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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