Cayman Firms Provide Data to Combat Money Laundering: Experts at Washington Forum Discuss Crime Prevention
Albert, Andrew, American Banker
WASHINGTON -- U.S. authorities are finally making clear strides in removing the shield of foreign bank secrecy that so often frustrates their attempts to nab international drug smugglers and money launderers.
The most recent progress came this week, when the Justice Department announced it is employing for the first time a month-old international agreement to obtain records from banks and corporations in the Cayman Islands.
Agency officials say they're seeking the financial data for seven separate narcotics investigations now in progress. The officials would offer no specifics about those probes.
The Caymans, a British independent protectorate in the Caribbean with strict laws guarding the confidentiality of corporate records, has long been considered a haven fro criminals seeking to conceal illegal proceeds from U.S. investigators. But federal narcotics agents are hoping for much greater access to the records of those companies, thanks to an agreement reached earlier this month by the United States and the Cayman Islands.
In fact, U.S. Attorney General William French Smith said the federal government may use the U.S.-Cayman pact as a model for efforts to gain access to confidential banking records in other countries, such as Panama.
Nevertheless, U.S. crime fighters admit they are facing an uphill battle in trying to track the billions of dollars in criminal profits flowing overseas. Bank secrecy laws in Panama, the Bahamas, the Netherlands Antilles, and other regions are still widely used to hide drug trafficking proceeds and tax evasion activities.
Federal agents stalking drug rings and money launderers "often reach a dead end when the trail leaves the U.S.," John M. Walker Jr., assistant Treasury secretary for enforecement and operations, said this week.
Financial sleuths and narcotics agents gathered at a Washington forum this week to hear Mr. Walker and other leaders of the law enforecement community discuss the difficulties of investigating global drug and currency cases. They were attending a two-day conference about offshore money laundering, sponsored by the Battelle Memorial Institute, a research group, and the host, American University.
Officials at the conference depicted the new breed of money launderers as highly skilled professionals -- accountants, attorneys, bankers, or money brokers -- many of whom have no previous criminal records.
The experts say laundering schemes are as varied as the human imagination allows. False loans, letters of credit, and commodities trading arrangements are among the more recent methods of converting illegal profit to seemingly legitimate assets. "It undermines the trust of our financial institutions," Mr. Walker said.
The Department of Justice estimates that illegal drug sales in the United States generate $76 billion a year and that as much as 40% of the total, or $30.4 billion, is "washed" through offshore banks -- primarily in the Caribbean.
Treasury agents believe they've already devised adequate reporting requirements for spotting laundering schemes in the United States. For instance, financial institutions must notify the federal government of any currency transactions of $10,000 or more. …