December 22, 2000
Global Money Launderers
America's security is threatened by the spread of international crime cartels, a dark side of globalization. A valuable new White House report documents how the collapse of the Soviet Union, the lowering of trade barriers and advances in telecommunications have increased the reach of crime syndicates, from Russia and Eastern Europe to Asia, Latin America and the diamond-rich war zones of Africa. The Clinton administration has led an international campaign to crack down on an essential component of the problem, money laundering. But American banks are themselves among the world's leading conduits for laundered funds. Unless America's own laundering laws are strengthened, international efforts to curtail the flow of dirty cash will have limited impact.
In the wake of the Asian and Russian financial crises and last year's Bank of New York scandal, in which Russian oligarchs moved billions through accounts at the bank, the Group of 8 industrialized countries started a campaign to "name and shame" countries that were lax about laundering. The list included familiar targets like Panama and offshore havens in the Caribbean and the Pacific. It also included Israel, where banks have been suspected of laundering huge sums looted from Russia by Russian mobsters. The effort has had results. Seven of the listed countries, including Israel, have enacted laws to criminalize money laundering and allow closer scrutiny of suspect bank accounts.
But America's own house is hardly in order. A recent General Accounting Office report found it "relatively easy" for foreigners to launder money through American banks. Such laundering is defined as a crime if the money comes from drug trafficking, terrorism or bank fraud. But profits from prostitution, extortion, smuggled immigrants and arms trafficking can still be laundered through an American bank with no consequence to either the bank or the depositor. Corrupt dictators and their business partners can still legally deposit their loot in American financial institutions.
Efforts by the Clinton administration to toughen money-laundering legislation died in Congress earlier this year. The Bush administration and Congress will need to plug the loopholes in America's own money-laundering statutes if there is to be real progress in combating global crime.
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