By Gary Weiss
In the aftermath of September 11, money laundering has taken on a new and devastating dimension. In an effort to attack the clandestine funding used to bankroll terror networks, the Bush Administration introduced on Sept. 27 a list of proposals aimed at making it harder for overseas terrorists to send money into this country. In testimony before the Senate Banking Committee on Sept. 26, Assistant Attorney General Michael Chertoff declared that money laundering is a "threat to our national security."
Such arguments have cut the floor from under longtime opponents of stronger money laundering laws, including Senator Phil Gramm (R-Texas) and the American Bankers Assn. "We generally will be extremely supportive," says Edward L. Yingling, executive director of ABA government relations.
The Administration's proposals would toughen and broaden the laws restricting money transfers, and make it easier for the feds to gather evidence. They're good ideas. But they have little chance of turning off the financial spigot that finances terrorist operations in the U.S. "Money laundering is never going to be eliminated. The only way to get rid of it is to eliminate profit-oriented crime," says Charles A. Intriago, publisher of Money Laundering Alert, a Miami-based newsletter.
Policing money laundering is a law-enforcement nightmare. Many schemes--including the hawala money-transfer networks in South Asia and the Mideast--use unrelated accounts in different countries, making them hard to shut down. U.S. crooks, similarly, often wire the proceeds from drug or stock-fraud enterprises to foreign bank or brokerage accounts. A stateside contact then pays the U.S. criminal after deducting a fee of 6% or so--a cost that's likely to soar because of the crackdown.
NEW SPIN. In contrast to U.S. wiseguys, Middle East terrorists have a more straightforward money-moving task. All they need in the States is a bank account to disburse the funds and one of innumerable ways of getting cash into the country. Getting an account in the U.S. is easy with false I.D. But terrorists can avoid banks and deal entirely in cash. To combat large-scale cash transports, one of the Administration's proposals would make it a crime to transport more than $10,000 across state lines if intended for an unlawful purpose. But terrorists can get around such a law by simply divvying up their cash shipments.
That's the fundamental problem with all anti-laundering laws. As soon as they are published, criminals figure out ways to circumvent them. So money-washers have proven almost impossible to eradicate. "I call it the second-oldest profession," says Intriago. He notes that money laundering is even mentioned in the New Testament, in the tale of Ananias and Sapphira. After hiding a quantity of money that was due to be given to Peter, the two sinners, confronted with their shame, "fell down and died." Not a very likely outcome in the fight against this latest breed of financial criminal. But it's a lovely thought, isn't it?
Senior Writer Weiss has written extensively about organized crime.