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U.S. bankers rightly point out that they must abide by relatively strict currency-reporting laws, while their counterparts in other countries play fast and loose. That discrepancy has prompted Washington to try to persuade the rest of the banking world to adopt the record-keeping system used by American institutions.
The biggest push could come from the provisions of the Kerry Amendment to the 1988 anti-drug abuse act. The law requires the Treasury Secretary to negotiate bilateral agreements on money-laundering detection and prevention with all U.S. trading partners. Countries that refuse to participate or that negotiate in bad faith could conceivably be excluded from the U.S. banking network and clearinghouses. Yet in hearings earlier this year, Assistant Treasury Secretary Salvatore Martoche indicated that the Bush Administration is reluctant to enforce the law zealously for fear of hampering the U.S. banking industry.
But there is more at risk than the dislocation of business as usual. Many experts believe the financial stability and national security of whole countries will be in jeopardy until the problem is solved. Says the head of the Italian treasury police, General Luigi Ramponi: "Now that they are too rich, the drug lords will start investing everywhere: in industry, in the stock market." In the U.S. some lawmakers have begun worrying about the impact of billions of drug dollars invested in U.S. institutions and wonder what influence the drug barons might eventually exert.
The money-laundering game is also creating a mess for investigators of other crimes, who are running into dead ends when they try to identify the players in fraud cases. Beverly Hills police are stymied by last August's Mob-style assassination of Hollywood entertainment executive Jose Menendez and his wife Kitty, who were shotgunned in the front room of their mansion. Menendez had been an executive and director of Carolco Pictures, an independent movie company that produced Sylvester Stallone's Rambo movies, and police have been unable to unravel his business affairs or identify all his partners. Carolco is controlled by a Netherlands holding company that is, in turn, owned by a tangle of offshore family trusts.
Financial experts are beginning to recognize that Washington will be unable to control drug money unless the U.S. compels offshore financial institutions to make their books "transparent" enough to show the true owners of the money. In the end, the Colombian drug cartels are about to force the world to re-examine the international financial system that has developed haphazardly over the 60 years since the Swiss first popularized secret banking. Countries may not yet be willing to make their banking transactions fully "transparent," but some light must be shed on everyone's books. Says Kerry: "It will take significant leverage and leadership. The President has to have the top bankers in and say, 'Unless you are part of the solution, you are part of the problem.' "