Horseman #3, "Inky": Money Laundering in America

[R.A. Hettinga]

<http://www.mensnewsdaily.com/archive/k/kouri/2004/kouri120704.htm>


MND COMMENTARY
- Jim Kouri - MensNewsDaily.com


Money Laundering in America


 December 7, 2004
 by Jim Kouri


 Federal law enforcement officials estimate that between $100 billion and
$300 billion is laundered in this country each year. While illegal drug
trafficking accounts for much of the funds being laundered, other criminal
activities, including terrorism and tax evasion, also account for an
extensive amount. In the past two decades, federal law enforcement efforts
to combat money laundering have focused on requiring financial institutions
to report currency transactions that exceed $10,000.

 Beginning in 1988, these reports have been supplemented by reports of
suspicious transactions. Many of the transactions reported as suspicious
involve individuals who appear to be attempting to avoid the $10,000
reporting requirement. However, any activity that deviates from the norm
for a particular account can be considered suspicious. The Right to
Financial Privacy Act, enacted in 1978, raised questions as to whether
financial institutions were authorized to report suspicious transactions.
To address these concerns, legislation has been enacted to provide
protection against civil liability for institutions reporting suspicious
transactions. Banks and other financial institutions report tens of
thousands of suspicious transactions each year. The reports have led to the
initiation of major investigations into various types of criminal activity.

 However, because there is no overall control or coordination of the
reports, there is no way of ensuring that the information is being used to
its full potential. Financial institutions report suspicious transactions
on a variety of different forms that provide different types of information
and that are filed with different law enforcement and regulatory agencies.
The form that is filed most frequently is filed with the Internal Revenue
Service (IRS) and kept on a centralized database. However, the form does
not contain any information describing the suspicious activity that would
allow law enforcement agencies to evaluate the usefulness of the
information on the basis of the form alone.

 Moreover, some institutions have been filing these forms erroneously. IRS
and other federal and state law enforcement agencies use the database on a
reactive basis; that is, to provide additional information on an
investigation that has already been initiated. Other forms used to report
suspicious transactions do describe the activity so that the information
can be evaluated. However, these forms are filed with six different federal
financial regulatory agencies. Because the forms are not maintained on a
centralized database, they are not used on a reactive basis. Financial
institutions filing this form are required to send a copy of it to the
nearest district office of IRS' Criminal Investigation Division.

 However, IRS has not developed any guidance or directives as to how the
information is to be managed as an intelligence resource. Use of the
reports to initiate investigations varies among the 35 district offices.
The Government Accounting Office identified 15 states that receive copies
of suspicious transaction reports filed on one or both of these two-forms.
Nine of these states told GAO that they use the information to initiate
criminal investigations. The Department of the Treasury, the financial
regulatory agencies, and IRS have recently agreed to substantial changes
regarding how suspicious transactions are to be reported and how the
information is to be used. These proposals, which were made with input from
the financial community, have the potential for significantly improving the
contribution that suspicious transaction reports make to law enforcement at
both the federal and state levels.

 The IRS does not have agencywide policies or procedures for managing
suspicious transaction reports. Consequently, the extent to which special
agents in the 35 CID district offices solicit, process, and evaluate the
reports is up to the discretion of the district CID chief and varies
significantly among districts. The percentage of investigations initiated
on the basis of suspicious transaction reports also varies significantly
among districts.

 >From October 1990 to June 1994 CID initiated 21,507 investigations
nationwide. About 4 percent of the cases were initiated as a result of a
suspicious transaction report. Among the district offices, however, the
percentage varied from 0 to over 18 percent. GAO believes that the varying
rates are an indication that use of the reports may not be emphasized to
the same extent among the districts.

 Sources: US Department of Justice, US Department of the Treasury and
National Security Institute

 Jim Kouri


 DISCUSS THIS ARTICLE IN THE FORUM!

Jim Kouri, CPP is currently fifth vice-president of the National
Association of Chiefs of Police. He's former chief at a New York City
housing project in Washington Heights nicknamed "Crack City" by reporters
covering the drug war in the 1980s.   He's also served on the National Drug
Task Force and trained police and security officers throughout the
country.  He writes for many police and crime magazines including Chief of
Police, Police Times, The Narc Officer, Campus Law Enforcement Journal, and
others.  He's appeared as on-air commentator for over 100 TV and radio news
and talk shows including Oprah, McLaughlin Report, CNN Headline News, MTV,
Fox News, etc.  His book Assume The Position is available at Amazon.Com,
Booksamillion.com, and can be ordered at local bookstores.


-- 
-----------------
R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'