Finance's Top Cops

By Leander, Ellen | Global Finance, October 1996 | Go to article overview

Finance's Top Cops

Leander, Ellen, Global Finance

Stan Morris. Elizabeth Montano. Fernando Carpentieri. Rick McDonell. Names that ring a bell? Probably not. But in the insular little world of finance, these are all people you should know.

That's because these four, along with a handful of others, are the "top cops" in finance-in the growing international campaign to stamp out money laundering and other forms of financial crime, but also in shaping the development of electronic payment systems, the regulation of global finance, the ways new nonbanks will operate and be governed, and the way business itself will be conducted in the future throughout the world.

That sounds like a lot of power. But the reality is that in the here and now the growth of free markets and the use of new technology is giving financial criminals a new lease on life and regulators a very large headache.

The challenge to governments everywhere is how to unshackle finance and open it up to new kinds of banking and new providers of funds without empowering the criminals and disarming the cops.

But the resumes of finance's top cops provide a glimpse into the strength and diversity of resources that governments are willing to commit to this battle. Many of the top cops, like Stan Morris, head of the Financial Crimes Enforcement Network (FinCEN), have law enforcement backgrounds. Others, such as Elizabeth Montano of the Australian Transaction Analysis Center in Sydney, and Ron Noble, formerly president of the Financial Action Task Force (FATF) and US undersecretary of the treasury for enforcement, have legal backgrounds. And a growing number, such as the current head of the FATF, Fernando Carpentieri, mix a legal background with international policymaking.

In fact, nearly all of these individuals held top positions in government or the private sector before joining the antilaundering fight. Morris, for example, was the deputy director for supply reduction in the White House Office of National Drug Control Policy during President George Bush's administration. His experience comes in handy, since a large percentage of laundered funds began as drug sales. Peter Eigen, founder and head of the Berlin-based anti-corruption organization Transparency International, held highlevel positions at the World Bank for 25 years. Working in both Latin America and Africa, he witnessed corruption, money laundering, and their undermining effects on society firsthand.

Anti-money laundering projects, in fact, are enticing the kind of talent that the international antidrug crusade attracted 15 years ago. And not a moment too soon. In part, that's because methods of detection have not kept pace with the rapid evolution of technology and the exploding global economy. But part of the problem is simply the nature of the offense. "Money laundering is not like murder," says Carpentieri, who at 55 is director general at the Italian treasury as well as president of the FATF. "With murder, you have evidence of a crime. In money laundering, we don't have evidence. Things happen without us knowing."

These top cops worry that without effective means to control money laundering, illicit funds could eventually overwhelm the world's financial system. Experts estimate that more than $1 trillion is laundered annually around the world today, and that total continues to grow. Small regulatory gains, such as suspicious transaction reporting requirements for banks, may raise the cost of laundering in a country like Australia. But the launderers will just move elsewhere, to laxer nations such as Thailand and Indonesia. Some change their modus operandi and launder cash through casinos and foreign exchange booths called cambios. Some convert their cash into expensive electronics or fancY cars, which they can easily ship overseas. Others simply call their brokers and invest in the local stock market. None of these alternatives-all of which are practiced by launderers on a regular basis in nations such as the United States, France, Germany, and Japanare regulated in any way to prevent laundering activity. …

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