One year after the 1998 embassy bombings, Sen. Charles E. Schumer, D-N.Y., and a Republican colleague introduced legislation to block terrorists from using clandestine offshore bank accounts to funnel cash into the United States.
As stories about the destruction of American embassies in Kenya and Tanzania eased off the nation's front pages, Schumer's legislation was smothered by lobbyists employed by the financial services industry, and the Senate Banking Committee, then headed by Sen. Phil Gramm, R-Texas.
Now, with most of Wall Street's financial services community left in shreds by the Sept. 11 attacks, and with a Democratic committee chairman and some help from the White House, Schumer is making a new attempt to pass a bill barring U.S. banks from cooperating with offshore "instant" banks that refuse to help U.S. investigators track terrorists' funds.
But Gramm and some banking lobbyists are still fighting the legislation.
Goldman Sachs & Co. is the sole financial services firm remaining in lower Manhattan. The offices of Fujibank, Wachovia-First Union, Bank of America, Fiduciary Trust, Morgan Stanley, Lehman Brothers and EuroBrokers were all in the World Trade Center, and all were destroyed.
Last year, Rep. John J. LaFalce, D-Town of Tonawanda, and Sen. John Kerry, D-Mass., proposed separate legislation to restrict these offshore "shell banks."
The term refers to financial institutions that can be created on the Internet almost instantly for a hefty fee.
But House Majority Leader Dick Armey, R-Texas, refused to allow the Banking Committee to bring the bill to the floor, according to Democratic congressional sources.
LaFalce announced Wednesday that he and a bipartisan group of senators are introducing bills giving the secretary of the treasury and others broad discretion to interfere with terrorists' access to money in the United States.
LaFalce's effort is a new move calculated to get around Gramm and Armey -- and the financial services industry, which donates $37 million every two years to federal candidates.
LaFalce, the senior Democrat on the banking panel, said his and Kerry's bill would give the government legal authority and discretion to deal with offshore money laundering.
LaFalce said Bush does not yet have the legal tools to carry out the campaign against money laundering he announced Monday.
Schumer's legislation would allow the government to bar U.S. banks from dealing with any offshore instant bank that refused to reveal the sources of its funds.
"There is a vast and fierce opposition on the Internet between mostly small island countries for this mother lode of terrorism, illegal drug and fraud money," Schumer said, referring to countries that invite foreigners to set up instant banks for fees ranging up to $90,000.
Schumer said the Treasury Department reported that $4.8 trillion is held in small countries with strict financial secrecy laws.
"That's more hidden money than the combined gross domestic product of France, Germany and Italy," Schumer said.
In response to moves by Bush and Congress against money laundering, Gramm warned he will oppose legislation that gives the treasury secretary too much discretionary power.
Bush said Monday that he wants the government to be able to punish any nation that refuses to cooperate in blocking terrorists' access to funds.