This article examines the fight against money laundering as a case study of the separation between an enforcement system's objectives and performance. To launder money is to hide its illegal origin. The fight against money laundering is supposed to disrupt laundering in its various forms--especially what is done by third party launderers and leaders of criminal organizations. In the process, the fight is supposed to undermine the process of financing and profiting from crimes ranging from drug trafficking to terrorism. Yet this fight delivers less than what it promises. Like many other enforcement systems, the fight against money laundering involves three major components: statutes with criminal penalties charged by prosecutors, rules administered by regulators, and detection systems primarily run by investigators. A close analysis of its three components reveals the fight to have quite a limited scope, involving (1) the disproportionate imposition of severe penalties on predicate offenders who are easily detected; (2) lax and narrowly-focused regulatory authority; (3) limited capacity to detect a range of chargeable domestic and international offenses; and (4) global diffusion of a fight against money laundering that leaves implementing authorities plenty of room for discretion and lax enforcement. These limitations probably arise not because of blindness or bad intentions but because the major players involved in running the system--including legislators, prosecutors, investigators, and regulators--face a tangle of incentives that leads them to dilute the intensity and scope of enforcement against some targets and to enhance the sanctions faced by other targets. While there is some evidence that suspicious activity reporting probably helps identify drug money placement in banks, the system seems ill suited to detecting and disrupting the larger universe of criminal financial activity that is so often vilified by the rhetoric justifying the fight against money laundering. All of this makes it hard to target terrorist financing using the anti-laundering system, even though it is easy to freeze assets allegedly linked to terrorism. Some changes in the system such as enhancing audit trails and strengthening suspicious activity reporting and analysis could be defended in the name of making the system work, though politics would make them difficult to achieve and their ultimate consequences are hard to predict. In the meantime, any inequities in the detection of predicate crimes end up being reproduced in money laundering prosecutions, and the system's most compelling objectives--detecting crimes in a new way, and targeting third-party launderers and leaders of criminal networks-seem mostly beside the point.
Here is a classic description of the "money laundering" game. (1) A drug dealer has a large amount of currency earned from the sale of crack and heroin. (2) His immediate problem is getting someone to turn stacks of crumpled $10 and $20 bills into balances at a local bank branch that can be easily transferred around the world, or across town to pay his supplier. (3) Once the money is credited to an account and moved around enough, it can be plowed back into more of the same criminal activity, invested in the legitimate economy, used to finance other criminal activities such as terrorism (so we are told in a post-September 11 world), or simply enjoyed by someone as profit.
To fight this system of criminal finance, governments aver a commitment to use a combination of criminal investigators--including undercover agents who offer to launder money and then catch the criminals who accept their generosity--as well as informants and regulatory tools, such as reports of large currency transactions to supplement traditional methods of criminal investigation. (4) Banks insist they cooperate with investigators and regulators by telling the government about suspicious transactions and trying to ensure that their accounts do not become coffers for laundered money. (5) Banks, along with other financial institutions, are especially vigilant when confronted with large currency transactions--which subject them to government-mandated reporting requirements. Cash evinces such suspicion because it is anonymous. (6) With it, a person can pay for an airline ticket, a box cutter, a chemical, a rented car, or a baseball bat without leaving much of a paper trail. With cash reporting requirements and the vigilant cooperation of financial institutions to help keep an eye on other transactions, the authorities can "follow" dirty money back to its nefarious source, (7) freeze assets and punish predicate crimes like drug trafficking, terrorism, (8) and corporate fraud. In short, the fight against laundering allows authorities to disrupt financial activity linked to crime and to deter future offenses. (9)
Or does it? It turns out the preceding scenario gives a radically incomplete picture of money laundering, the fight against it, and the broader patterns of criminal financial activity that might in principle be motivating the fight against laundering. For example, the picture above assumes enforcement to be relatively effective, and obscures the larger question of what it means for the fight against money laundering to be effective. Neither does the preceding account recognize that the fight against laundering--like many other enforcement systems--is the product of statutes, rules, and detection strategies each controlled by different institutions and individuals. In fact, we know precious little about how the fight against money laundering really works, either in the United States, where the fight was first christened and aggressively instituted, or across the world where it is has been fast adopted either in principle or practice, (10) Nor does most of the scholarly work on money laundering really address this question, as most of it focuses on whether banks and the government strike the right balance between disrupting financial activity connected to crime and protecting financial privacy and autonomy, (11) what precise interpretation should be given to the complicated federal laws criminalizing money laundering,(12) whether there is enough international cooperation to fight money laundering, (13) or what form that cooperation should take. (14)
So who or what is caught with the fight against laundering? (15) After all, the scenario of the drug trafficker with bags full of crumpled paper currency to deposit does not even begin to describe the full extent of criminal financial activity that the federal government says it has an interest in disrupting. (16) The core anti-money laundering criminal statutes have a long list of predicate offenses that may have little if anything to do with drugs, and perhaps even little to do with currency. (17) Money from these predicates, such as wire fraud in the course of running an energy-trading company, (18) can trigger criminal liability under the money laundering statutes just as surely as drug money laundering can. (19) Nor are currency transactions necessarily the only ones that are anonymous or nearly so. (20) Using bank accounts sheltered by protective bank and corporate secrecy laws in offshore financial havens, individuals can move and exchange resources without leaving an easy trail for law enforcement to follow. (21) Indeed, the growing concern over terrorist financing in the wake of September 11 poignantly illustrates the disconnection between the rhetoric about the fight against money laundering and the larger challenge of disrupting criminal finance. While federal government officials emphatically describe the targeting of terrorist financing as a major part of the fight against laundering, (22) sponsors of terrorism may start with money that originates from non-criminal sources and is never in physical currency form. (23) The terrorist hijackers funded their life and learned to fly using money that itself flew across the world from the United Arab Emirates to the U.S. through almost a dozen wire transfers, not bulk currency shipments. (24) Neither are financial institutions consistently reliable partners in the search for laundered money, because they might have at least as much of an interest in getting business as they do in supporting the government's policy objectives. (25) All of which reveals a gap between the simple picture of laundering described above and the more heterogeneous universe of what one could term "criminal finance," which includes the obvious scenario of simple cash placement laundering but also encompasses more complex schemes of currency laundering, non-currency laundering of proceeds from fraud or corruption, and the financing of crimes such as terrorism--whether the money comes from crime or not.
Abandon the more simplistic description of the laundering, and it starts to become plain just how much of the actual results of the fight against laundering depend on the intersecting effects of ambiguous criminal statutes, regulatory provisions, and detection strategies, all of which interact to produce the output of an enforcement system. Supposing that criminal statutes give prosecutors substantial flexibility regarding the conduct that counts as "laundering" (they do), then the sort of conduct that will end up being punished as such will depend on what sort of criminal activity is detected (it does). The more that the regulatory and investigative systems used to detect laundering or its close cousins rely on traditional investigative methods such as victim reports (for fraud) and undercover investigations (for drugs), the more that prosecutions for laundering and closely related crimes will tend to mimic the patterns of detection of the underlying predicate crimes. This dynamic should make one skeptical about the claim that the fight against money laundering is likely to be an effective means of detecting despised predicate offenses or disrupting the infrastructure of criminal finance that makes the underlying offenses possible.
That skepticism seems odd juxtaposed against the enthusiastic statements of the legislators who designed the system and many of the officials who run it. If one tries to make sense of these statements in light of the law, then the purpose of the fight against laundering can be best summed up in three words: disrupting criminal finance. (26) Just as the now-infamous federal RICO statute sought to deny criminals the opportunity of using an "enterprise" organizational form to carry out their crimes, (27) in principle the focus of the fight against money laundering appears to center on affecting the allegedly troubling intersection between crime and financial activity--not just laundering in its various forms, but also the overall financing of criminal activity. (28) As the reader will better grasp after the discussion of the system's characteristics in Part I, this does not clarify things completely, since even a cursory analysis of the rhetoric suggests there could be several quite different rationales for why criminal finance would be harmful. Maybe the ease of using the machinery of the financial system--banks, wire transfers, money exchanges, brokerage houses, and commodities traders--can lower the cost of perpetrating crime and increase its returns, particularly to the higher-level criminals who enjoy the largest profits from crime. Perhaps the financial activity associated with some kinds of predicate crimes is a smoking gun that makes it easier to detect such offenses, such as major drug smuggling or a terrorist plot--unless of course the smoking gun is camouflaged by professional third-party launderers whose stock in trade is moving money from the Bahamas to Basle. (29) The harm caused by money laundering could even have systemic, adverse consequences on the economy by distorting the incentives to engage in economic activity considered legitimate and productive, or by making it more difficult to formulate and implement economic policy. (30) Finally, the link between crime and financial activity may be so intimate--and disturbing--for a moral reason: it makes society complicit in crime by spreading (i.e., as legitimate economic investment in society) the gains from an activity considered so despicable that no one should profit from it. (31)
The preceding rationales imply that the law should have practical goals other than merely enhancing the punishment of run of the mill criminal offenders--a goal that would make the elaborate structure of the system targeting criminal finance a waste of time. Instead, virtually any effort to take the most plausible objectives of the fight against laundering seriously--that is, as something more than just political symbolism (32)--would yield a list of three concrete goals: (1) detecting crime through the "trail" of dirty money (i.e., raise the probability of being caught for both predicate crimes and laundering); (33) (2) targeting the laundering professionals who make it easier for criminals involved in predicate offenses to launder money (thereby raising the cost of laundering and eating into the profit from predicate crimes); (34) and (3) targeting the higher-level criminals that benefit the most from laundered money (lowering the return of financing, supporting, and engaging in the predicate crimes). (35)
The system to fight laundering can respond in ways other than meeting these goals, though, and it does. The principal anti-money laundering criminal statute and the doctrine interpreting it makes it easy for federal prosecutors to use laundering offenses to increase the sanctions that a large number of defendants face. (36) Detection strategies make it hard to develop cases against higher-ups and third-party launderers because of the reliance on currency enforcement as well as informants and undercover operations. (37) Regulations and regulatory enforcement appear to be diluted because of interest group pressure from financial institutions, which regulators, legislators, and prosecutors have incentives to accept. (38) The result is that the lofty goal of disrupting the larger universe of criminal finance seems of little relevance to the main output of the system--reports that lead to few investigations, and severe penalties used against predicate offenders caught through traditional law enforcement methods with nothing that makes them particularly distinctive in terms of their financial activity. The disconnection between the justifications for the fight against laundering and its actual operation raises the most basic questions about criminal enforcement, such as whether people actually punished for an offense deserve it, whether people who are not punished deserve to get off because they are harder to catch, (39) and how elaborate enforcement schemes might be advanced by rationales that bear a loose relationship to how those schemes are used in the course of everyday legal practice.
The balance of this Article pursues two related lines of inquiry: it uses the framework of analyzing criminal statutes, regulatory rules, and detection strategies to examine the limitations of the fight against laundering, and it treats that fight as a case study in the law and politics of affecting complex enforcement systems. To this end, Part I explains what money laundering is by giving the reader a tour of some of the ways that money's illegal origin is hidden and by explaining the tangle of laws and regulations designed to interfere with that process. Part II considers possible approaches to justifying the obsession with money laundering, surveying both theoretical justifications and the legislative and executive history. Part III uses quantitative and qualitative data to contrast the consequences of the fight against laundering with the lofty objectives of disrupting criminal finance cited by legislators and executive branch officials. The most striking result of this evaluation is that criminal penalties for money laundering are used overwhelmingly against people already subject to punishment for a predicate offense. Although suspicious activity and other reports probably also pick up drug and stolen vehicle cash placement, there is no indication that they pick up anything else, nor is there any comprehensive system to analyze all the information relevant to detection that the government already has. Part IV briefly considers some of the forces shaping the system's actual operation and considers possible changes to the fight against money laundering. Without changes in the system--and perhaps even despite them--the relationship between fighting money laundering and disrupting criminal finance will remain tenuous at best, making the asserted goals of the system mostly beside the point.
I. THE FIGHT AGAINST MONEY LAUNDERING
A petty thief, a drug trafficker, a corrupt businessman who gives kickbacks for contracts, and the crooked politician who gets those kickbacks might each have committed vastly different underlying offenses and boast strikingly different social backgrounds and skills. (40) But we might easily imagine they have something in common: their crimes involve money. A substantial proportion of criminal activity makes money, consumes money, or both. The petty thief may not have a difficult time using the cash gained from selling a stolen diamond ring to his fence, compared to a drug trafficker with a literal ton of cash to deposit. But given the link between crime and money, it would seem on the surface that one plausible way to combat crime is to pursue the people and activities that make it possible to profit from or to finance crime. (41) The Supreme Court endorsed this reasoning when it found constitutional a system of recordkeeping that would help the government target criminal activity by detecting its financial component. (42) The laws at issue in that case were not criminal penalties against money laundering, but reporting requirements designed to help the government detect and disrupt financial activity linked to crime. When Congress approved new criminal money laundering statutes some years later, they were also framed as tools to help the government disrupt financial activity linked to crime. Since then, anti-money laundering laws have begun proliferating throughout the world. (43) Of course, money laundering and criminal finance are overlapping but different concepts, made all the more difficult to separate because government officials insist that the fight against money laundering is designed not just to punish a few people who happen to get caught with money after committing a crime, but to punish instead the larger infrastructure that allows domestic and global criminal networks to profit from and finance crime. (44) So the question that arises is whether there is a difference between what the system promises and what it delivers. Because the system is more than just the criminal statutes and the doctrine interpreting them, the answer to the question means we should also consider how bureaucracies make and enforce regulations meant to combat money laundering, and how investigators actually detect the activity.
A. HOW TO LAUNDER MONEY
The laundering metaphor refers not to any financial transaction linked to crime, but specifically to the process through which money received from crime is rendered more useful by two means: converting it into a desirable medium (i.e., a bank balance or equity in a company) and erasing its more obvious links to crimes. (45) This narrow definition tracks quite closely the approach taken in the major federal statutes targeting money laundering, which primarily focus on criminalizing transactions involving the proceeds of crime. (46) The concept of criminal finance refers to something broader; activities related to profiting from or financing criminal activity. Obviously this includes the narrow definition of money laundering, including the laundering that is most likely to be picked up by existing enforcement methods (discussed below) as well as other types of money laundering that do not involve physical currency and may be more difficult for the existing system to detect. The concept of criminal finance also encompasses the financing of criminal activity such as terrorism with financial resources from whatever source--including crime as well as legitimate activity.
Official sources sometimes take even the narrow definition of money laundering as a paradigmatic example of criminal financial activity, and the laundering cash proceeds from drug sales as the most cogent illustration of money laundering. (47) One reason why this sort of laundering matters is that money from crime is not worth as much when it is in the form of bulky currency, when it is easily traced back to the crime, or when it shows up in some individual or company bank account that easily attracts suspicion because the owner of the account is under surveillance. (48) Much of what criminals get from selling drugs, for example, is physical currency. Common sense suggests that the higher up one travels in a criminal network, the more cumbersome it is for a trafficker to receive compensation in physical currency form. (49) Cash is bulky and ill-suited for use in most legitimate economic transactions of any substantial value. Reporting requirements make cash transactions the object of possible government attention. (50) Even once the money is in a bank account, the money is hardly useful if the account belongs to someone the government suspects, or if the frequency of currency deposits to the account triggers government suspicion. A simple example helps illustrate the challenges criminals face in using currency. If a drug trafficker and the people he supervises sell $1 million worth of heroin in Chicago, they must transport and distribute about twenty-two pounds of heroin. (51) Yet the sale of $1 million can produce over 250 pounds of currency. (52) So the trafficker's first challenge is to place the money into the financial system and thereby change its physical form from paper bills into a balance at a financial institution. (53) A common technique to accomplish placement is to break up a large deposit into a number of smaller deposits. This technique, known as structuring, lets the trafficker solve the logistical problem of transporting physical amounts of currency, which minimizes the logistical problems of making large currency deposits and avoids the suspicion created by large deposits. Structuring deposits helps the trafficker avoid currency transaction reporting requirements that kick in when a person uses over $10,000 in a transaction. (54) In some cases, traffickers use the cover of an existing cash-intensive business, such as a money exchange business or a restaurant, to help justify large currency deposits--even if they exceed the reporting threshold. (55)
Once the placement is complete, the criminal will probably want to separate the ultimate destination of the funds from their initial placement site to make using the funds more convenient and reduce the possibility of detection. To do this, the criminal engages in "layering," a process that blurs the connection between the origin of the funds and the destination. The goal of this activity is to create a layer of transactions separating the ultimate destination of the bank balances that have been created as a result of the currency's placement. (56) What makes layering possible is the fact that money can be moved around, even across the world, in a series of relatively routine and inexpensive transactions. (57) But the fact that layering is possible does not necessarily make it useful to criminals. Most bank transactions leave a record of some kind, either in paper or electronic form. (58) Presumably, each wire transfer would leave some record, as would an analogous operation to create layering of transactions between the placement account and the destination account. If investigators knew where to look, they could in fact probably reconstruct the pattern of transactions. The problem is investigators do not necessarily know where to look. (59) If the layers of transactions involved include the transmission of money to accounts in so-called "bank secrecy" havens, which make it difficult to learn the identity of account holders, then layering makes it more difficult to reconstruct where money has been before it gets to where it is going. (60) Even if the layering strategy did not rely on bank secrecy havens, the number of transactions can make it difficult to figure out money's origin.(61) This makes it possible for the criminal to engage in the final stage of traditional laundering, which could be described as integration. Once placement has turned "dirty" currency into bank balances, and layering has obscured the connection between the placement account and the destination account, the criminal can integrate the funds into any number of streams of economic activity, including legitimate financial activity such as investments in securities and derivatives, government bonds, direct investment in a legitimate enterprise, or further financing of criminal activity. (62) When integration involves some legal economic activity, there must be some justification for where the new funds originated. But this justification is relatively easy to accomplish when the layering process has done its work. (63) Bank accounts controlled by a businessman in Colombia seem far removed in space and subject mater from the dozens of accounts at U.S. financial institutions that were first used to place the money.
Sometimes launderers vary the basic three-step process for disposing of currency if they want to outsource the risk of placing currency or simply want to engage in a mix of different strategies to confound law enforcement. (64) A money transmitting business like a Western Union branch can serve as a bank for the initial placement of currency, which is one reason why currency and suspicious activity reporting requirements now apply to these "money services businesses" as well as banks. (65) In the so-called "Black Market Peso Exchange" scheme, a drug seller gives currency to a currency exchange business, which then launders the money for a fee. (66) A common method for getting rid of the currency often associated with the currency exchange businesses is the use of currency to purchase consumer goods, such as televisions or kitchen appliances, for export. These products can then be dumped on the Colombian market and produce what appear to be legitimate commercial revenues. (67) Another approach is for the launderer to use currency to supplement an apparently legitimate transaction. The launderer could pay for a piece of commercial real estate worth $780,000 with a wire transfer of $500,000 and $300,000 in currency. The currency might be given to the seller under the table, effectively outsourcing the responsibility of placing the currency to the seller, who might be someone operating a currency-intensive business such as a restaurant. The buyer can then easily justify his added wealth because of the difference between the purchase price and the subsequently-appraised value of the commercial property. What all these schemes have in common is that someone ends up placing the currency in a bank account, and at some point the money produced from the crime is integrated into the financial system. This gives the owner of the funds the convenience to decide how to spend the money, but also creates tax liability just as if the money were legitimately earned (unless, of course, the owner of the funds engages in the sort of tax fraud that might defeat the convenience of justifying the existence of the funds in the first place). To the extent that criminals procure assistance from third-party launderers operating businesses that appear legitimate, criminals tend to pay a fee to the launderer. (68) If third-party launderers are behaving rationally, the fee or commission charged should be high enough to offset the additional tax liability that would arise from reporting the criminally derived funds as legitimate income--just as the owner of the laundered funds should be expected to derive a benefit from laundering that exceeds the cost from the tax liability imposed on legitimate income. (69)
Despite the challenges involved, the incentive to do it efficiently and reduce the overhead as well as the risk of detection can lead to laundering operations of substantial size. For example, an extensive money laundering operation focusing primarily (but not exclusively) on currency laundering was investigated by the U.S. Customs Service in 1998 in an effort known as "Operation Casablanca." In this operation, "brokers" who were actually U.S. law enforcement agents specializing in criminal finance worked in concert with representatives from Mexican drug cartels. For a fee, the criminal finance brokers placed the currency in U.S. bank accounts or smuggled the currency across the border to Mexico. (70) Using wire transfers and money smuggled into Mexico, the criminal finance brokers could then consolidate the money at banks with lax internal controls. (71) The money laundering scheme was described as follows by the government in a civil penalty complaint against a bank, with the government's own agents sometimes doing the laundering in the undercover sting operation:
[T]he Mexican bank would establish bank accounts in the names of straw owners at one of its branches. When the government wished to launder money, it would wire-transfer the money (in the form of U.S. dollars) into these straw accounts. This frequently involved wire-transferring the money to one of the Mexican bank's accounts at a U.S. Bank (referred to as a "correspondent account"), for further credit to the straw account. The Mexican bank would then issue cashier's checks, again in U.S. dollars, to whatever fictitious names the informant or undercover agent would specify.... The Mexican banker involved would receive a commission for his participation in the money laundering. (72)
In contrast with Operation Casablanca, where money began as currency and was eventually wired or carried across borders, some criminal offenses produce money that is not in currency form at all. In United States v. Piervinanzi, the Second Circuit affirmed a conviction for international money laundering involving a fraudulent funds transfer scheme. (73) The facts showcase the challenges and opportunities faced by perpetrators of a crime that does not directly involve currency.
In March 1988, Anthony Marchese told DelGiudice that he and Piervinanzi were planning to rob an armored car. DelGiudice suggested a less violent alternative--an unauthorized wire transfer of funds from Irving Trust into an overseas account. DelGiudice explained that he could use his position at Irving Trust to obtain the information necessary to execute such a transfer. DelGiudice also explained that it would be necessary to obtain an overseas bank account of the scheme to succeed, because (1) United States banking regulations made the rapid movements of proceeds difficult, and (2) a domestic fraudulent transfer could, if detected, be readily reversed.... Tichio then told DelGiudice that he would be able to provide access to accounts in the Cayman Islands, and emphasized that the strong bank secrecy laws there would prevent tracing of the purloined funds. Tichio told DelGiudice that the $10 million they were then planning to steal could be repatriated in monthly amounts of $200,000. (74)
Without suggesting that the facts in Piervinanzi exemplify laundering schemes relating to fraud, the case highlights the relationship between the laundering scheme and the underlying crime, (75) and the role that bank secrecy havens play in making it more difficult to recapture the funds and detect the perpetrators even if the underlying scheme is discovered. One might envision similar patterns for embezzlement involving public corruption instead of private financial institutions. (76)
The contrast between the Piervinanzi case and Operation Casablanca again shows how money laundering is not just about physical currency. Where a person seeks to launder funds that are not in currency form, as in the case above, there is no need to bother with placement. (77) The challenge is layering. Once the funds are suitably distanced from the original account (perhaps through one or more layers of protection arising from bank or corporate secrecy laws), the launderer can reintegrate them and justify their use. The name of the game is to distance the funds from the account from which the funds were taken. (78)
Layering might include more than simple wire transfers. Imagine, for example, a shell corporation set up in Liechtenstein, a jurisdiction that protects the secrecy of a certain kind of corporate entity's officers and directors. (79) Once the funds in question have been siphoned oil from an account where they belonged, the launderer might wire transfer them to an account controlled by the shell corporation. The shell corporation then makes a loan to the launderer, who pays the loan essentially back to himself. From an investigator's perspective an obvious problem with this sort of laundering is that the launderer does not face the difficulty of placing the funds in the financial system. What partly offsets this problem is that the victims of financial frauds that produce non-currency balances sometimes have an incentive to report the fraud so that the siphoned funds can be recovered. (80)
The foregoing picture of money laundering--involving hiding the origins of money obtained from crime--demonstrates its overlap with the larger concept of criminal finance, defined earlier as including all the various forms of laundering as well as the financing of crime. If money laundering is the process through which criminally derived funds are rendered usable, then surely any definition of criminal finance should at least encompass all activities that would be defined as money laundering. Sometimes money laundering would allow a criminal to reinvest in criminal activity, thereby providing a ready source of capital for the maintenance or expansion of criminal activity. (81) Even if this were not the case, the cost of laundering presumably is still an expense for the criminal and may reduce the fruits of the crime. (82) By the same token, the financing of crime might involve funds that begin entirely clean, with no link to crime other than the nefarious intent of someone who comes to control the funds at some point and chooses to use them to further some crime. A person financing a crime such as terrorism with clean money might still be engaged in some sort of laundering (or obscuring of the source of funds) in order to achieve anonymity or at least pseudonymity, but the soil being washed away is not the crime that produced the money, but the person who finances it. (83) The techniques to pull this off involve something like traditional money laundering in reverse. Since there is no reason to assume the money would begin as currency, assume it is in a bank account somewhere outside the target country, where the money must arrive in order to be useful for the commission of the crime. To move the money into the target country, the criminal financier has a few choices. He can simply wire the money to an account in the target country. The wire transfer leaves an audit trail that might extinguish the financier's anonymity, (84) but only to the extent that the recipient's account is identified. Non-traditional alternatives include the use of an informal money broker. In South Asia, the so-called Hawala system allows someone to send money across the world without a paper trail by paying the principal and a fee to a broker in the country of origin and designating someone with a pseudonym to receive the money in the targeted country. (85)
In all cases, the owner of an account with bank balances has substantial advantages over the drug money launderer with crumpled bills or the fraudster trying to hide hot money stolen from a victim soon to miss it: there is almost never a need for placement, nor is there a clearly identifiable financial victim tending to have an incentive to report the offense. To the extent that anti-money laundering enforcement depends in some measure on creating logistical and legal impediments to placement, then the aspect of criminal finance that involves criminal financing might be quite difficult to detect. Neither is there a clearly identifiable victim with an incentive to report an offense that does not involve fraud. In short, it is not at all clear whether any efforts to fight money laundering could easily come to disrupt terrorist financing or similar activities not necessarily involving cash, or whether such efforts would be likely to put a substantial dent even in cash placement. That depends on the details of the enforcement system targeting money laundering, to which we turn next.
B. COMPONENTS OF THE ENFORCEMENT SYSTEM
The near-relentless focus of legal scholarship on substantive laws and constitutional regulation of criminal procedures obscures a tripartite structure defining the law's efforts against many complex crimes or offenses. (86) Substantive criminal statutes obviously matter. Assuming a system that tends to encourage legal interpretations that meet some threshold of intellectual honesty, then the language of a statute shapes a court's decision over what to instruct the jury and a prosecutor's decision to charge a particular defendant. But a prosecutor cannot charge a defendant if she does not suspect that a particular defendant has committed an offense. Discovering this depends on what investigators do, and particularly how they gather information about the universe of possible violations, which depends in part on regulatory systems. The following pages provide an overview of these three components. (87)
1. Criminal Statutes Charged by Prosecutors
Our first stop is the core criminal statutes themselves, which bring us back into the rarified world of statutory text and judicial pronouncements about legal doctrine. The most often-studied federal anti-money laundering statutes are 18 U.S.C. [subsection] 1956 and 1957, known among prosecutors and commentators as "the" money laundering statutes. (88) Section 1957 targets conduct involving knowing transactions with certain kinds of criminal proceeds. Section 1956 criminalizes the concealment of criminal proceeds or the promotion of particular kinds of crime with monetary proceeds. The structure of the statutes appears to reflect two seemingly contradictory concerns. Since money laundering penalties extended criminal liability in a way that seemed strange and unusual, one objective was to narrow the scope of conduct subject to criminal penalties under the statutes. (89) At the same time, investigators and prosecutors clamored for more discretion, resulting in the inclusion of certain vague terms (such as "monetary transaction" and "financial transaction") that enlarged the statutes' scope to the point that almost any post-crime activity undertaken by someone with money generated from some list of crimes risks criminal liability for money laundering. As discussed below, this ability to use the money laundering statutes to cover such a broad range of conduct can prove irresistible to prosecutors trying to enhance the sentence of someone who has already been detected for an underlying offense. What follows elucidates the structure of the statutes and how they have been interpreted.
Begin with [section] 1956, which demonstrates some of the tension between limiting and expanding the scope of laws criminalizing laundering. Section 1956(a)(1) focuses on domestic financial transactions designed to conceal or promote a specified unlawful activity, (90) while [section] 1956(a)(2) prohibits certain international transfers meant to conceal or promote the specified activities. Since the statute's drafters appear to have recognized the difficulty of investigating some of these offenses--particularly if the statute was going to be used to punish money laundering activities of third-parties who specialize in this-[section] 1956(a)(3) explicitly authorizes sting operations to catch violators. The paragraphs below discuss each of these sections in detail to give a sense of how this principal anti-money laundering statute works.
The intuitive logic behind the crime of money laundering is that financial transactions can help further a crime or make it easier to enjoy the fruits of it. (91) The first part of 9 1956 addresses that type of situation. A person violates [section] 1956(a)(1) if she conducts a financial transaction (or tries to) involving proceeds of specified unlawful activity, knowing that the property involved in such a financial transaction represents the proceeds of some form of unlawful activity, and acting with a specific kind of intent. (92) The violator's intent must include one of the following: (a) promoting the carrying on of the specified unlawful activity, (93) (b) intending to violate 26 U.S.C. [subsection] 7201 and 7206 (tax offenses not included as specified unlawful offenses), (94) (c) knowing that the transaction is meant to confuse the source or control of proceeds of specified unlawful activity, (95) or (d) acting with knowledge that the transaction is designed to avoid some of the Bank Secrecy Act's reporting requirements, or state reporting requirements, discussed below. (96) From the language of the statute one might conclude that a typical violation could involve not only the drug trafficker breaking down currency deposits to hide their origin, but also persons involved in the third-party laundering of non-currency criminal proceeds that have to do with offenses such as the sale of counterfeit aircraft parts. (97) After the new USA Patriot Act ("USAPA"), which radically expanded federal authority to engage in the fight against money laundering, the category of specified unlawful activity has expanded dramatically. It now includes, among other things, any crime of violence, bribery of a public official, smuggling of munitions, any offense for which the United States is obligated to extradite or prosecute someone by multilateral treaty, firearms trafficking, computer fraud, and "terrorism offenses" as defined in 18 U.S.C. [section] 2332(b). (98) If the specified unlawful activity category had the potential to serve as a means of focusing the use of criminal money laundering statutes, what little remained of that argument has been vanquished by September 11 and the resulting USAPA changes.
The activity requirement necessary to establish an offense under [section] 1956(a)(1) is the existence of a "financial transaction," or at least an attempt to engage in one. (99) Perhaps in large measure with an eye to making life easier for prosecutors and investigators, the statute defines "financial transaction" quite broadly, including in that umbrella the purchase, loan, sale, pledge, gift, transfer, delivery or other disposition of property between parties. (100) When a financial institution is involved, a financial transaction includes the usual array of things that a bank can do for a customer, including a deposit, withdrawal, transfer between accounts, exchange of currency, loan, extension of credit, use of a safe deposit box, or just about any other payment, transfer, or delivery by, through, or to a financial institution. (101)
The statute does more than just criminalize financial transactions that conceal or promote specified unlawful activities. It also provides for a separate crime involving the activity of international movement, or the transnational transportation, transmission, or transfer ("transportation") of money connected to some crimes. (102) Specifically, [section] 1956(a)(2) establishes three separate offenses: (a) intending to promote the carrying on of a specified unlawful activity through the transnational transportation; (b) the transnational transportation of money representing the proceeds of some form of unlawful activity, with the intent to conceal or disguise the link between the money and the unlawful activity; and (c) the transnational transportation of specified unlawful activity proceeds with the intent to avoid a state or federal transaction reporting requirement. (103) Offenses meant to promote the carrying out of some specified unlawful activity need not involve the proceeds of specified unlawful activity in order to trigger criminal liability. Thus, if a person uses perfectly clean money gleaned from capital gains on equity investments and uses it to support illegal drug agriculture in Bolivia, she is violating [section] 1956(a)(2)(A).
Of course, the fact that someone can be prosecuted for making transactions linked to the promotion or concealment of specified unlawful activity does not mean it is easy to detect such transactions. On the contrary: if the concern that gave rise to the anti-money laundering statutes is correct, then the existence of underworld professionals specializing in money laundering might make these transactions particularly difficult to detect. (104) Prosecutors use the "sting" provision contained in [section] 1956 to help allay this problem. Section 1956(a)(3) makes it a crime to conduct (or attempt to conduct) a financial transaction with property that a law enforcement officer represents (105) as the proceeds of a specified unlawful activity with one of three types of intent that are probably familiar by now: (a) promoting some specified unlawful activity, (106) (b) concealing or disguising unlawful activity proceeds, (107) or (c) avoiding reporting requirements. (108)
Most of the time prosecutors use [section] 1956 in connection with criminal prosecutions. But the statute also includes a civil penalty provision that lowers the standard of proof necessary to levy some sort of penalty under the statute. This gives prosecutors an added tool that can increase their bargaining power against individuals or financial institutions suspected of engaging in certain transactions to promote a crime or conceal it by hiding the money. (109)
If [section] 1956 opens the door for law enforcement to punish someone who did not commit a crime but supports it indirectly by hiding the money or plowing more of it into the criminal activity, [section] 1957 swings that door wide open--making it even easier to convict a third-party launderer who had nothing directly to do with the underlying offense. The offense is titled "engaging in monetary transactions in property derived from specified unlawful activity." (110) The statute essentially prohibits the knowing disbursement or receipt of more than $10,000 of criminally derived proceeds if a financial institution is used at some point. (111) Unlike with [section] 1956, a person commits an offense under this section even if the funds are not used for any additional criminal purpose or the defendant lacks any specific intent. Thus, if a car dealer takes more than $10,000 that he knows to be derived from criminal activity, he violates [section] 1957. Because criminal liability under the statute requires the transaction in question to be more than $10,000 but the transaction is so vaguely defined, a major issue in interpreting [section] 1957 is the exact meaning of the monetary amount threshold. Courts seem dismissive of the importance of tracing in the context of [section] 1956 prosecutions. Not so for [section] 1957, where it is well-settled that a conviction under that statute requires that at least $10,000 be traced back to some specified unlawful activity. (112) If courts let prosecutors dispense with proving tracing altogether, it would be hard to argue that the $10,000 threshold in [section] 1957 makes any difference at all in any case where the defendant happened to have access to an account with more than $10,000, because then all of that money could be assumed to be illegal. But just what "tracing" means in the context of [section] 1957 is not entirely clear, even if the trend suggests some sort of pragmatic balancing requiring the government to do more tracing as the ratio of tainted to clean funds increases. (113) At least one circuit has concluded that the government must trace the commingled funds to a specified unlawful activity or prove that the entire source of funds in an account derived from specified unlawful activity. (114) Meanwhile, as a result of the USAPA, prosecutors can also charge someone with a civil violation of [section] 1957. (115)
Distinctions in the details of [subsection] 1956 and 1957 should not obscure the prevailing pattern in the way courts parse the statutes' abstruse terms: with just occasional exceptions, over time the statutes' interpretation has tended to favor prosecutors. Court interpretation of the knowledge requirement under the two core anti-money laundering statutes illustrates the trend favoring prosecutors. Courts follow the language in the statutes to require knowledge that the funds in question were derived from some illegal activity, and not from a specified unlawful activity. (116) Beyond this, courts seem to accept the premise that the legislature created the statutes in large measure to target third parties who facilitate money laundering without necessarily being involved in the underlying crime. (117) This seems to lead courts to the conclusion that, although the statutes require "actual knowledge," willful blindness can amount to such knowledge, at least (1) when the defendant claims to lack such knowledge, (2) the facts suggest deliberate ignorance, and (3) jurors would not misunderstand the instruction as mandating an inference of willful blindness. (118) In some ways the ascribed similarity between actual knowledge and willful blindness is hardly surprising. Suppose a private banker who normally gleans some knowledge of the origin of his clients' funds is introduced to a potential client reputed to be a criminal. Suppose the private banker, having been placed on alert that his new customer might be a criminal, then changes his practices to avoid learning anything about the new client's funds. It seems plausible that the private banker should face the risk of liability at least under [section] 1957, which does not require specific intent to promote an unlawful offense. Indeed, the private banker's willful blindness almost amounts to actual knowledge, because it was triggered by the knowledge of the new client's reputation. The problem is that a potential defendant does not always know ahead of time that a new client is suspected to be a criminal. Because of this, courts applying the willful blindness doctrine have had to explain what it is about people, their behavior, or their money, that gives rise to such compelling suspicion that the rejection of that suspicion amounts to willful blindness. For example, in United States v. Campbell, a real estate agent was involved in a transaction with a person who drove a red Porsche, possessed a cellphone (certainly more unusual in 1992 than ten years later), and once brought a briefcase filled with $20,000 in cash to demonstrate his ability to pay for the property. (119) By concluding that the real estate agent engaged in "willful blindness," the court here endorsed the use of a sort of criminal profile that, if observed, should lead to the inference that the money or property in question is "criminally derived." If you drive a flashy car and have a briefcase with $20,000 cash but are saddled with bad credit, then people who ignore the possibility that you are a criminal when they take your money might be seen to be willfully blind. (120)
As with the willful blindness doctrine, courts have also broadened the scope of the term "financial transaction" in [section] 1956 to a striking degree, even when considering the open-ended language in the relevant portions of the statute. (121) A financial transaction must have a link to interstate commerce in order to trigger liability under [section] 1956--but this element is satisfied with minimal effects on interstate commerce, such as investment in construction of a shopping mall or deposits in a federally insured financial institution. (122) More importantly, courts have decided that "financial transaction" means, among other things, selling a car or transferring title to a truck. (123) It also means transferring cashiers' checks, (124) depositing money into a bank account, (125) wiring funds, (126) posting a bail bond, (127) writing checks, (128) or cashing embezzled checks at a bank. (129) This last sort of financial transaction highlights the related issue of when an act of money laundering "merges" with the underlying offense in situations where, as with the cashing of the embezzled check, the financial transaction might be viewed as part of the underlying offense. The prevailing view is that as long as the money laundering violation involves at least one separate transaction from the underlying crime, it counts as a separate offense. (130) Even when courts say that an underlying offense, by itself, does not amount to a money laundering violation, prosecutors can often cure the defect by charging someone for conduct that comes only slightly later in the process of committing a criminal offense. What makes this easier is the pliability of the definition of financial transaction--as more and more conduct involving money gained from crime is viewed as amounting to a financial transaction, it becomes easier for prosecutors to make a money laundering case against an underlying offender for doing almost anything at all with the proceeds from a specified unlawful activity. (131)
One might think that even if "financial transaction" ends up meaning almost anything under the sun, there would still be some limits because offenses under [section] 1956(a) still require an intent to promote or conceal a specified unlawful activity. But while "intent to promote" still seems to have some content to it, (132) "intent to conceal" has proven more pliable, (133) In fact, whenever prosecutors have trouble tracing the money involved in a financial transaction back to the specified unlawful activity they might try to argue that obviously the transaction in question is meant to conceal the specified unlawful activity, because otherwise it would be easy to trace the proceeds back to the crime. (134) The predictable result is that prosecutors can almost always slap on a money laundering charge to financial crime offenses involving financial transactions, generating far more severe potential penalties and enhancing their bargaining position against defendants. (135)
The swelling reach of the concept of "financial transaction" under [section] 1956 stands despite a legislative history suggesting that Congress--to the extent it intended anything--sought to craft a definition of financial transaction that would not expand to include everything under the sun.  Moreover, because [section] 1956 has no explicit Sixth Amendment protection built in to prevent the government from using money laundering prosecutions or associated forfeitures to interfere with criminal defense funding, the widening scope of the statute also raises the question of when government interference with the funding of criminal representation violates the Constitution. (137) The continuing trend toward widening what is meant by financial transaction gives prosecutors ever more leeway in deciding when to use [section] 1956, because the occurrence of some kind of financial transaction is what triggers liability under the statute. In short, the pattern is that interpretations have become more draconian over time. Part of this is because the statutes are written to favor expansive interpretations that lower the costs of prosecuting the offense, as demonstrated by the expansive definition of financial transactions. But there may be other reasons why courts might tend to resolve so many of the ambiguities in [subsection] 1956 and 1957 in favor of prosecutors, a subject to which I turn below. (138)
The reason why [subsection] 1956 and 1957 are so useful to prosecutors is not only that it is relatively easy to prove the necessary elements for a conviction, but also that the penalties available for those convictions are tremendously severe under the federal sentencing guidelines. (139) In some cases, money laundering penalties are more severe than for the underlying predicate offenses. (140) Although the guidelines applicable to money laundering offenses have recently been revised to make a better case that the punishments have some relationship to the severity of the offense committed, the resulting guidelines still punish money laundering activity severely. (141) Even if the applicable guidelines for money laundering are not always more severe than those for predicate offenses, the sentences are certainly severe enough that prosecutors and investigators could use money laundering charges as substitutes for underlying predicate offense charges that might be more difficult to prove against particular defendants. After all, [subsection] 1956 and 1957 generally only require that the money in question be traced to the specified unlawful activity, not that the defendant possess any particular link to the commission of the specified unlawful activity.
Although prosecutions under the core anti-money laundering statutes might be especially attractive given these draconian sentencing guidelines, they are not the only statutory tools prosecutors can use to undermine money laundering. Even before anyone had ever heard of federal anti-money laundering laws, prosecutors were using federal conspiracy statutes to attack forms of money laundering tied to drug trafficking offenses. For example, in United States v. Barnes, the Second Circuit noted:
[I]mporters, wholesalers, purchasers of "cutting" materials, and persons who "wash" money are all as necessary to the success of a drug venture as the trafficker. They can all be held to agree with one another in what has been called a "chain" conspiracy. (142)
Such a theory of criminal liability is still available, though it is likely to be less attractive because it requires that prosecutors establish a link to the underlying criminal activity (i.e., drug trafficking) and does not expose the defendant to punishment for violating multiple statutes.
Still other tools available to prosecutors seeking to disrupt the sorts of activities encompassed by criminal finance include federal forfeiture provisions, criminal penalties for structuring and other reporting violations such as breaking up deposits to avoid reporting currency transactions, and state money laundering and forfeiture laws. Though forfeiture laws are controversial, it is at least plausible to view them as tools that might help the government attack money laundering through confiscation of criminal proceeds and accessories. (143) Federal law provides for the in personam criminal forfeiture of any property traceable to (or involved in) a money laundering offense. (144) Civil forfeiture is also available against property connected to money laundering, as are civil and criminal forfeiture for the proceeds of any offense defined as specified unlawful activity. (145) Forfeiture seems to attract enthusiastic attention from law enforcement authorities, who have also held out the prospect of sharing forfeited assets with informants and foreign governments to galvanize their cooperation. In 1994 alone, the Department of Justice reported that the government achieved forfeiture of approximately $550 million. (146) Meanwhile, criminal penalties for currency-related reporting violations include, for example, the prohibition against the operation of an illegal money transmitting business, (147) prohibitions on breaking down deposits (or "structuring" them) to evade reporting requirements, (148) and penalties for financial institutions' failure to file reports--discussed below--required under the Bank Secrecy Act and other legal provisions. (149) Moreover, a financial institution violating criminal anti-money laundering laws may even face the regulatory equivalent of the "death penalty" by being forced to forfeit its charter and terminate its federal deposit insurance. (150) State anti-money laundering laws have also proliferated, giving local prosecutors and investigators a chance to engage in some of the same charging patterns that their federal counterparts practice. (151) By the same token, state authorities might face similar problems in detecting money laundering activity when it is not obvious from large aggregations of currency or from an investigation incident to an underlying offense that has already been detected. (152)
In short, depending on the details of her conduct, a money launderer might face liability under [section] 1956 for promoting or concealing specified unlawful activity through a financial transaction, such as selling currency derived from some criminal activity to a money exchange business. The transaction might also give rise to criminal liability under [section] 1957 for the operator of the money exchange business if he knows the currency represented criminal proceeds. Both individuals might face the prospect of civil and criminal forfeiture of the instrumentalities of the laundering (i.e., the building housing the money transmitting business), as well as what the laundered money buys. The two persons might also face liability for criminal violations of regulatory-type provisions arising from conduct such as structuring cash deposits to evade reporting requirements. Finally, both might be punished under state anti-money laundering laws (by state prosecutors), or under a conspiracy theory (i.e., conspiracy to important narcotics) used to go after money laundering even before specific statutes against the practice were on the books. But even if individual launderers end up honeycombed with criminal liability, their opportunity to launder might depend substantially on the conduct of financial institutions, whose incentives might be driven at least as much by regulations and civil penalties (discussed below) as by criminal sanctions on individuals.
2. Rules Administered by Regulators
Parallel to the system of criminal statutes and pretrial procedures administered by prosecutors is a framework of regulations and civil penalty actions overseen by regulators. This system of rules is aimed primarily at financial institutions, and has two obvious and interrelated purposes: to give financial institutions an incentive to cooperate in fighting against money laundering, and to force those institutions to generate information that can help investigators working with prosecutors to detect money laundering activity. (153) What follows is a discussion of the major regulatory requirements imposed on financial institutions and others, and a summary of the major changes to these requirements following the passage of Title III of USAPA, which represents the most dramatic change in regulatory authority designed to disrupt criminal finance since the entire system was created in 1970.
Not surprisingly, the bulk of the requirements involve accounting for transactions involving physical currency. Before 1970, banks could take large currency deposits--even from people whose circumstances and behavior hinted that the money's origin was probably illegal activity--without filing any sort of report. For the most part, banks lacked economic incentives to have any compunctions about taking such money. (154) The Currency and Foreign Transactions Reporting Act, commonly known as the Bank Secrecy Act of 1970, has been the basis of a decades-long effort to shape the behavior of financial institutions, create an audit trail allowing law enforcement to track large currency transactions, and thereby deter tax evasion and money laundering. (155) The "secrecy" in the Act's title is misleading, since its main purpose is to limit, rather than boost, the secrecy of some financial transactions. Although the law's main purpose was not to outlaw money laundering directly, but to create a regulatory structure to obtain information about currency transactions, it also provides for criminal penalties for reporting violations. (156) The theory behind the law was in part that banks would be forced to become vigilant in identifying suspect customers and transactions. (157)
The Bank Secrecy Act gives the Treasury Department a substantial degree of discretion to define what counts as a "financial institution," which current regulations have defined to include depository institutions such as state and federally chartered commercial banks, money services businesses such as check cashers, currency exchangers, and money transmitters, post offices, casinos, and securities firms. (158) Under the regulations, financial institutions must file a Currency Transaction Report (CTR) to report any single currency transaction over $10,000, and multiple transactions that total over $10,000 conducted on the same business day if the institution knows the transaction was conducted on behalf of the same person. (159) Businesses and trades that receive more than $10,000 for a single transaction--including lawyers--have to file reports of the transaction. (160) So must licensed casinos, (161) except if they are in Nevada (where cash payouts over $10,000 need not be identified), a quirky exception that highlights the extent to which the details of regulatory requirements and enforcement might be driven by politics. (162) On the theory that launderers might physically carry money out of the country instead of taking their chances structuring deposits in the United States, the regulations also impose a requirement on individuals to report the transportation of $10,000 or more in currency or monetary instruments into or out of the country. (163) Individuals must also disclose the existence of foreign bank accounts over which they have signature authority or control with balances of more than $10,000 during the calendar year. (164) Because these requirements are likely to be tremendously overbroad, the Bank Secrecy Act requires Treasury to exempt some transactions and gives it the discretion to exempt even more. (165)
Some of the Bank Secrecy Act reporting requirements might seem invasive, but the Supreme Court has found those requirements constitutional. Shortly after its inception, bank customers whose activities were being reported challenged the constitutionality of the Bank Secrecy Act and the regulations it spawned. In California Bankers Ass'n v. Shultz, the Supreme Court held the recordkeeping requirements of the Bank Secrecy Act constitutional on their face, but determined that access to such records should not be arbitrary. (166) Instead, access to the records was controlled by "existing legal process." (167) In finding that the recordkeeping requirements were constitutional, the Court noted that Congress had virtually plenary power to regulate cross-border movements, which should logically be taken to include the movement of currency across borders (reported through CMIRs) and the existence of bank accounts abroad controlled by U.S. nationals (reported through FBARs). (168) Moreover, the Court believed the recordkeeping requirements to be reasonable because Congress had reason to believe currency aggregations were inherently suspicious, and had considered extensive testimony to this effect. (169)
When the Supreme Court again returned to pass on the Bank Secrecy Act, in United States v. Miller, it was asked to decide whether an alleged illegal whiskey distiller whose Bank Secrecy Act records had been obtained by allegedly defective subpoenas had a Fourth Amendment interest in his bank records. (170) The Supreme Court rejected the argument. This forced it to figure out a way of distinguishing Boyd v. United States, a holding that is now riddled with exceptions but has never been explicitly overturned by the Court. (171) Under Boyd, individuals have a property interest in documents subject to the government's subpoena power. In Miller, the Court reasoned that Boyd did not apply to currency and bank records since the customer had no property interest in the records. Neither did the Fourth Amendment's prohibition against unreasonable searches or seizures affect the government's access to the records, since its application depends on the individual's legitimate expectation of privacy and there was none in this case. (172) The customer had no legitimate expectation of privacy, the Court concluded, since he had consented to disclosure of the information in question to a third-party (i.e., the bank). It is easy to criticize the Court's argument that third-party disclosures obviate any reasonable expectation of privacy when hardly anyone would bank with an institution that promised to make all its customers' records completely available to the public on the Internet. Nonetheless, the Court might have been reluctant to completely eviscerate the government's ability to force third parties to keep records, which would have been the potential consequence of accepting Miller's argument. (173) Had the Supreme Court decided otherwise, it is difficult to see how any of the recordkeeping framework of the Bank Secrecy Act or its subsequent changes (particularly those changes requiring the reporting of suspicious activities) could have been salvaged. Partly in response to these developments, legislators supported the Right to Financial Privacy Act, which regulated some of the federal government's access to financial information. (174) The Privacy Act does stop banks' extreme practices such as turning over entire customer files without telling customers, and instead creates a system where, save for some exceptions, investigators must request non-Bank Secrecy Act records in writing and banks must notify customers whose records are provided to investigators. (175) The Bank Secrecy Act therefore allows law enforcement to see records without the formalities associated with obtaining records through the Privacy Act or through a regular subpoena. (176)
While the Supreme Court recognized the value of having reporting requirements for currency transactions, those requirements are not set in stone. Obviously they can be changed through statutory amendments and changes in regulations. In addition, the …