Combating the New Generation of Money Laundering: Regulations and Agencies in the Battle of Compliance, Avoidance, and Prosecution in a Post-September 11 World
Jackson, Christina, The Journal of High Technology Law
"[T]he first steps to reversing their recent dramatic gains must be to ... treat these conflicts not as law enforcement problems but as a new global trend that shapes the world as much as confrontations between nation-states did in the past. Customs officials, police officers, lawyers, and judges alone will never win these wars." (1)
Increasing globalization, the opening of markets, and the proliferation of both officially sanctioned and underground financial networks have contributed to an exponential growth of money laundering. (2) In the past, money laundering was often about profit-making, such as hiding and integrating drug trafficking profits. (3) In response to the attacks of September 11, 2001, a new and more sophisticated perspective on money laundering is evolving: it is no longer simply about profit for profit's sake, but is more recently about funding religious and zealous objectives--and it is no small problem. (4) While various efforts to pinpoint exact amounts have proven unsatisfactory, (5) in 2002 the International Money Fund estimated global money laundering at two to five percent of the total world gross domestic product, (6) or approximately $600 billion to $1.8 trillion U.S. Dollars. (7) The world's greater interconnectedness means all countries are at risk for money laundering and terrorism, as well as their repercussions. Money laundering is a global issue, and several players in the international arena are currently working together to fight it. (8) While the United States has addressed some aspects of money laundering by forming new organizations, bolstering existing regulations, and passing the USA PATRIOT Act of 2001 (PATRIOT Act), (9) after two years only a handful of related claims have found their way to our high courts. (10)
This note discusses the paradigm shift and the United States' position on contemporary money laundering issues in light of the events of September 11, 2001, and their aftermath. Key aspects of the money laundering battle are the definition and evolving nature of money laundering and it processes, the organizations that combat it, and the delicate international balance of government and economic trust and cooperation entwined with it. Domestically, U.S. federal court decisions also shed light on the interpretations of changes in the money laundering statutes. (11) Part I defines money laundering and discusses its processes. Parts II--IV explore the economic implications of money laundering, U.S. regulations designed to address it, and domestic and international agencies that exist to fight it. Part V addresses modern means of compliance, avoidance, and efforts to enforce the PATRIOT Act.
I. WHAT IS MONEY LAUNDERING?
Money laundering is a multi-faceted process of disguising financial assets. (12) It can be as exceedingly simple as cash deposits and withdrawals from a bank account, or as complex as an international labyrinth of off-shore banking, shell corporations, trafficking in cash and monetary instruments, wire transfers, and informal personal networks. (13) The subversive nature of money laundering makes it difficult to characterize, (14) but it is generally bifurcated according to its source: dirty and clean. (15) Dirty money is proceeds derived from an illegal source that launderers transform into funds with a seemingly legal source. (16) Clean money is funds that are acquired legally, but criminals launder or misappropriate for the purpose of illegal activities. (17) Previously, analysts ignored clean money as a component of money laundering; part of the re-conceptualization resulting from the September 11, 2001 attacks involves the inclusion of clean money into the definition of money laundering. (18)
Generally, regardless of its purpose, money laundering occurs in three stages: placement, layering, and integration. (19) At the placement stage, the launderer transfers the physical proceeds into a financial institution or system. …