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American Russian Law Institute
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Terrorism and
money laundering

 

 

ARLI on Capitol Hill

Congressional Statement

of Emanuel Zeltser

 

On Monday, September 24, President Bush signed an executive order freezing U.S. assets of suspected terrorists. The President described this order as a "major thrust" in a war against terrorism aimed at "starving" terrorist networks. National Security Advisor, Condoleezza Rice, echoed this sentiment pointing out that the bin Laden organization “will ultimately not be able to function if it cannot have access to money." US and international law enforcement agencies are promising a massive offensive against money laundering. They view this to be a major weapon against organized terror. Experts agree that cutting off the money channels will eventually disrupt the terrorist networks. Many however believe that tracking these channels will be a major challenge because of the intricacies of international financial transactions, webs of shell offshore companies and, critically, because of “paperless, rudimentary financial system commonplace in many Muslim nations.” (See “Financial sleuths arm themselves to follow money trail”, CNN, Sep. 22, 2001)

Could it be that we are looking in the wrong place and maybe (just maybe) before engaging in the gargantuan search of stealth transactions of the Muslim financial system, we should consider taking a closer look at our own books? We know that hundreds of thousands of US dollars were paid to train hijackers to fly aircraft and to support them and their families in style, in Florida and other US cities for years. It would be naive to assume that these monies were smuggled to Florida in brown paper bags from Afghanistan or Sudan. They came into the criminals’ hands through banks; US banks to be sure. The banks that are required by law to keep exhaustive records and report suspicious transactions.

The unfortunate and simple truth is that the September 11 tragedy was made possible by our general aversion at looking for evil amongst us. Who wants to learn that a venerable US bank contributed, even unwittingly, to the most horrific tragedy ever visited upon America? We are naturally reluctant to go after our big financial institutions, continually succumbing to the banking lobby’s opposition to more stringent anti-money laundering legislation. Case in point: the House and Senate hearings, conducted in 1999 and 2000, amidst the Bank of New York scandal, resulted, in practical terms, in nothing meaningful. The tough anti-money laundering bill proposed by the House Committee on Banking and Financial Services got stalled in Congress last year.

Nobody disputes that billions of dollars were laundered through the Bank of New York, one of the most respected financial pillars of America. Testifying before the House Banking Committee, BoNY Chairman, Tom Renyi, admitted that allowing the suspect accounts “to remain open and active without sufficient questioning was a lapse on the part of the bank." BoNY’s senior vice president, Lucy Edwards, pleaded guilty to money laundering conspiracy designed “to facilitate ... criminal activity, including the payment of $300,000 in ransom on behalf of a Russian businessman who had been kidnapped in Russia.” What other criminal activities have these (and perhaps other) billions of laundered cash financed? Could the September 11 attacks on the US have been prevented if the "lapses" (admitted by BoNY’s chairman) were more thoroughly investigated? We don’t know. What we do know is that the hijackers’ box-cutting knifes were purchased with US dollars handed to criminals by a teller at a US bank. We know that these dollars either originated in the US or were wired to a US bank from overseas.

We also know that BoNY is one of a handful of major international banks that still maintain correspondent relationship with the Central Bank of Afghanistan (which also acts as a commercial bank with multiple branches throughout Afghanistan.) BoNY also maintains offices in Lebanon and other terrorist hangouts. It continues to quietly raise millions of dollars for companies in Lebanon, Pakistan, Qatar, United Arab Emirates, Bahrain, and Jordan through its depository receipts programs. One wonders, how BoNY manages to deal with the “paperless” Afghan-style financial system and yet ensure that this relationship is profitable. Perhaps its management would be in the best position to advise our law enforcement officials on ways to investigate “Muslim banking”?

We also know that after all the Bank of New York-money laundering hype that media has termed “the largest financial scandal of all times” only one person went to jail ... for two weeks. The stock of the Bank, preceding the September 11 attack was at all time highs. BoNY’s financial report is prefaced by the statement of Mr. Renyi: “Last year, your company achieved the highest earnings in its history, the seventh consecutive year in which we set new records for overall financial performance." Mr. Renyi remains BoNY's CEO and chairman to this day. In 1999 Renyi was “punished” for the money laundering scandal by receiving a bonus of only $5.73 million (in addition to his $850,000 salary, $167,819 in other compensation and 500,000 options.) However, this “shortfall” was made up to him in the year 2000 in the form of a $12.1 million bonus.

In order to stop crime, we must make sure that crime doesn’t pay. Not only to those abroad who actually committed the crime. Nobody here at home should be enriched by its fruits. The President’s executive order is a step in the right direction. But it is only the first step.

 


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