Attorney General Prepared Remarks
Organized Crime Conference [NOTE: THE ATTORNEY GENERAL OFTEN DEVIATES FROM PREPARED REMARKS] Chicago, Illinois August 7, 2001
When asked why he robbed banks, the notorious bank robber Willie Sutton is said to have replied, "Because that's where the money is." This quote - whether Sutton actually said it or not - has become a part of American folk wisdom, a reminder that we should not overlook the obvious when approaching any problem.
Like Sutton, most organized crime figures sell drugs, commit securities and bank fraud, traffick in human beings, murder and extort because that's where the money is. But once acquired, money that is the result of illegal activity must somehow enter the legitimate financial system to be useful to the criminal. This fact makes the cash that is organized crime's greatest objective also one of its greatest vulnerabilities.
Consider the average drug trafficking organization. If it wishes to sell $1 million worth of heroin it must produce, transport and distribute merely 22 pounds of heroin to do so. Having sold the drugs, however, the trafficking organization must contend with 256 pounds of street cash. That's 10 times the weight of the drugs sold. For major drug trafficking organizations this effect is of course multiplied. Drug dealers that sell $1 billion worth of cocaine must contend with 256,000 pounds of illicit currency. And although no definitive figures are available, if we assume a conservative figure of $50 billion worth of illicit drugs sold in the United States each year, the amount of "dirty" currency produced by these sales weighs almost 13 million pounds. This represents a tremendous burden for organized crime - and a tremendous opportunity for law enforcement.
The process by which criminals conceal or disguise all their weighty ill-gotten gains is, of course, money laundering. As a criminal enterprise, money laundering often is not taken as seriously as it should be. Many are inclined to view it as a harmless, victimless game played by unscrupulous accountants and white collar criminals. But nothing could be further from the truth. Money laundering constitutes a serious threat to our communities, to the integrity of our financial institutions and to our national security. For behind every dollar of dirty money in need of laundering is a trail of victims - victims of violent crimes committed to settle drug wars; victims of terrorism; women and children trafficked into dangerous, degrading labor; and honest businessmen and women driven to bankruptcy by front operations for organized crime.
Money laundering is the final stage of organized criminal activity, and sadly, it is an enormous problem. One recent estimate put worldwide money laundering activity at roughly $1 trillion a year, almost half of it attributable to the proceeds from drug trafficking. A former IMF official estimated that money laundering accounts for two to five percent of the world's gross domestic product.
In the 1970s the United States was among the first nations to recognize the threat of money laundering. The laws we passed to combat the practice - requiring banks and other financial institutions to report to the Internal Revenue Service any cash transactions over $10,000, for example - have done their job. Now that they are denied direct access to U.S. financial institutions, criminals have had to find other ways to launder their profits. Criminals in the United States have been forced to send their proceeds overseas, often through a complex series of transactions involving shell corporations and off-share banks operating in countries with lax financial laws. Criminals outside the U.S. have resorted to indirect methods of placing their profits in the United States by using dollar-denominated accounts in foreign banks that are in turn deposited in U.S. financial institutions in the foreign bank's name.
And criminals engaged in all-cash operations. Principally drug dealers, but others as well - are reacting to U.S. currency reporting laws by keeping their profits out of the banking system altogether. They employ an army of couriers to physically transport huge volumes of currency out of the country. These couriers travel over the highways or through the airports with loads of cash -- often stuffed in boxes, suitcases and concealed compartments in vehicles. Such bulk cash smuggling, in fact, may be the most common form of money laundering today.
More than many areas of law enforcement, successfully combating money laundering takes the coordinated effort of the federal government, foreign governments, state and local law enforcement, banks and other financial institutions. State and local investigators must have the training and the resources they need to recognize and investigate suspected laundering operations.
The Department of Justice is committed to helping you use our money laundering laws to the fullest extent possible to identify, investigate and prosecute those who would launder the illegal proceeds of organized crime by giving law enforcement to tools to follow the trail. The United States Congress has shown leadership in attacking organized crime by following the trail of dirty money it leaves behind. But our money laundering laws have not changed significantly since they were enacted. The time has come for Congress to lead once again.
The Department of Justice has identified several areas in which our money laundering laws need to be updated to more effectively combat organized crime and to better serve the cause of justice.
The first of these areas is bulk cash smuggling. Hundreds of millions in U.S. currency is transported out of the United States each year in shipments of bulk cash. The only law enforcement weapon currently available to combat this activity is a requirement that shipments of more than $10,000 in cash be accompanied by a report to the United States Customs Service. Complicating matters further, the Supreme Court has ruled that the failure to file such a report is not a serious enough offense to warrant the confiscation of bulk cash when it is discovered - even if the smuggler took elaborate steps to conceal the currency. The result is that the effective penalty for smuggling dirty cash out of the country is a relatively short prison sentence for the courier - a virtually meaningless penalty for a drug trafficking organization or a money laundering ring.
A Customs Agent in Puerto Rico, for instance, recently stopped a passenger waiting to board a flight to the Dominican Republic with $139,000 stuffed in his socks. For not filing the Customs report, the smuggler was sentenced to 12 months in jail. Now, it's safe to assume that whomever the courier worked for was able to replace him almost immediately. Confiscating the cash the courier carried, however, would have been a significant blow to his employer. But the court ruled that the Customs Service could not seize the cash unless it could prove the money was acquired through criminal activity.
The existing laws against bulk cash smuggling are wholly inadequate. The Department of Justice is currently considering recommending that Congress act to make bulk cash smuggling a crime and to provide for the confiscation of the smuggled property. It stands to reason that if smuggling diamonds or firearms is a crime serious enough to justify seizure of the smuggled goods - whether or not it can be shown that the courier was involved in another crime - smuggling illicit cash should be a crime as well. This is a common sense reform of our money laundering laws that I hope Congress will consider seriously and adopt.
Of course, the same couriers who attempt to smuggle cash out of the country have to transport the cash to the border or to the airport. This is yet another opportunity for law enforcement to crack down on organized crime with the appropriate adjustment of our money laundering laws.
A police officer, for example, recently stopped three men in a car traveling on Interstate 295 in Delaware. One of the men had a prior conviction for drug trafficking; another had two prior convictions for drugs and a pending murder charge. In the trunk of the car was $10,000 in cash, wrapped in rubber bands and two layers of plastic and stuffed inside a duffle bag. A drug sniffing dog hit on the currency and an Ion scan machine detected cocaine on the bills.
The officer seized the currency as drug money. But just last month a federal court threw out the case. The reason is the same as in the bulk cash smuggling case. It's currently not a crime to transport drug money down the highway. It's a crime to put drug money in the bank, or to electronically wire it to Brazil. It's even a crime to use drug money to buy a Persian rug. But it is not illegal to transport it on our roads or through our airports.
Congress should close this loophole in our money laundering laws. The Department of Justice is considering asking Congress make it a federal offense for a person to transport more than $10,000 in cash proceeds of a criminal offense in interstate commerce -- that is, on a public highway, on an airplane or on any other common carrier. This offense would occur if the person knows that the money is the result of criminal activity, or if he or she knows it is intended to be used for a criminal purpose.
The third area in which change is needed in our money laundering laws is the list of crimes committed in other countries that allow prosecution by U.S. officials when their proceeds are brought to the United States.
Our money laundering laws make it a crime for foreign drug dealers, terrorists or those who have committed bank fraud to send their profits to the United States. But the great majority of other foreign crimes - crimes that routinely generate money that criminals need to hide or invest somewhere else - are not on the list. The result is that U.S. prosecutors are routinely forced to turn down cases involving money sent into the United States by corrupt foreign public officials, swindlers and organized crime groups.
This gaping hole in U.S. law makes it extraordinarily difficult for federal law enforcement to keep the proceeds of foreign crimes out of U.S. financial institutions. One solution might be to amend the money laundering statute so that foreign criminals -- whether working with each other or with criminals in the United States -- are placed on an equal footing with domestic criminals. Laundering the proceeds of any serious crime should be a criminal offense in the United States, regardless of where the underlying crime was committed.
These are a few of the changes that in the coming weeks and months the Department of Justice plans to ask Congress to make in our money laundering laws. Other areas we are considering very closely as well include the wire transfer of tainted money, laundering the proceeds of terrorism and denying U.S. visas to suspected foreign money launderers and their families. With these changes in the law, we hope to enhance the ability of federal, state and local law enforcement to work with banks and private businesses to identify, investigate and prosecute money launderers - and it so doing help take the profits out of organized crime.
It has often been said that it took an accountant to bring Al Capone to justice - and for good reason. Legend has it that the term "money laundering" originated from Capone's use of a string of coin-operated launderettes here in Chicago to disguise his revenues from gambling, prostitution and protection rackets. And in the end, Capone was convicted of tax evasion, not any of the underlying crimes he had committed.
Investigating and prosecuting money laundering can be a long, arduous and complex process. But it is critical to bear in mind that it is more than a bloodless exercise in accounting. When we fight money laundering we fight organized crime. When we fight money laundering we keep drugs out of our playgrounds and away from our kids. We keep weapons out of the hands of terrorists. We protect small businesses. And we safeguard the human dignity of women and children trafficked into forced labor and prostitution.
When we stop criminals from enjoying the fruits of their illicit activity, we serve the cause of freedom and justice. For law enforcement, there is no higher calling. And for the citizens we serve, there is no greater cause.
Thank you very much.