Magazine article American Banker

Former Fed Governor: Law Meant to Detect Dirty Money Ineffective

Magazine article American Banker

Former Fed Governor: Law Meant to Detect Dirty Money Ineffective

Article excerpt

Anti-money-laundering laws are ineffective, former Federal Reserve Board Governor Lawrence B. Lindsey said Friday.

"We are asking for a lot of compliance to catch a few people," Mr. Lindsey said at a Cato Institute forum here.

To underscore his point, Mr. Lindsey said that prosecutors had brought charges against just 3,000 suspects from 1987 to 1995, while 77 million currency transaction reports - 62 tons of paper - were filed by financial institutions. Just 580 of those suspects were convicted, according to the former central bank official.

Mr. Lindsey, now a resident scholar at the American Enterprise Institute, cautioned that invading the privacy of law-abiding citizens and heaping reporting costs on legitimate businesses are as much a threat to society as drug traffickers and money launderers.

"We have overstepped the bounds of balance and reason today," he said, "and we as citizens should start reining our government back before their powers increase even further."

Richard W. Rahn, president of the diversified company Novecon Corp. and former chief economist of the U.S. Chamber of Commerce, agreed that the cost of complying with rules against money laundering far outweighs any benefit.

Disparaging law enforcement authorities as "Gestapo," Mr. Rahn said efforts such as a Treasury Department proposal requiring money transmitters to report overseas money wires exceeding $750 were pointless and unconstitutional.

Treasury official Stephen Kroll said the government is sensitive to privacy issues and has taken several steps to slash needless paperwork. …

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