Banking On Secrecy

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If the anti-money-laundering forces prevail, law-enforcement experts say, steps can be taken to crack down on terrorists' use of financial institutions. Among the most important:

GIVE THE TREASURY SECRETARY MORE POWER TO TRACK OVERSEAS MONEY. The Senate antiterrorism bill would help close a key loophole in the U.S. financial system by authorizing the Treasury Department to identify and scrutinize foreign money entering via correspondent bank accounts.

IMPROVE THE EFFICIENCY OF THE FEDERAL AGENCIES CHARGED WITH ADMINISTERING ANTI-MONEY-LAUNDERING LAWS. Right now, critics say, the 150,000 suspicious-activity alerts filed with the irs are reviewed at a plodding pace. How plodding? Some of the filings are reportedly transcribed at a Chippewa Reservation in North Dakota onto magnetic tape, which is then used on the obsolete data-entry equipment the IRS has dedicated to the project. The turnaround can take nine days--more than enough time for a terrorist who has done something suspicious to have spent the money and moved on.

FORCE THE RESPONSIBLE AGENCIES TO ISSUE CRITICAL REGULATIONS MORE QUICKLY. The Treasury Department's Financial Crimes Enforcement Network recently announced that, despite having had 28 months to impose reporting requirements on money service businesses, including check-cashing operations, it would not have regulations ready until the summer of 2002. Investigators say the Sept. 11 hijackers used check-cashing firms to transfer money used in the attacks.

GO AFTER NATIONS THAT FAIL TO DO THEIR PART TO HELP IN THE CRACKDOWN. Charles Intriago, publisher of Money Laundering Alert and a former federal prosecutor, argues that just as the Bush Administration has threatened to go to war not just on terrorists but on the nations that sponsor them, the U.S. may need to go after countries that permit their banks to safeguard money for terrorists. Given the centrality of the U.S. financial system in the world economy, no nation could easily survive being told that it could not clear its transactions in American banks. "We can eliminate them from our financial map," says Intriago. "It's the ultimate bloodless weapon, as lethal as anything we drop on Afghanistan."

But if the Bush Administration is going to take a hard line, it will have to stand up to a number of recalcitrant forces. To get at terrorists' assets, they have to apply more pressure on Saudi leaders who have been dragging their feet about identifying and freezing bin Laden's linked funds. The Administration believes that there is terrorist money to be got in Saudi Arabia. Late last week the U.S. announced it would freeze the accounts of Yasin al-Qadi, a prominent Saudi businessman, for alleged financial support of al-Qaeda. He is affiliated with a charitable foundation administered by some of Saudi Arabia's wealthiest and esteemed men, one that U.S. officials say funnels millions to bin Laden.

To make larger reforms in anti-money-laundering law, the Administration will have to stand up to the politicians and lobbyists who still want to go easy on offshore tax havens. Even after the President declared "financial war" on terrorists, the C.F.P. posted a "strategic memorandum" on its website last week arguing that the Bush Administration-backed bills contained "language designed to hinder international tax competition" and should be scaled back or defeated.

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