Drugs and Money: Laundering Latin America's Cocaine Dollars

By Robert E. Grosse | Go to book overview

Chapter 16

How Should Banks Deal with Money Laundering?

INTRODUCTION

After all of the changes in legislation since 1970, the main concerns of banks and other financial institutions in relation to money laundering are first to meet the reporting requirements of the Bank Secrecy Act (BSA) and second to make a careful effort to avoid allowing their banks to be used for money laundering.

The 1970 Bank Secrecy Act has been revised and updated several times in the past 30 years, but still the basic idea is that banks need to file appropriate reports on cash and monetary instrument transactions so that law enforcement agencies will be able to find records of activities that may turn out to be the laundering of proceeds from “specified unlawful activity.” In our context, this unlawful activity would be related to narcotics trafficking, but it also applies to kidnapping, robbery, extortion, and fraud, among other crimes.

The 1986 Money Laundering Control Act made money laundering itself a criminal act, so banks also need to establish policies and train employees to keep such acts from occurring. These efforts largely focus on requiring banks to know their customers well and to document transactions carefully in the event that subsequent events prove that money laundering has occurred.

Banks are used by criminals for drug money laundering in a variety of ways. The main problem in the 1970s was the delivery of large amounts of drug-related cash that was being deposited into commercial banks. For example, without clear rules to keep records that might later demonstrate the trail from cocaine or heroin to the money and subsequent laundered financial assets such as bank accounts and investments, law enforcement was truly limited in its ability to produce evidence about such activities. Once the BSA was written and implemented, banks were required to take the first big step toward helping law en-

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