Date: Sun Dec 24, 1995 12:43 pm CST
From: snet l
EMS: INTERNET / MCI ID: 376-5414
MBX: snet-l@world.std.com
TO: * David Beiter / MCI ID: 635-1762
Subject: Great buys in Colombia - let's go
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The New York Times, December 24, 1995
Week In Review, p. 4.
Money Laundering, New and Improved
Forget Swiss banks. Buy and sell whisky or TV sets. Or,
to really hide loot, wait for the arrival of
'cybercash.'
By David E. Sanger
Washington. A tip for last-minute Christmas shoppers: For
the best price on Johnnie Walker Black Label, do your
buying in Colombia. It's cheaper there than in Scotland,
steps from the distillery.
The reason has nothing to do with Latin American drinking
habits but everything to do with money laundering. A
worldwide squeeze on safe havens for dirty cash has forced
drug traffickers, and many others with an interest in
moving huge sums of cash around the world without notice,
into the liquor business. They now take the proceeds of
drug sales in the United States, buy whisky (or General
Electric refrigerators, Sony televisions, Microsoft
software and in one case last year a Picasso) and ship them
back home, where they are sold quickly at below-market
prices. The drug cartels lose 20 or 30 percent of their
earnings, but in a high-margin, high-risk business that's
not considered a terrible price.
That is only one of the latest maneuvers as the science of
money laundering -- the life-blood of any enterprise that
wants to turn illicit profits into palatial houses and
fleets of Mercedes -- soars to new heights.
The days when you could trust a Swiss banker to hold on to
your millions and keep his mouth shut are long gone: Just
ask Imelda Marcos or, better yet, Paulina Castanon, the
sister-in-law of Mexico's former President, Carlos Salinas
de Gortari. She spent several weeks in a Geneva jail
recently after showing up to make an $84 million withdrawal
from an account that Mexican prosecutors say was filled
with the proceeds of drug deals. The assumption is that it
was controlled by the Salinas family, but the former
President, in self-imposed exile, isn't saying much. His
brother has just been indicted for "inexplicable
enrichment."
Then there is Roh Tae Woo, the former South Korean
President, who kept his half-billion or so in "gifts" in
South Korean banks, which were once famous for their
"no-name" accounts. It turns out that when the political
winds change, their memory about depositors improves.
Such embarrassing incidents are forcing any money launderer
worth his pocket change to go high-tech, using the wonder
of home-banking computer programs to zip money across
borders. Or, in the case of Russia's increasingly savvy
crime syndicates, they are buying up banks, probably the
surest way to make certain that tellers treat transactions
with appropriate discretion. All this has touched off a
frenzy of activity in Washington, where the Clinton
Administration is cajoling governments around the world,
from Turkey to Brazil to Taiwan, that they need to create,
or greatly tighten, laws governing the movement of cash.
President Clinton has threatened sanctions against nations
that encourage money laundering, cutting off their
electronic access to American financial institutions.
But it will take more than threats to persuade many
governments that cracking down on money laundering is in
their interest. Some, like Japan, fear that the American
initiative will expose relationships they would like to
keep out of public view, including the ties between the
world's largest banks and the yakuza, Japan's very
organized crime groups. In the four-year-long bust in
Japanese real estate, many of those banks lent money to
purchase buildings that the yakuza now control. Not
surprisingly, the gangsters are tardy about paying the
monthly mortgage, and the bankers are reluctant to oust
them. "If we do ever get paid," one Japanese banker said
recently, "no one will want to ask too many questions about
where the funds came from."
And Japan is one of the easy cases, where the Government
usually cooperates in money-laundering investigations. "The
list of countries where the line between government and
organized crime is blurred is expanding at a disturbing
rate," said Ronald K. Noble, the Assistant Secretary of the
Treasury for enforcement.
No one knows how much ill-gotten cash is annually invested
or exchanged in an effort to conceal its illegal source,
and many governments in a position to make estimates won't
touch the whole issue. At a meeting in Paris last month,
the United States Treasury estimated that the American
share of international drug proceeds five years ago was
$100 billion, but cited other estimates three times higher.
Much of it heads to Mexico and Colombia, and Treasury
Secretary Robert E. Rubin traveled to Latin America last
month to win support for a new task force that will toughen
laws and help investigators follow money transfers across
borders. "You have to remember that we only made money
laundering illegal in 1986," said Mr. Noble. "And it takes
a while to make it clear to other countries that over the
long term, money laundering hurts them -- it destabilizes
their governments, it undercuts legitimate businesses."
Mr. Noble's problem is that money laundering is also quite
profitable for a number of countries. It brought wealth to
safe havens like the Cayman Islands, which now has signed
on to the effort to restrict laundering. The Seychelles are
aspiring to become money-laundering giants, and all over
Asia, where cash is king and checks are for chumps,
laundering is still second nature.
What American authorities fear the most, however, is the
rise of "cybercash." Experiments are under way around the
world to market smart cards containing an electronic chip
that can be filled or emptied with the equivalent of cash.
The most elaborate experiment is Mondex, a project of the
National Westminster and Midland Banks in England, along
with British Telecom. The cards can be filled with cash
from bank machines or over the telephone from a bank
account. Money can move from one card to another, in person
or again by phone. And the holder of the card, operating in
splendid anonymity, can use it for large or small
purchases. Pilot projects are planned in San Francisco,
Canada and Hong Kong, which is already Asia's greatest
money-laundering center.
"The nightmare of it is that there is no registration of
every transaction, the way there is if you use a Visa or
Mastercard," said Stanley E. Morris, who heads the
financial crimes enforcement network, a little-known, $24
million-a-year operation buried in the Treasury Department
that, to aid the Federal Reserve, the F.B.I., intelligence
agencies and the Internal Revenue Service tracks the
movement of money around the world. "That's the drug
kingpin of the future: The guy walking around with a chip
in his pocket worth a few million."
[Photo captions]
Do: Buy a Mercedes.
Don't: Use a Swiss bank.
Maybe: Bank in the Caymans.
Do: Buy liquor.
[End]
LISBON, (Mar. 26) IPS - Drug trafficking has become so pervasive a
global current that many economies and various politicians depend on the
laundering of dirty money and traffickers actually control some large
international banks, a conference here was told.
Held between Mar. 23 and yesterday under the theme "Drugs:
Dependence and Interdependence," the conference concluded the drug
problem could not be solved by purely national action. Such was its
global dimensions, a broad multinational strategy was required.
Some 160 delegates from 58 drug producing and consumer countries
attended the three-day meeting. It was organized by the North-South
Center (NSC) of the Council of Europe based here. The meeting was
supported by the United Nations, the Georges Pompidou Center of the
Council of Europe and the European Observatory of Drugs and Drug
Addiction.
Attending were representatives of people living in the
drug-cultivating regions, associations of citizens, as well as various
organizations of women, youth, trade unions, religious leaders,
educators, agronomists, anthropologists, human rights advocates,
sociologists, historians, social scientists and members of the legal
profession.
Between $300 and $500 billion of illegal drug money goes into
circulation annually, according to figures revealed by a delegate from
the U.N. Drug Control Program. However, some experts said these
statistics were too conservative, the actual figure could actually be as
high as one trillion dollars.
Delegates agreed trafficking in drugs covered the whole planet, and
had been transformed into merchandise used to service and repay part of
the foreign debt of many countries whose economies were most vulnerable.
Moreover, some major international banks were now directly or
indirectly controlled by organized crime, they said.
The protective mechanisms of the financial system through bank
secrecy favored the laundering of money coming from the drug traffic.
Though recognizing the legal difficulties involved, the delegates
defended the idea of introducing stricter controls over current
accounts.
Italian delegate Umbert Santino proposed the abolition of bank
secrecy and the installation of systems of control over movements of
capital "to end the financial activities of the drug traffickers.
He also defended the idea of handling the problem through a global
project covering both the North and the South, "because the wealth of
the former is directly related to the poverty of the latter."
According to Rogerio Rocco, a member of the Rio de Janeiro State
Council for Drugs, "many governments have no interest in where the money
comes from, the important thing is that it is there. As the ancient
Romans used to say, 'pecunia non olet' (money doesn't smell)."
When financial crimes became public "the system mitigates the
penalties because such cases involve private interests which if
interfered with could destabilize a country's whole economy," charged
one Brazilian specialist.
Another concern of the conference was the growing activity in drugs
in former socialist countries of eastern Europe, which can count on
their chemical and pharmaceutical industries having a sophisticated
technology at their disposal to be used to produce illicit drugs.
In the former Soviet Union fields of marijuana were proliferating in
Kazakhistan, amapola plantations (the base for manufacturing heroin) in
Tajikistan, Uzbekistan and the Ukraine, the conference was warned.
The meeting concluded that in the case of the countries of the South
the problem of drugs was related to development. There was a lack of a
viable alternative crop for cultivators of the basic raw materials used
in the production of illegal drugs.
Copyright 1996
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