ARIZONA STATE SENATE
Phoenix, Arizona
money laundering;
applicability; financial institutions
Clarifies that banks, savings and loans and credit unions are not subject to civil racketeering liability unless the specified financial institutions have knowledge and are complacent regarding the unlawful activities.
Currently, banks, savings and loan institutions and credit unions operate under and are subject to a variety of criminal and civil codes. Specifically, these financial institutions operate under the Uniform Commercial Code, and are subject to various criminal and civil codes regarding illegal activities, including the Racketeer Influenced and Corrupt Organization (RICO) act and different criminal codes dealing with money laundering. Until recently, the RICO statutes had not been used as a basis for civil liability cases. Instead, it was assumed that the civil code outlined in the Uniform Commercial Code applied to civil liability issues.
A recent court case has cast doubt on those assumptions, and the industry now seeks to clarify civil racketeering requirements and their applicability to financial institutions. H.B. 2266 prescribes that the specified financial institutions are exempt from civil racketeering liability for damages or other relief unless it is found that the institution knew the funds were proceeds of an offense and that a director or high managerial agent tolerated the illegal conduct. Remaining statutes governing the liability and conduct of banks remain unchanged.
According to the JLBC, there is no general fund impact associated with H.B. 2266.
1. Exempts certain financial institutions from civil liability under the criminal code, regarding racketeering activities, unless the institution knows the proceeds are ill-gotten gains from illegal activities and are complacent regarding the transaction.
2. Provides for a general effective date.
Prepared by Senate Staff
March 27, 2001