the Internal Revenue Code. For example,

section 6103(p)(4)(E) requires agencies seeking Form 8300 information to file a report with

the Secretary of the Treasury that describes the procedures established and utilized by the

agency for ensuring the confidentiality of the information. IRS requires that agencies

requesting Form 8300 information file a ‘Safeguard Procedures Report’ which must be

approved by the IRS before any such information can be released. For that reason, Federal,

State and local law enforcement agencies are not given access to the Form 8300s as Congress

anticipated when it last amended this statute. See 26 U.S.C. 6103(l)(15).

“While the IRS uses Form 8300 to identify individuals who may be engaged in tax

evasion, Form 8300 information can also be instrumental in helping law enforcement

authorities trace cash payments by drug traffickers and other criminals for luxury cars,

jewelry, and other expensive merchandise. Because of the restrictions on their dissemination

outlined above, however, Form 8300s are not nearly as accessible to law enforcement

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reflected in section 357 which asks the Secretary of the Treasury to report on the

Internal Revenue Service’s role in the administration of the Currency and Foreign

Transaction Reporting Act (31 U.S.C. 5311 et seq.), and what transfers of authority,

if any, are appropriate.

Sections 351 and 355 address the liability for disclosure of suspicious activity

reports (SARs). Prior to the Act, federal law prohibited financial institutions and their

officers and employees from tipping off any of the participants in a suspicious

transaction, 31 U.S.C. 5318(g)(2)(2000 ed.). Federal law, however, immunized the

institutions and their officers and employees from liability for filing the reports and for

failing to disclose that they had done so, 31 U.S.C. 5318(g)(3)(2000 ed.). Section

351 makes changes in both the immunity and the proscription. It adds government

officials who have access to the reports to the anti-tip ban, 31 U.S.C. 5318(g)(2)(A).

It allows, but does not require, institutions to reveal SAR information in the context

of employment references to other financial institutions, 31 U.S.C. 5318(g)(2)(B).

Finally, it makes clear that the immunity does not extend to immunity from

governmental action.59 Section 355 expands the immunity to cover disclosures in

authorities as the various reports mandated by the Bank Secrecy Act, which can typically be

retrieved electronically from a database maintained by the Treasury Department. The

differential access to the two kinds of reports is made anomalous by the fact that Form 8300

elicits much the same information that is required to be disclosed by the Bank Secrecy Act.

For example, just as Form 8300 seeks the name, address, and social security number of a

customer who engages in a cash transaction exceeding $10,000 with a trade or business,

Currency Transaction Reports (CTRs) mandated by the Bank Secrecy Act require the same

information to be reported on a cash transaction exceeding $10,000 between a financial

institution and its customer”).

“Subsection (a) of section [351] makes certain technical and clarifying amendments to 31

U.S.C. 5318(g)(3), the Bank Secrecy Act’s ‘safe harbor’ provision that protects financial

institutions that disclose possible violations of law or regulation from civil liability for

reporting their suspicions and for not alerting those identified in the reports. The safe harbor

is directed at Suspicious Activity Reports and similar reports to the government and

regulatory authorities under the Bank Secrecy Act.

“First, section [351](a) amends section 5318(g)(3) to make clear that the safe harbor

from civil liability applies in arbitration, as well as judicial, proceedings. Second, it amends

section 5318(g)(3) to clarify the safe harbor's coverage of voluntary disclosures (that is, those

not covered by the SAR regulatory reporting requirement). The language in section

5318(g)(3)(A) providing that ‘any financial institution that * * * makes a disclosure pursuant

to * * * any other authority * * * shall not be liable to any person’ is not intended to avoid the

application of the reporting and disclosure provisions of the Federal securities laws to any

person, or to insulate any issuers from private rights of actions for disclosures made under the

Federal securities laws.

“Subsection [351](b) amends section 5318(g)(2) of title 31--which currently prohibits

notification of any person involved in a transaction reported in a SAR that a SAR has been

filed--to clarify (1) that any government officer or employee who learns that a SAR has been

filed may not disclose that fact to any person identified in the SAR, except as necessary to

fulfill the officer or employee's official duties, and (2) that disclosure by a financial institution

of potential wrongdoing in a written employment reference provided in response to a request

from another financial institution pursuant to section 18(v) of the Federal Deposit Insurance

Act, or in a written termination notice or employment reference provided in accordance with

the rules of a securities self-regulatory organization, is not prohibited simply because the

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employment references to other insured depository financial institutions provided

disclosure is not done with malicious intent.60

The Financial Crimes Enforcement Network (FinCEN), a component within the

Treasury Department long responsible for these anti-money laundering reporting and

record-keeping requirements, 31 C.F.R. pt. 103, was administratively created in 1990

to provide other government agencies with an “intelligence and analytical network in

support of the detection, investigation, and prosecution of domestic and international

money laundering and other financial crimes,” 55 Fed.Reg. 18433 (May 2, 1990).

The Act, in section 361, makes FinCEN a creature of statute, a bureau within

the Treasury Department, 31 U.S.C. 310. Section 362 charges it with the

responsibility of establishing a highly secure network to allow financial institutions to

file required reports electronically and to permit FinCEN to provide those institutions

with alerts and other information concerning money laundering protective measures,

31 U.S.C. 310 note.

Special Measures. In extraordinary circumstances involving international

financial matters, the Act grants the Secretary of the Treasury, in consultation with

other appropriate regulatory authorities, the power to issue regulations and orders

involving additional required “special measures” and additional “due diligence”

requirements to combat money laundering. The special measure authority, available

under section 311, comes to life with the determination that particular institutions,

jurisdictions, types of accounts, or types of transactions pose a primary money

potential wrongdoing was also reported in a SAR,” H.R.Rep.No. 107-250, at 66 (2001).

31 U.S.C. 1828(w). “This section deals with the same employment reference issue

addressed in section [351] but with respect to title 12. Occasionally banks develop suspicions

that a bank officer or employee has engaged in potentially unlawful activity. These suspicions

typically result in the bank filing a SAR. Under present law, however, the ability of banks to

share these suspicions in written employment references with other banks when such an officer

or employee seeks new employment is unclear. Section 208 would amend 12 U.S.C. 1828 to

permit a bank, upon request by another bank, to share information in a written employment

reference concerning the possible involvement of a current or former officer or employee in

potentially unlawful activity without fear of civil liability for sharing the information, but only

to the extent that the disclosure does not contain information which the bank knows to be

false, and the bank has not acted with malice or with reckless disregard for the truth in making

the disclosure,” H.R.Rep.No. 107-250, at 67 (2001).

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laundering concern.61 These special measures may require U.S. financial institutions

to:

• maintain more extensive records and submit additional reports relating to

participants in foreign financial transactions with which they are involved

• secure beneficial ownership information with respect to accounts maintained

for foreign customers

• adhere to “know-your-customer” requirements concerning foreign customers

who use “payable-through accounts” held by the U.S. entity for foreign financial

institutions

• keep identification records on foreign financial institutions’ customers whose

transactions are routed through the foreign financial institution’s correspondent

accounts with the U.S. financial institution

• honor limitations on correspondent or payable-through accounts maintained for

foreign financial institutions.62

31 U.S.C. 5318A. The circumstances considered in the case of a suspect jurisdiction are:

evidence of organized crime or terrorist transactions there; the extent to which the

jurisdiction’s bank secrecy or other regulatory practices encourage foreign use; the extent and

effectiveness of the jurisdiction’s banking regulation; the volume of financial transactions in

relation to the size of the jurisdiction’s economy; whether international watch dog groups

(such as the Financial Action Task Force) have identified the jurisdiction as an offshore

banking or secrecy haven; the existence or absence of a mutual legal assistance treaty between

the U.S. and the jurisdiction; and the extent of official corruption within the jurisdiction. The

institutional circumstances weighed before imposing special measures with respect to

particular institutions or types of accounts or transactions include the intent to which the

suspect institution or types of accounts or transactions are particularly attractive to money

launderers, the extent to which they can be used by legitimate businesses, and the extent to

which focused measures are likely to be successful.

The House report describes these measures in greater detail: “Section [311] adds a new

section 5318A to the Bank Secrecy Act, authorizing the Secretary of the Treasury to require

domestic financial institutions and agencies to take one or more of five ‘special measures’ if

the Secretary finds that reasonable grounds exist to conclude that a foreign jurisdiction, a

financial institution operating outside the United States, a class of international transactions,

or one or more types of accounts is a ‘primary money laundering concern.’ Prior to invoking

any of the special measures contained in section 5318A(b), the Secretary is required to consult

with the Chairman of the Board of Governors of the Federal Reserve System, any other

appropriate Federal banking agency, the Securities and Exchange Commission, the National

Credit Union Administration Board, and, in the sole discretion of the Secretary, such other

agencies and interested parties as the Secretary may find to be appropriate. Among other

things, this consultation is designed to ensure that the Secretary possesses information on the

effect that any particular special measure may have on the domestic and international banking

system. In addition, the Committee encourages the Secretary to consult with non-governmental

‘interested parties,’ including, for example, the Bank Secrecy Act Advisory Group, to obtain

input from those who may be subject to a regulation or order under this section.

“Prior to invoking any of the special measures contained in section 5318A, the Secretary

must consider three discrete factors, namely (1) whether other countries or multilateral groups

have taken similar action; (2) whether the imposition of the measure would create a significant

competitive disadvantage, including any significant cost or burden associated with

compliance, for firms organized or licensed in the United States; and (3) the extent to which

the action would have an adverse systemic impact on the payment system or legitimate

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business transactions.

“Finally, subsection (a) makes clear that this new authority is not to be construed as

superseding or restricting any other authority of the Secretary or any other agency.

“Subsection (b) of the new section 5318A outlines the five ‘special measures’ the

Secretary may invoke against a foreign jurisdiction, financial institution operating outside the

U.S., class of transaction within, or involving, a jurisdiction outside the U.S., or one or more

types of accounts, that he finds to be of primary money laundering concern.

“The first such measure would require domestic financial institutions to maintain records

and/or file reports on certain transactions involving the primary money laundering concern,

to include any information the Secretary requires, such as the identity and address of

participants in a transaction, the legal capacity in which the participant is acting, the beneficial

ownership of the funds (in accordance with steps that the Secretary determines to be

reasonable and practicable to obtain such information), and a description of the transaction.

The records and/or reports authorized by this section must involve transactions from a foreign

jurisdiction, a financial institution operating outside the United States, or class of international

transactions within, or involving, a foreign jurisdiction, and are not to include transactions that

both originate and terminate in, and only involve, domestic financial institutions.

“The second special measure would require domestic financial institutions to take such

steps as the Secretary determines to be reasonable and practicable to ascertain beneficial

ownership of accounts opened or maintained in the U.S. by a foreign person (excluding

publicly traded foreign corporations) associated with what has been determined to be a

primary money laundering concern.

“The third special measure the Secretary could impose in the case of a primary money

laundering concern would require domestic financial institutions, as a condition of opening or

maintaining a ‘payable-through account’ for a foreign financial institution, to identify each

customer (and representative of the customer) who is permitted to use or whose transactions

flow through such an account, and to obtain for each customer (and representative)

information that is substantially comparable to the information it would obtain with respect

to its own customers. A ‘payable-through account’ is defined for purposes of the legislation

as an account, including a transaction account (as defined in section 19(b)(1)(C) of the

Federal Reserve Act), opened at a depository institution by a foreign financial institution by

means of which the foreign financial institution permits its customers to engage, either directly

or through a sub-account, in banking activities usual in connection with the business of

banking in the United States.

“The fourth special measure the Secretary could impose in the case of a primary money

laundering concern would require domestic financial institutions, as a condition of opening or

maintaining a ‘correspondent’ account for a foreign financial institution, to identify each

customer (and representative of the customer) who is permitted to use or whose transactions

flow through such an account, and to obtain for each customer (and representative)

information that is substantially comparable to the information that it would obtain with

respect to its own customers. With respect to a bank, the term ‘correspondent account’ means

an account established to receive deposits from and make payments on behalf of a foreign

financial institution.

“The fifth measure the Secretary could impose in the case of a primary money

laundering concern would prohibit or impose conditions (beyond those already provided for

in the third and fourth measures) on domestic financial institutions’ correspondent or

payable-through accounts with foreign banking institutions. In addition to the required

consultation with the Chairman of the Board of Governors of the Federal Reserve, prior to

imposing this measure the Secretary is also directed to consult with the Secretary of State and

the Attorney General.

“The five special measures authorized by this section may be imposed in any sequence

or combination as the Secretary determines. The first four special measures may be imposed

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Due Diligence. Section 312 demands that all U.S. financial institutions have

policies, procedures, and controls in place to identify instances where their

correspondent and private banking accounts with foreign individuals and entities

might be used for money laundering purposes, 31 U.S.C. 5318(i). They must

establish enhanced due diligence standards for correspondent accounts held for

offshore banking institutions (whose licenses prohibit them from conducting financial

activities in the jurisdiction in which they are licensed) or institutions in money

laundering jurisdictions designated by the Secretary of the Treasury or by international

watch dog groups such as the Financial Action Task Force. The standards must at

least involve reasonable efforts to identify the ownership of foreign institutions which

are not publicly held; closely monitor the accounts for money laundering activity; and

to hold any foreign bank, for whom the U.S. institution has a correspondent account,

to the same standards with respect to other correspondent accounts maintained by the

foreign bank. In the case of private banking accounts of $1 million or more, U.S.

financial institutions must keep records of the owners of the accounts and the source

of funds deposited in the accounts. They must report suspicious transactions and,

when the accounts are held for foreign officials, guard against transactions involving

foreign official corruption.63

by regulation, order, or otherwise as permitted by law. However, if the Secretary proceeds by

issuing an order, the order must be accompanied by a notice of proposed rulemaking relating

to the imposition of the special measure, and may not remain in effect for more than 120 days,

except pursuant to a regulation prescribed on or before the end of the 120-day period. The

fifth special measure may be imposed only by regulation,” H.R.Rep.No. 107-250, at 68-9.

See generally, H.R.Rep.No. 107-250, at 71-2 (“Section [312] amends 31 U.S.C. 5318 to

require financial institutions that establish, maintain, administer, or manage private banking

or correspondent accounts for non-U.S. persons to establish appropriate, specific, and, where

necessary, enhanced due diligence policies, procedures, and controls to detect and report

instances of money laundering through those accounts.

“The section requires financial institutions to apply enhanced due diligence procedures

when opening or maintaining a correspondent account for a foreign bank operating (1) under

a license to conduct banking activities which, as a condition of the license, prohibits the

licensed entity from conducting banking activities with the citizens of, or with the local

currency of, the country which issued the license; or (2) under a license issued by a foreign

country that has been designated (a) as non-cooperative with international anti-money

laundering principles by an intergovernmental group or organization of which the United

States is a member, with which designation the Secretary of the Treasury concurs, or (b) by

the Secretary as warranting special measures due to money laundering concerns.

“The enhanced due diligence procedures include (1) ascertaining the identity of each of

the owners of the foreign bank (except for banks that are publicly traded); (2) conducting

enhanced scrutiny of the correspondent account to guard against money laundering and report

any suspicious activity; and (3) ascertaining whether the foreign bank provides correspondent

accounts to other foreign banks and, if so, the identity of those foreign banks and related due

diligence information.

“For private banking accounts requested or maintained by a non-United States person,

a financial institution is required to implement procedures for (1) ascertaining the identity of

the nominal and beneficial owners of, and the source of funds deposited into, the account as

needed to guard against money laundering and report suspicious activity; and (2) conducting

enhanced scrutiny of any such account requested or maintained by, or on behalf of, a senior

foreign political figure, or his immediate family members or close associates, to prevent,

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General Regulatory Matters. The Act establishes several other regulatory

mechanisms directed at the activities involving U.S. financial institutions and foreign

individuals or institutions. Section 313, for instance, in another restriction on

correspondent accounts for foreign financial institutions, prohibits U.S. financial

institutions from maintaining correspondent accounts either directly or indirectly for

foreign shell banks (banks with no physical place of business64) which have no

affiliation with any financial institution through which their banking activities are

subject to regulatory supervision.65

The Act, in section 325, empowers the Secretary of the Treasury to promulgate

regulations to prevent financial institutions from allowing their customers to conceal

their financial activities by taking advantage of the institutions’ concentration account

practices.66

The Secretary of the Treasury is instructed in section 326 to issue regulations for

financial institutions’ minimum new customer identification standards and record-

detect and report transactions that may involve the proceeds of foreign corruption. A private

bank account is defined as an account (or any combination of accounts) that requires a

minimum aggregate deposit of funds or other assets of not less than $1 million; is established

on behalf of one or more individuals who have a direct or beneficial ownership in the account;

and is assigned to, or administered or managed by, an officer, employee or agent of a financial

institution acting as a liaison between the institution and the direct or beneficial owner of the

account.

“This section directs the Secretary of the Treasury, within 6 months of enactment of this

bill and in consultation with appropriate Federal functional regulators, to further define and

clarify, by regulation, the requirements imposed by this section”).

Or more exactly, a bank which has no physical presence in any country; a “physical

presence” for a foreign bank is defined as “a place of business that – (i) is maintained by a

foreign bank; (ii) is located at a fixed address (other than solely an electronic address) in a

country in which the foreign bank is authorized to conduct banking activities, at which

location the foreign bank – (I) employs 1 or more individuals on a full-time basis; and (II)

maintains operating records relating to its banking activities; and (iii) is subject to inspection

by the banking authority which licensed the foreign bank to conduct banking activities,” 31

U.S.C. 5318(j)(4).

31 U.S.C. 5318(j); H.R.Rep.No. 107-250, at 72 (2001).

The Act does not define “concentration accounts,” although the House Financial Services

Committee report provides some incite into the section’s intent, H.R.Rep.No. 107-250, at 72-3

(2001)(“This section gives the Secretary of the Treasury discretionary authority to prescribe

regulations governing the maintenance of concentration accounts by financial institutions, to

ensure that these accounts are not used to prevent association of the identity of an individual

customer with the movement of funds of which the customer is the direct or beneficial owner.

If promulgated, the regulations are required to prohibit financial institutions from allowing

clients to direct transactions into, out of, or through the concentration accounts of the

institution; prohibit financial institutions and their employees from informing customers of the

existence of, or means of identifying, the concentration accounts of the institution; and to

establish written procedures governing the documentation of all transactions involving a

concentration account.”)

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keeping and to recommend a means to effectively verify the identification of foreign

customers.67

31 U.S.C. 5318(l); H.R.Rep.No. 107-250, at 62-3 (2001)(“Section [326](a) amends 31

U.S.C. 5318 by adding a new subsection governing the identification of account holders.

Paragraph (1) directs Treasury to prescribe regulations setting forth minimum standards for

customer identification by financial institutions in connection with the opening of an account.

By referencing ‘customers’ in this section, the Committee intends that the regulations

prescribed by Treasury take an approach similar to that of regulations promulgated under title

V of the Gramm-Leach-Bliley Act of 1999, where the functional regulators defined

‘customers’ and ‘customer relationship’ for purposes of the financial privacy rules. Under this

approach, for example, where a mutual fund sells its shares to the public through a

broker-dealer and maintains a ‘street name’ or omnibus account in the broker-dealer's name,

the individual purchasers of the fund shares are customers of the broker-dealer, rather than

the mutual fund. The mutual fund would not be required to ‘look through’ the broker-dealer

to identify and verify the identities of those customers. Similarly, where a mutual fund sells

its shares to a qualified retirement plan, the plan, and not its participants, would be the fund's

customers. Thus, the fund would not be required to ‘look through’ the plan to identify its

participants.

“Paragraph (2) requires that the regulations must, at a minimum, require financial

institutions to implement procedures to verify (to the extent reasonable and practicable) the

identity of any person seeking to open an account, maintain records of the information used

to do so, and consult applicable lists of known or suspected terrorists or terrorist

organizations. The lists of known or suspected terrorists that the Committee intends financial

institutions to consult are those already supplied to financial institutions by the Office of

Foreign Asset Control (OFAC), and occasionally by law enforcement and regulatory

authorities, as in the days immediately following the September 11, 2001, attacks on the

World Trade Center and the Pentagon. It is the Committee's intent that the verification

procedures prescribed by Treasury make use of information currently obtained by most

financial institutions in the account opening process. It is not the Committee's intent for the

regulations to require verification procedures that are prohibitively expensive or impractical.

“Paragraph (3) requires that Treasury consider the various types of accounts maintained

by various financial institutions, the various methods of opening accounts, and the various

types of identifying information available in promulgating its regulations. This would require

Treasury to consider, for example, the feasibility of obtaining particular types of information

for accounts opened through the mail, electronically, or in other situations where the

accountholder is not physically present at the financial institution. Millions of Americans open

accounts at mutual funds, broker-dealers, and other financial institutions in this manner; it is

not the Committee's intent that the regulations adopted pursuant to this legislation impose

burdens that would make this prohibitively expensive or impractical. This provision allows

Treasury to adopt regulations that are appropriately tailored to these types of accounts.

“Current regulatory guidance instructs depository institutions to make reasonable efforts

to determine the true identity of all customers requesting an institution's services. (See, e.g.,

FDIC Division of Supervision Manual of Exam Policies, section 9.4 VI.) The Committee

intends that the regulations prescribed under this section adopt a similar approach, and impose

requirements appropriate to the size, location, and type of business of an institution.

“Paragraph (4) requires that Treasury consult with the appropriate functional regulator

in developing the regulations. This will help ensure that the regulations are appropriately

tailored to the business practices of various types of financial institutions, and the risks that

such practices may pose.

“Paragraph (5) gives each functional regulator the authority to exempt, by regulation

or order, any financial institution or type of account from the regulations prescribed under

paragraph (1).

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Federal regulatory authorities must approve the merger of various financial

institutions under the Bank Holding Company Act, 12 U.S.C. 1842, and the Federal

Deposit Insurance Act, 12 U.S.C. 1828. Section 327 requires consideration of an

institution’s anti-money laundering record when such mergers are proposed, 12

U.S.C. 1842(c)(6), 1828(c)(11).

Section 314 directs the Secretary of the Treasury to promulgate regulations in

order to encourage financial institutions and law enforcement agencies to share

information concerning suspected money laundering and terrorist activities, 31 U.S.C.

5311 note.

Section 319(b) requires U.S. financial institutions to respond to bank regulatory

authorities’ requests for anti-money laundering records (within 120 hours) and to

Justice or Treasury Department subpoenas or summons for records concerning

foreign deposits (within 7 days), 31 U.S.C. 5318(k). Section 319 also calls for civil

penalties of up to $10,000 a day for financial institutions who have failed to terminate

correspondent accounts with foreign institutions that have ignored Treasury or Justice

Department subpoenas or summons, 31 U.S.C. 5318(k)(3).

Section 352 directs the Secretary of the Treasury to promulgate regulations, in

consultation with other appropriate regulatory authorities, requiring financial

institutions to maintain anti-money laundering programs which must include at least

a compliance officer; an employee training program; the development of internal

policies, procedures and controls; and an independent audit feature.68

Section 359 subjects money transmitters to the regulations and requirements of

the Currency and Foreign Transactions Reporting Act (31 U.S.C. 5311 et seq.) and

directs the Secretary of the Treasury to report on the need for additional legislation

relating to domestic and international underground banking systems.

Federal law obligates the Administration to develop a national strategy for

combating money laundering and related financial crimes, 31 U.S.C. 5341. Section

354 insists that the strategy contain data relating to the funding of international

terrorism and efforts to prevent, detect, and prosecute such funding, 31 U.S.C.

5341(b)(12).

Section 364 authorizes the Board of Governors of the Federal Reserve to hire

guards to protect members of the Board, as well as the Board’s property and

personnel and that of any Federal Reserve bank. The guards may carry firearms and

make arrests, 12 U.S.C. 248(q).

Reports to Congress. Section 366 instructs the Secretary of the Treasury

to report on methods of improving the compliance of financial institutions with the

currency transaction reporting requirements and on the possibility of expanding

“Paragraph (6) requires that Treasury's regulations prescribed under paragraph (1)

become effective within one year after enactment of this bill”).

31 U.S.C. 5318(h); H.R.Rep.No. 107-250, at 72 (2001).

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exemptions to the requirements with an eye to improving the quality of data available

for law enforcement purposes and reducing the number of unnecessary filings.69

Section 324 instructs the Secretary of the Treasury to report on the execution

of authority granted under the International Counter Money Laundering and Related

Measures subtitle (III-A) of the Act and to recommend any appropriate related

legislation, 31 U.S.C. 5311 note.

International Cooperation. Reflecting concern about the ability of law

enforcement officials to trace money transfers to this country from overseas, section

328 instructs the Secretary of the Treasury, Secretary of State and Attorney General

to make every effort to encourage other governments to require identification of the

originator of international wire transfers.70

Section 330 expresses the sense of the Congress that the Administration should

seek to negotiate international agreements to enable U.S. law enforcement officials

to track the financial activities of foreign terrorist organizations, money launderers

and other criminals.

Section 360 authorizes the Secretary of the Treasury to direct the U.S. Executive

Directors of the various international financial institutions (i.e., the International

Monetary Fund, the International Bank for Reconstruction and Development, the

European Bank for Reconstruction and Development, the International Development

Association, the International Finance Corporation, the Multilateral Investment

Guarantee Agency, the African Development Bank, the African Development Fund,

the Asian Development Bank, the Bank for Economic Development and Cooperation

in the Middle East and North Africa, and the InterAmerican Investment Corporation):

(1) to support the loan and other benefit efforts on behalf of countries that the

President determines have supported our anti-terrorism efforts, and (2) to vote to

ensure that funds from those institutions are not used to support terrorism.

31 U.S.C. 5313 note; H.R.Rep.No. 107-205, at 65 (2001).

H.R.Rep.No. 107-250, at 67 (2001)(“This section directs the Secretary of the Treasury,

in consultation with the Attorney General and the Secretary of State, to (1) take all reasonable

steps to encourage foreign governments to require the inclusion of the name of the originator

in wire transfer instructions sent to the U.S. and other countries; and (2) report annually to

Congress on Treasury's progress in achieving this objective, and on impediments to instituting

a regime in which all appropriate identification about wire transfer recipients is included with

wire transfers from their point of origination until disbursement.

“The Committee is concerned that inadequate information on the originator of wire

transfers from a number of foreign jurisdictions makes it difficult for both law enforcement

and financial institutions to properly understand the source of funds entering the United States

in wire transfers. Such a lack of clarity could aid money launderers or terrorists in moving

their funds into the United States financial system. Additionally, while arguments have been

made that there are technical impediments to requiring that complete addressee information

appear on all wire transfers terminating in or passing through the United States, the

Committee believes that having such information is technically feasible and would aid both

financial institutions in performing due diligence and law enforcement in tracking or seizing

money that is the derivative of or would be used in the commission of a crime”).

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Crimes. Federal criminal money laundering statutes punish both concealing the

fruits of old offenses and financing new ones. They proscribe financial transactions

which:

• involve more than $10,000 derived from one of a list of specified underlying

crimes, 18 U.S.C. 1957, or

• are intended to promote any of the designated predicate offenses, or

• are intended to evade taxes, or

• are designed to conceal the proceeds generated by any of the predicate

offenses, or

• are crafted to avoid transaction reporting requirements, 18 U.S.C. 1956.

They also condemn transporting funds into, out of, or through the United States with

the intent to further a predicate offense, conceal its proceeds, or evade reporting

requirements, 18 U.S.C. 1956. Offenders face imprisonment for up to twenty years,

fines of up to $500,000, civil penalties, 18 U.S.C. 1956, 1957, and confiscation of the

illicit funds involved in a violation or in any of the predicate offenses, 18 U.S.C. 981,

982.

The Act contains a number of new money laundering crimes, as well as

amendments and increased penalties for existing crimes. Section 315, for example,

adds several crimes to the federal money laundering predicate offense list of 18 U.S.C.

1956. The newly added predicate offenses include crimes in violation of the laws of

the other nations when the proceeds are involved in financial transactions in this

country: crimes of violence, public corruption, smuggling, and offenses condemned

in treaties to which we are a party, 18 U.S.C. 1956(c)(7)(B). Additional federal

crimes also join the predicate list:

• 18 U.S.C. 541 (goods falsely classified)

• 18 U.S.C. 922(1) (unlawful importation of firearms)

• 18 U.S.C. 924(n) (firearms trafficking)

• 18 U.S.C. 1030 (computer fraud and abuse)

• felony violations of the Foreign Agents Registration Act, 22 U.S.C. 618.

As the report accompanying H.R. 3004 explains:

This amendment enlarges the list of foreign crimes that can lead to money

laundering prosecutions in this country when the proceeds of additional foreign

crimes are laundered in the United States. The additional crimes include all

crimes of violence, public corruption, and offenses covered by existing bilateral

extradition treaties. The Committee intends this provision to send a strong signal

that the United States will not tolerate the use of its financial institutions for the

purpose of laundering the proceeds of such activities. H.R.Rep.No. 107-250, at

55 (2000).

In this same vein, section 376 adds the crime of providing material support to a

terrorist organization (18 U.S.C. 2339B) to the predicate offense list and section 318

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expands 18 U.S.C. 1956 to cover financial transactions conducted in foreign financial

institutions.71

Section 329 makes it a federal crime to corruptly administer the money

laundering regulatory scheme. Offenders are punishable by imprisonment for not

more than 15 years and a fine of not more than three times the amount of the bribe.

Section 5326 of title 31 authorizes the Secretary of the Treasury to impose

temporary, enhanced reporting requirements upon financial institutions in areas

victimized by substantial money laundering activity (geographic targeting regulations

and orders). Section 353 makes it clear that the civil sanctions, criminal penalties,

and prohibitions on smurfing (structuring transactions to evade reporting

requirements) apply to violations of the regulations and orders issued under 31 U.S.C.

5326.72 It also extends the permissible length of the temporary geographical orders

from 60 to 180 days.

Violations of the special measures and special due diligence requirements of

sections 311 and 312 are subject to both civil and criminal penalties by virtue of

section 363's amendments to 31 U.S.C. 5321(a) and 5322. The amendments

authorize civil penalties and criminal fines of twice the amount of the transaction but

not more than $1 million. Criminal offenders would be subject to a fine in the same

amount.

“[S]ection 1956 of title 18, United States Code, makes it an offense to conduct a

transaction involving a financial institution if the transaction involves criminally derived

property. Similarly, 18 U.S.C. 1957 creates an offense relating to the deposit, withdrawal,

transfer or exchange of criminally derived funds ‘by, to or through a financial institution.’ For

the purposes of both statutes, the term ‘financial institution’ is defined in 31 U.S.C. 5312. See

18 U.S.C. 1956(c)(6); 18 U.S.C. 1957(f).

“The definition of ‘financial institution’ in 5312 does not explicitly include foreign

banks. Such banks may well be covered because they fall within the meaning of ‘commercial

bank’ or other terms in the statute, but as presently drafted, there is some confusion over

whether the government can rely on section 5312 to prosecute an offense under either 1956

or 1957 involving a transaction through a foreign bank, even if the offense occurs in part in

the United States. For example, if a person in the United States sends criminal proceeds

abroad--say to a Mexican bank--and launders them through a series of financial transactions,

the government conceivably could not rely on the definition of a ‘financial institution’ in

1956(c)(6) to establish that the transaction was a ‘financial transaction’ within the meaning

of 1956(c)(4)(B) (defining a ‘financial transaction’ as a transaction involving the use of a

‘financial institution’), or that it was a ‘monetary transaction’ within the meaning of 1957(f)

(defining ‘monetary transaction’ as, inter alia, a transaction that would be a ‘financial

transaction’ under 1956(c)(4)(B)).

“Similarly, the money laundering laws in effect in most countries simply make it an

offense to launder the proceeds of any crime, foreign or domestic. In the United States,

however, the money laundering statute is violated only when a person launders the proceeds

of one of the crimes set forth on a list of ‘specified unlawful activities.’ 18 U.S.C. 1956(c)(7).

Currently only a handful of foreign crimes appear on that list. See 1956(c)(7)(B),”

H.R.Rep.No. 107-250, at 38 (2000).

Cf., H.R.Rep.No. 107-250, at 57.

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Earlier federal law prohibited the operation of illegal money transmitting

businesses, 18 U.S.C. 1960. Section 373 amends the proscription to make it clear

that the prohibition must be breached “knowingly” and to cover businesses which are

otherwise lawful but which transmit funds they know are derived from or intended for

illegal activities. It also amends 18 U.S.C. 981(a)(1)(A) to permit civil forfeiture

of property involved in a transaction in violation of 18 U.S.C. 1960.73

Sections 374 and 375 of the Act seek to curtail economic terrorism by increasing

and making more uniform the penalties for counterfeiting U.S. or foreign currency

and by making it clear that the prohibitions against possession of counterfeiting

paraphernalia extend to their electronic equivalents.74 They increase the maximum

terms of imprisonment for violation of:

• 18 U.S.C. 471 (obligations or securities of the U.S.) from 15 to 20 years;

• 18 U.S.C. 472 (uttering counterfeit obligations and securities) from 15 to 20

years;

• 18 U.S.C. 473 (dealing in counterfeit obligations and securities) from 10 to 20

years;

“The operation of an unlicensed money transmitting business is a violation of Federal law

under 18 U.S.C. 1960. First, section 104 clarifies the scienter requirement in 1960 to avoid

the problems that occurred when the Supreme Court interpreted the currency transaction

reporting statutes to require proof that the defendant knew that structuring a cash transaction

to avoid the reporting requirements had been made a criminal offense. See Ratzlaf v. United

States, 114 S. Ct. 655 (1994). The proposal makes clear that an offense under 1960 is a

general intent crime for which a defendant is liable if he knowingly operates an unlicensed

money transmitting business. For purposes of a criminal prosecution, the Government would

not have to show that the defendant knew that a State license was required or that the Federal

registration requirements promulgated pursuant to 31 U.S.C. 5330 applied to the business.

“Second, section 104 expands the definition of an unlicensed money transmitting

business to include a business engaged in the transportation or transmission of funds that the

defendant knows are derived from a criminal offense, or are intended to be used for an

unlawful purpose. Thus, a person who agrees to transmit or to transport drug proceeds for a

drug dealer, or funds from any source for a terrorist, knowing such funds are to be used to

commit a terrorist act, would be engaged in the operation of an unlicensed money transmitting

business. It would not be necessary for the Government to show that the business was a

storefront or other formal business open to walk-in trade. To the contrary, it would be

sufficient to show that the defendant offered his services as a money transmitter to another.

“Finally, when Congress enacted 1960 in 1992, it provided for criminal but not civil

forfeiture. The proposal corrects this oversight, and allows the government to obtain forfeiture

of property involved in the operation of an illegal money transmitting business even if the

perpetrator is a fugitive,” H.R.Rep.No. 107-250, at 54 (2001).

“This section makes it a criminal offense to possess an electronic image of an obligation

or security document of the United States with intent to defraud. The provision harmonizes

counterfeiting language to clarify that possessing either analog or digital copies with intent to

defraud constitutes an offense. This section mimics existing language that makes it a felony

to possess the plates from which currency can be printed, and takes into account the fact that

most counterfeit currency seized today is generated by computers or computer-based

equipment. The section also increases maximum sentences for a series of counterfeiting

offenses,” H.R.Rep.No. 107-250, at 75-6 (2001).

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• 18 U.S.C. 476 (taking impressions of tools used for obligations and securities)

from 10 to 25 years;

• 18 U.S.C. 477 (possessing or selling impressions of tools used for obligations

or securities) from 10 to 25 years;

• 18 U.S.C. 484 (connecting parts of different notes) from 5 to 10 years;

• 18 U.S.C. 493 (bonds and obligations of certain lending agencies) from 5 to 10

years;

• 18 U.S.C. 478 (foreign obligations or securities) from 5 to 20 years;

• 18 U.S.C. 479 (uttering counterfeit foreign obligations or securities) from 3 to

20 years;

• 18 U.S.C. 480 (possessing counterfeit foreign obligations or securities) from

1 to 20 years;

• 18 U.S.C. 481 (plates, stones, or analog, digital, or electronic images for

counterfeiting foreign obligations or securities) from 5 to 25 years;

• 18 U.S.C. 482 (foreign bank notes) from 2 to 20 years; and

• 18 U.S.C. 483 (uttering counterfeit foreign bank notes) from 1 to 20 years.

Aliens believed to have engaged in money laundering may not enter the United

States, section 1006 (8 U.S.C. 1182(a)(2)(I)). The same section directs the Secretary

of State to maintain a watchlist to ensure that they are not admitted, 8 U.S.C. 1182

note.

Bulk Cash. Customs officials ask travelers leaving the United States whether

they are taking $10,000 or more in cash with them. Section 1001 of title 18 of the

United States Code makes a false response punishable by imprisonment for not more

than 5 years. Section 5322 of title 31 makes failure to report taking $10,000 or more

to or from the United States punishable by the same penalties. The Act's bulk cash

smuggling offense, section 371, augments these proscriptions with a somewhat

unique feature, 31 U.S.C. 5332 – a criminal forfeiture of the smuggled cash in lieu of

a criminal fine. The basic offense outlaws smuggling cash into or out of the United

States. The concealment element of the offense seems to cover everything but in-sight

possession as long as an amount $10,000 or more is carried in manner to evade

reporting.75

The section appears to be the product of reactions to the Supreme Court’s

decision in United States v. Bajakian, 524 U.S. 321 (1998). There officials had

confiscation $350,000 because Bajakian attempted to leave the country without

declaring it, a violation of 31 U.S.C. 5322. In the view of the Court, the confiscation

was grossly disproportionate to the gravity of the offense and consequently contrary

to the Constitution’s excessive fines clause, 524 U.S. at 337. The Committee Report

accompanying H.R. 3004 explains the Justice Department’s assurance that casting

surreptitious removal of cash from the United States as a smuggling rather than a false

reporting offense will avoid the adverse consequences of the Supreme Court's

“For purposes of this section, the concealment of currency on the person of any individual

includes concealment in any article of clothing worn by the individual or in any luggage,

backpack, or other container worn or carried by such individual,” 31 U.S.C. 5332(a)(2).

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examination of forfeiture in false reporting cases under the Constitution's Excessive

Fines Clause.76

Section 5317 of title 31 once called for civil forfeiture of property traceable to

a violation of 31 U.S.C. 5316 (reports on exporting or importing money instruments

worth $10,000 or more). Section 372 of the Act recasts section 5317 to provide for

civil and criminal forfeitures for violations of 31 U.S.C. 5316, of 31 U.S.C. 5313

(reports on domestic coins and currency transactions involving $10,000 or more) and

of 31 U.S.C. 5324 (structuring transactions to evade reporting requirements

(smurfing)).

Extraterritorial Jurisdiction. The Act makes 18 U.S.C. 1029, the federal

statute condemning various crimes involving credit cards, PIN numbers and other

access devices, applicable overseas if the card or device is issued by or controlled by

an American bank or other entity and some article is held in or transported to or

through the United States during the course of the offense, section 377. The change

was part of the original Justice Department proposals. Justice explained that,

“[financial crime[] admits of no border, utilizing the integrated global financial

network for ill purposes. This provision would apply the financial crimes prohibitions

to conduct committed abroad, so long as the tools or proceeds of the crimes pass

through or are in the United States,” DoJ at §408. The section, however, appears to

limit the otherwise applicable extraterritorial jurisdiction implicit in section 1029, since

federal courts would likely recognize extraterritorial jurisdiction over a violation

“As recent Congressional hearings have demonstrated, currency smuggling is an extremely

serious law enforcement problem. Hundreds of millions of dollars in U.S. currency –

representing the proceeds of drug trafficking and other criminal offenses – is annually

transported out of the United States to foreign countries in shipments of bulk cash. Smugglers

use all available means to transport the currency out of the country, from false bottoms in

personal luggage, to secret compartments in automobiles, to concealment in durable goods

exported for sale abroad. . . .

“Presently, the only law enforcement weapon against such smuggling is section 5316 of

title 31, United States Code, which makes it an offense to transport more than $10,000 in

currency or monetary instruments into, or out of, the United State without filing a report with

the United States Customs Service. The effectiveness of section 5316 as a law enforcement

tool has been diminished, however, by a recent Supreme Court decision. In United States v.

Bajakajian, 118 S.Ct. 2028 (1998), the Supreme Court held that section 5316 constitutes a

mere reporting violation, which is not a serious offense for purposes of the Excessive Fines

Clause of the Eighth Amendment. Accordingly, confiscation of the full amount of the

smuggled currency is unconstitutional, even if the smuggler took elaborate steps to conceal

the currency and otherwise obstruct justice.

“Confiscation of the smuggled currency is, of course, the most effective weapon that can

be employed against currency smugglers. Accordingly, in response to the Bajakajian

decision, the Department of Justice proposed making the act of bulk cash smuggling itself a

criminal offense, and to authorize the imposition of the full range of civil and criminal

sanctions when the offense is discovered. Because the act of concealing currency for the

purpose of smuggling it out of the United States is inherently more serious than simply failing

to file a Customs report, strong and meaningful sanctions, such as confiscation of the

smuggled currency, are likely to withstand Eighth Amendment challenges to the new statute,”

H.R.Rep.No. 107-250 at 36-7 (2001).

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under either circumstance (issued by a U.S. entity or physical presence in the U.S.)

as well as a number of others.77

Venue. Section 1004 relies on dicta in United States v. Cabrales, 524 U.S. 1,

8 (1998), in order to permit a money laundering prosecution to be brought in the

place where the crime which generated the funds occurred, “if the defendant

participated in the transfer of the proceeds,” 18 U.S.C. 1956(i).

Ordinarily, the Constitution requires that a crime be prosecuted in the state and

district in which it occurs, in the case of money laundering,78 in the state and district

in which the monetary transaction takes place. The Supreme Court in Cabrales held

that a charge of money laundering in Florida, of the proceeds of a Missouri drug

trafficking, could not be tried in Missouri. The Court declared in dicta, however, that

“money laundering . . . arguably might rank as a continuing offense, triable in more

than one place, if the launderer acquired the funds in one district and transported them

into another,” 524 U.S. at 8.79

Forfeiture. Forfeiture is the government confiscation of property as a

consequence of crime.80 The forfeiture amendments of the Act fall into two

categories. Some make adjustments to those portions of federal forfeiture law which

govern the confiscation of property derived from, or used to facilitate, various federal

crimes. Others follow the pattern used for the war-time confiscation of the property

of enemy aliens under the Trading With the Enemy Act, 50 U.S.C.App. 1 et seq.

(TWEA), forfeitures which turn on the ownership of the property rather than upon

its proximity to any particular crime.

Constitutional Considerations. The Act adds TWEA-like amendments to

the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. 1701 et seq.,

which already allowed the President to freeze the assets of foreign terrorists under

certain conditions. Under IEEPA, as amended by section 106 of the Act, the

President or his delegate may confiscate and dispose of any property, within the

United States v. Bowman, 260 U.S. 94, 97-8 (1922); Ford v. United States, 273 U.S. 593,

623 (1927). For a general discussion of the extraterritorial application of federal criminal

law, see, Doyle, Extraterritorial Application of American Criminal Law, CRS REP.NO. 94166A (Mar. 13, 1999).

“The trial of all crimes . . . shall be held in the state where the said crimes shall have been

committed; but when not committed within any state, the trial shall be at such place or places

as the Congress may by law have directed,” U.S.Const. Art.III, §2, cl.3.

“[I]n all criminal prosecutions, the accused shall enjoy the right to a speedy and public

trial, by an impartial jury of the state and district wherein the crime shall have been

committed; which district shall have been previously ascertained by law,” U.S.Const. Amend.

VI.

See also, United States v. Rodriguez-Moreno, 526 U.S. 275, 280-81 n.4 (1999) (holding

that acquiring and using a firearm in Maryland in connection with a kidnaping in New Jersey

might constitutionally be prosecuted in New Jersey under a statute which outlawed possession

of a firearm “during and in relation to” a crime of violence.

For general background information, see, Doyle, Crime and Forfeiture, CRS REP.NO. 97139A (Oct. 11, 2000).

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jurisdiction of the United States, belonging to any foreign individual, foreign entity,

or foreign country whom they determine to have planned, authorized, aided or

engaged in an attack on the United States by a foreign country or foreign nationals.

The section also permits the government to present secretly (ex parte and in camera)

any classified information upon which the forfeiture was based should the decision be

subject to judicial review. The Justice Department requested the section as a revival

of the President's powers in times of unconventional wars.81 By virtue of section 316,

property owners may initiate a challenge to a confiscation by filing a claim under the

rules applicable in maritime confiscations. The section permits two defenses to

forfeiture – that the property is not subject to confiscation under section 106 or that

the claimant is entitled to the innocent owner defense of 18 U.S.C. 983(d).82 The

characterization of the defenses as “affirmative defense” indicates that the claimant

bears the burden of proof. The innocent owner defenses of 18 U.S.C. 983(d) are

probably not available in cases under section 106, since that section is explicitly

“This section is designed to accomplish two principal objectives. First, the section restores

to the President, in limited circumstances involving armed hostilities or attacks against the

United States, the power to confiscate and vest in the United States property of enemies during

times of national emergency, which was contained in the Trading with the Enemy Act, 50

App. U.S.C. §5(b)(TWEA) until 1977. Until the International Economic Emergency Act

(IEEPA) was passed in 1977, section 5(b) permitted the President to vest enemy property in

the United States during time of war or national emergency. When IEEPA was passed, it did

not expressly include a provision permitting the vesting of property in the United States, and

section 5(b) of TWEA was amended to apply only ‘during the time of war.’ 50 App.U.S.C.

§5(b).

“This new provision tracks the vesting language currently in section 5(b) of TWEA and

permits the President, only in the limited circumstances when the United States is engaged in

military hostilities or has been subject to an attack, to confiscate property of any foreign

country, person, or organization involved in hostilities or attacks on the United States. Like

the original provision in TWEA, it is an exercise of Congress's war power under Article I,

section 8, clause 11 of the Constitution and is designed to apply to unconventional warfare

where Congress has not formally declared war against a foreign nation.

“The second principal purpose of this amendment to IEEPA is to ensure that reviewing

courts may base their rulings on an examination of the complete administrative record in

sensitive national security or terrorism cases without requiring the United States to

compromise classified information. New section (c) would authorize a reviewing court, in the

process of verifying that determinations made by the executive branch were based upon

substantial evidence and were not arbitrary or capricious, to consider classified evidence ex

parte and in camera. This would ensure that reviewing courts have the best and most

complete information upon which to base their decisions without forcing the United States to

choose between compromising highly sensitive intelligence information or declining to take

action against individuals or entities that may present a serious threat to the United States or

its nationals. A similar accommodation mechanism was enacted by Congress in the AntiTerrorism and Effective Death Penalty Act of 1996, 8 U.S.C. §1189(b)(2),” DoJ at §159.

“An owner of property that is confiscated under any provision of law relating to the

confiscation of assets of suspected international terrorists, may contest that confiscation by

filing a claim in the manner set forth in the Federal Rules of Civil Procedure (Supplemental

Rules for Certain Admiralty and Maritime Claims), and asserting as an affirmative defense

that – (1) the property is not subject to confiscation under such provision of law; or (2) the

innocent owner provisions of section 983(d) of title 18, United States Code, apply to the case,”

Sec. 316(a).

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excepted from the coverage of 18 U.S.C. 983.83 The challenge proceedings permit

the court to admit evidence, such as hearsay evidence, that would not otherwise be

admissible under the Federal Rules of Evidence if the evidence is reliable and if

national security might be imperiled should dictates of the Federal Rules be followed,

§316(b). The section recognizes the rights of claimants to proceed alternatively

under the Constitution or the Administrative Procedure Act.84

The Justice Department also recommended enactment of an overlapping

provision which ultimately passed as section 806 of the Act without any real

discussion of the relationship of the two sections.85 Section 806 authorizes

confiscation of all property, regardless of where it is found, of any individual, entity,

or organization engaged in domestic or international terrorism (as defined in 18

U.S.C. 2331),86 against the United States, Americans or their property, 18 U.S.C.

18 U.S.C. 983(i)(2)(D).

“The exclusion of certain provisions of Federal law from the definition of the term ‘civil

forfeiture statute’ in section 983(i) of title 18, United States Code, shall not be construed to

deny an owner of property the right to contest the confiscation of assets of suspected

international terrorists under – (A) subsection (a) of this section; (B) the Constitution; or (C)

subschapter II of chapter 5 of title 5, United States Code (commonly known as the

‘Administrative Procedure Act’),” Sec. 316(c)(1).

“Current law does not contain any authority tailored specifically to

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