News

USIS Washington File

08 February 2000

Text: "Stopping Money Laundering Requires International Cooperation"

(ONDCP chief outlines strategies to counter illicit drug trade) (1320)

Following is the text of an article that appeared in the Mexican
newspaper El Universal on February 8, under the byline of General
Barry McCaffrey, director of the White House Office of National Drug
Control Policy (ONDCP):

[Note: In the text, billion = thousand million.]

(begin text)

"Stopping Money Laundering Requires International Cooperation"
by Barry R. McCaffrey, Director
Office of National Drug Control Policy

Recent news about increased drug consumption in Mexico is one more
example of the internationalization of the cost of drug trafficking. A
meaningful distinction can no longer be made between transit and
consuming countries because aspects of the drug trade are experienced
by most regions. For this reason, international cooperation is more
important than ever to minimize the damage illicit drugs cause.

An essential aspect of the fight against illegal drugs is an attack
upon the profits made by the drug cartels. Traffickers enter the drug
business as a quick way to make money. By attacking the financial
gains made by drug organizations, this illegal activity can be hurt
where it is most vulnerable. According to estimates by the United
Nations, illegal commerce in drugs reached a global level of five
hundred billion dollars annually -- more than the profits generated by
the international oil and gas industry and twice as much as the auto
industry. Money laundering allows drug dealers to invest ill-gained
funds in legal ways. Initiatives against money laundering are
extremely useful in redirecting the success of this destructive
industry.

The multimillion-dollar profits from the drug trade have to be
laundered daily through the international financial system. The
communications revolution, the globalization of financial markets, and
a wide range of new technologies have transformed the way we do
business. These advances are being used by narco-traffickers for their
own benefit. Today, traffickers can transfer drug monies to
jurisdictions with few legal obstacles. Drug dealers also use a
variety of financial mechanisms, such was front companies, to hide
assets or disguise their origin and destination. The International
Monetary Fund estimates that more than a million corporations of this
type exist worldwide. The IMF calculates that money-laundering
transactions represent about 8 percent of the total value of
international commerce. A large part of this money comes from
narco-trafficking.

Apart from the incalculable social cost that these sums generate, drug
trafficking corrupts financial markets and political systems. It
damages democratic institutions, ignores the rule of law, and destroys
civic order with impunity. Money laundering also creates inexplicable
changes in the demand for currency, endangers the stability of banking
systems, contaminates legal financial transactions with greater
volatility in the flow of international capital, and distorts exchange
rates.

The United States spends about fifty-seven billion dollars annually on
illegal drugs. Considering that approximately 80 percent of this sum
is converted into profit after the payment of costs, forty-six billion
dollars from narco-trafficking are laundered each year as a result of
U.S. drug consumption. The United States government has attacked this
problem with two laws: the Money Laundering Control Act and the Bank
Secrecy Act. Money laundering is a serious federal crime with more
than 170 related acts which entail sentences of up to twenty years in
prison along with fines exceeding a half-million dollars. The Bank
Secrecy Act is administered by the Treasury Department and provides
investigators with tools to follow money of suspicious origin. The
name of this law is a bit misleading since the law reduced bank
secrecy in the United States. The act obliges financial institutions
to present reports about any cash transaction of more than ten
thousand dollars as well as all suspicious transactions. Not
presenting reports or dividing a transaction to avoid a report have
been classified as crimes. In the past three years, the Department of
Justice tried more than six thousand defendants who were accused of
money laundering. Approximately half of these cases involved
narco-trafficking.

U.S. authorities have struck back at money launderers through
successful federal operations. For example, Operation Polar Cap is a
continuing investigation headed by the Drug Enforcement Agency, which
confiscated $105 million and led to the arrest of 111 people. Task
Force El Dorado involves a dozen federal, state, and local agencies in
New York. The Task Force confiscated 150 million dollars in cash and
arrested more than seven hundred people. This Task Force dramatically
reduced the flow of funds to Colombia via money transfers from New
York. In the international arena, the U.S. supports international
cooperation through participation in the Financial Action Task Force
against money laundering.

Twenty-six countries and territories that are members of Financial
Action Task Force (with its seat at the Organization of Economic
Cooperation and Development) established forty recommendations that
set a universal standard for combating money laundering. The U.S.
Congress approved the Money Laundering and Financial Crimes Strategy
Act of 1998, which asked federal authorities to develop a five-year
strategy against money laundering. The Departments of the Treasury and
Justice recently presented the first of five reports requested by
Congress. The National Money Laundering Strategy of 1999 sought to
interrupt the flow of illicit money, increase regulatory efforts and
cooperation with the private sector to prevent money laundering,
promote coordination with local and state governments within the U.S.,
and increase international cooperation. New laws may classify as
crimes a greater number of offenses related to money laundering,
identify areas susceptible to money laundering, reinforce the scrutiny
of suspicious transactions, and establish rules requiring financial
service businesses and casinos to present reports about suspicious
activities. Currently, such reports are only demanded from banks.

The United States is clearly committed to reducing money laundering.
In a global world where millions of transactions take place daily by
wire or the touch of a button, international cooperation is critical.
Mexico and the United States must continue working against money
laundering on a bilateral and multilateral level. Only by cooperating
in the struggle against a common enemy can our two nations protect
citizens and ensure respect for the rule of law.

(end text)

(Distributed by the Office of International Information Programs, U.S.
Department of State)