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2002 National Money Laundering Strategy Roll Out

Jimmy Gurulé, Under Secretary
U.S. Department of the Treasury
July 25, 2002

(Note: In the text "billion" means 1,000 million.)

Thank you, Deputy Secretary Dam. I want to thank you and Secretary O'Neill for your leadership and support in the development of the 2002 Money Laundering Strategy.

This is an important day and an important document.

The preparation of the National Money Laundering Strategy is an enormous undertaking. The active support and participation of a number of federal agencies contributed to the final project. I would like to thank the representatives here today of all the other bureaus and agencies who have contributed to the 2002 Strategy. This is truly a collaborative process reflecting the input of all the relevant players.

I would also like to thank Deputy Assistant Secretary for Money Laundering and Financial Crimes, Julie Myers, for spearheading the preparation of this Strategy and the Treasury Executive Office of Asset Forfeiture for the valuable role they played in assisting DAS Myers.

When I was sworn in as Under Secretary, I pledged to make anti-money laundering enforcement one of my primary goals. I am here today to tell you that it has become a priority of Treasury Enforcement for one critical reason. Attacking the financial structures of criminal organizations -- their lifeblood -- is one of the best ways to dismantle sophisticated criminal enterprises. Let me explain why.

If our law enforcement agents pick up a drug mule carrying narcotics across the border that helps to fight crime but it doesn't leave a permanent impact on the criminal organization. The criminal gang will simply go down the block and find another willing participant to take their incarcerated colleague's place. But if you penetrate the financial underpinnings of a criminal organization replacement is not so easy. The criminals can't just pick up the phone and find another sophisticated accountant or professional money handler who understands global banking systems and is willing risk their white collar lifestyle to tread into illegal waters. As Treasury agents recognized long ago, if you get Al Capone's money, you get Al Capone.

That rationale also applies to attacking the financial underpinnings of terrorist groups. These networks of murderers are mercenaries who require hard money to finance their deadly acts of terror. If we can shut down their financial structures, we save innocent lives.

I am pleased to tell you that our efforts are making a difference. We have blocked the assets of 211 terrorist entities and individuals. $34.3 million has been blocked domestically and $77.9 million has been blocked by our allies, for a total of over $112 million that is not going to support terrorist training camps and to purchase weapons of death.

At the same time, we are making solid progress on our more traditional money laundering case investigations. For the first time, the 2002 Strategy reports on some of the significant money laundering cases that the federal government has investigated and prosecuted in the last year.

For example, last month, Customs agents in New Jersey arrested an Assistant Vice-President of a bank who was operating an illegal money transmitting business that moved approximately a half billion dollars in eight months. The Assistant VP maintained over 250 accounts at the bank, 44 of which were in the names of non-existent companies and people that were fronts for currency exchange firms in Brazil. Customs received substantial assistance from IRS-CI and DEA in the case, which is now being prosecuted by the U.S. Attorney's Office in Newark.

I would also like to highlight a few other cases that illustrate the progress we are making on the money-laundering front:

Last month, a jury in North Carolina convicted Mohamad Hammoud and his brother Chawki, for providing material support to the terrorist group Hezbollah through racketeering, conspiracy, and conspiracy to commit money laundering by funneling profits from a cigarette smuggling operation to purchase military equipment for the Hezbollah terrorists.

In March 2002, several of the Hammoud's co-defendants pled guilty to a number of charges including conspiracy to commit money laundering. That case began when West Virginia State Police seized a significant quantity of contraband cigarettes and notified Treasury agents at ATF. The Financial Crimes Enforcement Network or FinCEN, from the early stages of this investigation, supplied and networked over 300 Bank

Secrecy Act leads to the FBI and ATF.

A New York City policeman pled guilty in March to laundering between $6 and $10 million obtained from the sale of drugs in the New York City metropolitan area. Colombian narcotics traffickers shipped sixty tons of cocaine to the New York City area over a two-year period. After the cocaine was sold, the defendants received instructions to pick up the drug money, and would meet the drug dealers at various

locations on the streets of New York City where they received bags containing between $100,000 and $500,000 in cash. The defendants rented cars and drove the drug proceeds to Miami, Florida. Once in Miami, the defendants delivered the money to various Miami area businesses, which accepted the drug money as payment for goods, such as video games, calculators, print cartridges, bicycle parts and tires, which they subsequently exported to Colombia – transactions consistent with the operation of the trade-based BMPE laundering system frequently employed by Colombian narcotics traffickers.

The Customs Service, in conjunction with DEA and Colombia's Departamento Administrativo de Seguridad arrested 37 individuals in January 2002 as a result of Operation Wire Cutter, a 2 1/2 year undercover investigation of Colombian peso brokers and their money laundering organizations. These individuals are believed to have laundered money for several Colombian narcotics cartels. The peso brokers contacted undercover Customs agents and directed them to pick-up currency in New York, Miami, Chicago, Los Angeles, and San Juan, Puerto Rico that had been generated from narcotics transactions. The brokers subsequently directed the undercover agents to wire these proceeds to specified accounts in U.S. financial institutions that were often in the name of Colombian companies or banks that had a correspondent account with a U.S. bank. Laundered monies were subsequently withdrawn from banks in Colombia in Colombian pesos.

Investigators seized over $8 million in cash, 400 kilos of cocaine, 100 kilos of marijuana, 6.5 kilos of heroin, nine firearms, and six vehicles.

I should also note the long-standing "El Dorado" Task Force, which is led by U.S. Customs and IRS in New York. Comprised of 185 individuals from 29 federal, state, and local agencies, the "El Dorado" Task Force is one of the nation's largest and most successful financial crimes task forces, having seized $425 million and arrested 1,500 individuals since its inception in 1992. In addition the HIFCA Task Forces (High Intensity Financial Crimes Areas) have also made significant progress. They initiated over 100 new money laundering investigations during 2001 alone. Finally, in 2001, law enforcement agents of the Departments of Treasury and Justice seized over $1 billion in criminal funds -- about 38% of which was related to money laundering investigations. The Departments forfeited over $241 million in  criminal assets in FY 2001 relating to money laundering.

But we can and must do even better. Good government requires creative problem solving to successfully address the problems this country faces today. The 2002 National Money Laundering Strategy is a blueprint of how the Administration will address critical issues surrounding the enforcement of financial crimes.

With that in mind, I would like to walk you through some of the key points of the 2002 Strategy and then take some of your questions.

Terrorist Financing

The 2002 Strategy calls on the Departments of State, Treasury, and Justice and the intelligence community to enhance the level of cooperation currently received from our partners abroad.

There is a special emphasis placed on continued involvement in multi-national bodies such as FATF and also in joint designations with other countries. Furthermore we are also working on agreements with our allies that would allow us to partner with law enforcement agencies abroad to jointly investigate financial links to terrorists.

Charities and Improper Use of NGOs

The 2002 Strategy focuses on "high impact" targets and systems, including corrupt charities, the misuse of alternative remittance systems, which include hawalas, and bulk-cash smuggling. The enactment of the USA Patriot Act has made it more difficult for terrorist financiers to transfer money through traditional Western banking system. Thus terrorists have resorted to alternative means of moving and hiding money. FinCEN has been conducting a study on the use of these alternative systems that will be completed in October.

Treasury will lead an interagency process to develop a set of internationally accepted standards or "best practices" for the alternative remittance industry. This goal will be pursued in the context of the Financial Action Task Force (FATF) Special

Recommendations on Terrorist Financing and the Asia Pacific Group (APG) recommendations on Alternative Remittance and Underground Banking Systems, both of which call for enhanced regulatory oversight.

The use of non-governmental organizations (NGOs), including charities, to raise funds in support of terrorist groups is an area that demands further attention from the U.S. Government. Though these NGOs may be offering humanitarian services here or abroad, funds raised by certain charities have been diverted to terrorist causes. This scheme is particularly troubling because these funds are earmarked for good and they are being grossly perverted to fund acts of evil against innocent civilians.

The United States will work to help develop international "best practices" on how to regulate charities to prevent their abuse and infiltration by terrorists and their supporters. At the June 2002 FATF Plenary meeting, the United States presented a paper that will form the basis for a discussion of international standards. As part of this

effort, the U.S. government will identify high-risk areas and deploy multi-agency teams to assist host governments in applying charitable regulation "best practices".

Creation of Targeting Team

Officials at both the Department of the Treasury and the Department of Justice recognize that it is vitally important to cooperate and coordinate with one another to investigate priority targets whenever it is possible to do so. The strategy addresses the importance of making joint decisions about what major money laundering organizations and systems to target and how to investigate and prosecute them before

those investigations are initiated. To address this concern, the Departments of the Treasury and Justice will co-lead an interagency effort to identify potential money laundering-related targets, and then deploy the necessary assets to attack those agreed upon targets.

We will establish an interagency targeting team to help focus our efforts and resources against the most significant money laundering organizations and systems, such as individuals who smuggle bulk cash and terrorist groups. In addition the Strategy calls for more jail time for the money-laundering masterminds.

USA PATRIOT Act

Information is a critical weapon in the war against terrorist financing. The new information-sharing provisions of the USA PATRIOT Act afford financial institutions greater flexibility in evaluating potential risks and sharing their concerns with both the federal government and amongst themselves. We are working with FinCEN to draft

regulations to implement some of the anti-money laundering provisions of the PATRIOT Act, and are evaluating comments submitted to the regulations we proposed to implement other sections.

Highlights of our major accomplishments over the past nine months include:

  • Issuing customer identification and verification regulations jointly with the federal regulators to ensure that all federally regulated financial institutions employ basic procedures to identify and verify the identity of their customers.

  • Providing immediate guidance for complying with an important provision of the Act that cuts unregulated foreign shell banks off from our financial system.

  • Expanding our basic anti-money laundering program requirement to the major financial services sectors, such as broker-dealers, and

  • Developing a proposed rule to implement a comprehensive statutory provision that seeks to minimize risks presented by correspondent banking and private banking accounts.

Metrics

The 2002 Strategy is a groundbreaking document. It provides, for the first time in a National Money Laundering Strategy, baseline facts and figures that can help determine how well the federal government is succeeding in its efforts to detect, prevent, and deter money laundering -- a major goal of Secretary O'Neill.

The 2002 Strategy publishes data collected by the U.S. Sentencing Commission in Fiscal Year 2000 concerning defendants in federal cases that went to jail for committing a money laundering offense. Although the Sentencing Commission data is incomplete by itself, analysis of this data is instructive and provides a starting point for meaningful baselines and metrics.

  • We now know that over 80 percent of all money launderers that were sentenced did not receive a leadership enhancement.

  • We now know that almost 80 percent of those sentenced laundered less than $1 million.

  • We know that some districts, even densely populated districts, prosecuted a limited number of money laundering cases.

These statistics show that we can improve our ability to focus on major money laundering prosecutions and target large organizations.

Of course, it is not enough merely to pledge to do better. We must have ways to meaningfully quantify our efforts. With these articulated baselines, we will be able to develop metrics to evaluate our progress. We are also seeking to develop new baselines within the Strategy by measuring our investment in money laundering enforcement and developing a uniform case reporting system. These efforts will take time, and, if done right, should show some real results.

For instance by tracking the commission rate charged in money laundering transactions we will be able to ascertain if our efforts are making a difference over a period of years.

FATF/International

On the ever important international front, we will continue to work with the international financial institutions, such as the World Bank and International Monetary Fund, and the multinational Financial Action Task Force to improve and monitor anti-money laundering compliance efforts throughout the world. The Strategy reports on the efforts and results achieved by all the countries that have appeared on the FATF list. FATF periodically revises the Forty Recommendations to address new anti-money laundering challenges. The U.S., under Treasury leadership, is playing an active role in this effort. In May 2002, FATF finalized a consultation paper that presents options and

seeks the views of non-FATF members and the private sector on these possible revisions. FinCEN has also been instrumental through the Egmont Group of financial intelligence units (FIUs) in enhancing the exchange of financial information in support of criminal investigations including terrorist-related financing.

I would be happy to answer any questions that you have on the 2002 Strategy.

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