ACCESSION NUMBER:00000
FILE ID:95051209.LAR
DATE:05/12/95
TITLE:U.S. BANKS LEARNED ABOUT MONEY LAUNDERING THE HARD WAY
TEXT:
TR95051209 (Now willingly work to curb it) lf (680)
By Louise Fenner
USIA Staff Writer
WASHINGTON -- It took stiff fines, prison terms for bank officials,
and a lot of bad publicity before the U.S. banking industry finally
realized that it had to cooperate with law enforcement officials to
curb money laundering, says an official with the American Bankers
Association (ABA).
John Byrne, a lawyer and senior federal legislative counsel for ABA,
told a workshop for foreign journalists May 11 that "the banking
industry was dragged kicking and screaming to compliance" with a 1970
law setting up reporting requirements for cash transactions, including
suspicious transactions.
What convinced the banks, said Byrne, was the highly publicized
prosecution of the Bank of Boston in 1985 for flouting regulations
designed to curb tax evasion and money laundering, including the
requirement to file a Currency Transaction Report (CTR) with the
Internal Revenue Service on all cash transactions of more than
$10,000.
The Bank of Boston paid $500,000 in fines after pleading guilty to
failing to report $1,200 million in cash transactions with foreign
banks. Partly in response to the case, Congress in 1986 passed a law
making money laundering a federal crime.
Non-compliance with the law can bring criminal fines of up to $10,000
a day and civil penalties of up to $1 million a day "if you
intentionally fail to comply with the law," Byrne said. Such penalties
can be levied in serious money laundering cases.
Several banks were fined heavily and some bank officials ended up in
jail. "The publicity was terrible," Byrne said. "It served as a wakeup
call to our industry that not only will you be fined and sanctioned,
but the public won't trust you any more... If people don't trust your
institution, you're not going to be in business very long."
He said banks also have realized that money flowing through a bank for
the purpose of being laundered (that is, hiding its illicit origin),
"is really no windfall.... It's illegitimate, it's tainted, you have a
customer base that's very suspect -- there's no good reason to turn
one's eyes away from the money that comes into your system."
Banks now file cash transaction reports religiously, Byrne said. Last
year 11 million were filed, compared with just 7,000 in 1977.
He noted that money launderers have turned to non-bank institutions
such as check cashing firms, money exchanges (casas de cambio), and
money transmitters.
Jonathan Winer of the State Department's Bureau for International
Narcotics and Law Enforcement Affairs stressed that "suspicious
transaction reporting by financial institutions from all over the
world is critical" in fighting money laundering. "If you don't have
the private sector participating and recognizing that it is in its
interest to oppose criminality, the whole system breaks down."
The U.S. banking industry "has done a remarkable job over the last 10
years in changing its practices," Winer said.
He noted that Congress has broadened the law to impose cash and
suspicious transaction reporting requirements on non-bank financial
institutions, on businesses such as car dealers, jewelry stores,
brokerage firms and casinos, and on professionals such as lawyers and
accountants.
Susan Smith, a trial attorney in the Justice Department's criminal
division, pointed out that in the United States less than half of all
money laundering is related to drug trafficking. White collar crime,
arms smuggling and terrorism, tax fraud, and other criminal activities
account for the rest.
She said every country should require financial institutions to report
suspicious transactions to a regulatory authority, and should have a
unit such as the U.S. Treasury Department's Financial Crimes
Enforcement Network (FinCEN) to coordinate intelligence-gathering and
investigations.
The world community is realizing that because of technology which
permits money to be transmitted instantaneously anywhere in the world,
"we must start cooperating with each other in our fight against money
laundering -- because there is no other way to stop it," Smith said.
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