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Federal Government Takes Aim at Money Launderers

August 18, 1985

MIAMI (AP) _ Drug dealers are smuggling billions of dollars in illegal profits out of the United States to cover their tracks, sometimes stuffing teddy bears with cash to pass through customs. Still, the money leaves a trail, and the government is trying to follow it through bank transactions.

Officials estimate that between $50 billion and $75 billion is earned illegally in the United States each year, and that an estimated $5 billion to $15 billion of that moves into international financial channels.

The Reagan administration wants to change banking laws to give authorities more access to financial records.

Under the Bank Secrecy Act, records must be kept of all banking and border transactions involving $10,000 or more in cash. All foreign bank accounts of more than $5,000 must also be registered.

″We can see where there is a bank that has unusually eccentric transactions, or we can see where there are a lot of transactions in one account by different names - all sorts of deals that do not make normal commercial sense, but do make sense if you are a bad guy,″ said U.S. Customs Commissioner William von Raab.

″To put it into its simplest terms, if you come across a guy who’s got a lot of cash, you basically can say to him, ’Where did you get it?‴ von Raab said.

The government also can confiscate undeclared cash crossing the border if it amounts to $100,000 or is tied to another criminal act.

″In May, during the course of one outbound operation, we seized $2.7 million,″ said Miami Customs Agent Leon Guinn. ″The interesting thing is the methods of concealment and the ingenuity used to try to get the money out of the country.″

Officers found packets of tightly rolled bills sealed in cans of baby powder, Tootsie Rolls, cereal boxes, and even teddy bears during the May operation, said Customs spokeswoman Kitty Pryor. This month alone, agents at Miami International Airport have confiscated more than $4.2 million.

″It’s not just dirty figuratively, but it’s dirty literally,″ von Raab said during a recent trip to Miami. ″It’s collected just like in a church, in contributions of crumpled dollar bills. And it’s hard to handle. One million bucks weighs about 100 pounds.″

The Reagan administration is backing a bill introduced by Rep. Bill McCollum, R-Fla., that would strengthen existing laws by making money laundering punishable of up to five years in prison and $250,000 in fines.

The bill also would amend the Bank Secrecy Act to give new subpoena powers to the secretary of the treasury, change wiretap laws and alter the Right to Financial Privacy Act to shield financial institutions from invasion of privacy lawsuits.

Opponents already concerned about the existing law say the proposed legislation would end the public’s financial privacy.

Fritz Elmendorf, spokesman for the American Bankers Association in Washington, said his organization supports the idea of making money laundering a crime, but not by stripping the public’s right to financial secrecy.

″The administration bill virtually guts the Right to Financial Privacy Act,″ Elmendorf said. ″We don’t feel you have to do violence to the public’s right to financial privacy in order to stop money laundering.″

But Florida Bankers Association Executive Vice President John Milstead supports McCollum’s bill, even if it means sacrificing some of the public’s financial privacy.

″The drug issue has become such a terribly expensive and socially bad problem, and banks have been put at the center of it all,″ Milstead said. ″The only concern we have is that those people who work at banks not be brought into question.″

Earlier this year the Bank of Boston was fined $500,000 for noncompliance with the recording requirements, and the Treasury Department has 140 other banks under investigation, said Arthur Brill of the President’s Commission on Organized Crime.

″We’re not going to lick the problem until every chairman of the board down to the tellers in every bank say we’re not going to accept the mob’s money,″ said Brill.

Most banks in South Florida have heeded the law, forcing much of the drug money to places like Houston, Los Angeles and Chicago, von Raab said.

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