Question: What is the size of the money laundering issue? We know it encompasses more than just money laundering from the illegal drug trade.

Morris: Well, it is difficult to estimate the dollar amount of money laundering. It's a criminal activity. Criminal activity is only successful if it is surreptitious, and not measurable. But we do know that organized crime has to launder its money if it is going to be successful, and that the size of the drug trade and other criminal activities is very great. And, therefore, the issue is very important. I've seen used by reasonably responsible people $100,000 million U.S. and $300,000 million worldwide. I've also heard the United Nations use numbers up to a trillion. I don't put a lot of basis in it.

Money laundering starts with the initial payment, say, for so much heroin. That money basically has a velocity effect. You can count it and count it and count it, multiple times, as it runs through the criminal organization for payments and the like. So this is a tricky business. We had had some discussions with economics experts at one of the national laboratories and at the International Monetary Fund (IMF), to begin looking at a better way to identify the worldwide size of it, but I would be ill-advised to give you a number.

Q: Would you agree with estimates that perhaps half of the total comes from illegal narcotics trade and, if so, what would the other half consist of?

Morris: Our thinking is that the answer is yes, probably half is a reasonably good estimate. The other half goes everywhere from fraud, to extortion. If you look at the former Soviet Union, the drug business isn't the largest part of the criminal activity. It is, in fact, extortion, stolen vehicles, and the like. Arms trafficking is important and then there is some of the more basic activities such as fencing and prostitution and basic criminal activities. And, if you add all of those pieces together, you come up with another large category of criminal activity.

Q: FinCEN's mission is to provide world leadership in prevention and detection of the movement of illegally derived money. How do you do that?

Morris: We've got a multiple set of ways that the Treasury moves to provide attention and leadership in this area. There is the G-7 (the seven leading industrial countries) Financial Action Task Force. The Treasury Department is president this year. Its meeting will be held for the first time in the United States at the end of this month.

We have had the last year a fundamental reexamination of the 40 recommendations to combat money laundering - for example, banks should know the customers making deposits and receiving transfers of funds, large cash deposits should be reported to officials - that serve as the major guideposts for countries, and some of those will be changed and new ones adopted. Also, there are other multilateral vehicles. We have been active in the Caribbean Financial Action Task Force, which is an affiliated organization dealing with the issues in the Caribbean. Similarly, Secretary [of the Treasury Robert] Rubin chaired a meeting in Buenos Aires, Argentina as part of President Clinton's effort to follow up on the Summit of the Americas meeting in 1994.

One of the elements adopted at the Summit was the establishment of an anti-money laundering regime that all of the countries in this hemisphere would adopt. Just two weeks ago, Secretary Rubin hosted a meeting of finance ministers and announced a significant effort on the part of the U.S. and, more specifically, the Inter-American Development Bank, to begin to provide technical assistance and support to various countries, first assessing their needs and then trying to provide the necessary resources to combat laundering.

We also have added to the agenda of the Asian Pacific Economic Cooperation (APEC) forum, the issue of money laundering. Secretary Rubin has pressed the importance of ensuring that capital markets are free from corruption and illegal activity.

And bilaterally, we have been encouraging the establishment of financial intelligence units, organizations similar to FinCEN. There are now over 20 in the world, and we have been working with them to build more effective relationships. They include countries as small as Slovenia and Panama and as large as the United States and Australia and France. We believe that a multi-jurisdictional organization with a close working relationship with financial institutions is a very important approach to providing the necessary prevention as well as investigative support to try to keep our banks clean and out of the hands of organized criminals.

A team just came back from meeting with senior officials in Mexico, trying to assist them in understanding the various ways that our regulatory and enforcement regimes operate, both multilaterally and bilaterally.

Q: You said that the Financial Action Task Force will be meeting here in Washington. Would you tell us something about the agenda, what you hope will come out of the meeting?

Morris: Well, the first order of business is a reexamination of the 40 recommendations, and we hope that there will be a consensus on modernizing them, updating them in a number of areas. For example, we clearly believe that we need to look beyond banks because, increasingly, money laundering is going on in less regulated aspects of the financial sector. We clearly believe that governments need to pay attention to money laundering, not just as it relates to drugs, but as it relates to all serious crimes. We think that reporting from financial institutions should be mandatory and that the reporting of suspicious financial transactions should be protected from liability for such reporting.

We believe that we should be looking into the future and that governments should analyze the changing nature of financial services and payment services to make sure that they're not susceptible to new forms of money laundering. We'll also be starting the examination of countries' performances against the recommendations. We've just completed over the last four or five years what we call a mutual evaluation, in which each country submits itself to an assessment by legal, regulatory, and law enforcement authorities from other countries to assess whether the laws are in place to deal with the problem.

The next step, which is beginning now, will go on into the next couple of years and will be an assessment of how those laws are being applied, and several countries have already begun the process. Thirdly, we will be looking at ways of improving our affiliation with other organizations in Asia and the Caribbean, such as the Organization of American States (OAS), with the Council of Europe, Interpol, and the World Customs Organization. All of them play a role here, and we want to try to improve that.

We will also for the first time make public a version of our judgment on the changing nature of money laundering, and issue it at the end of this month. It's important to know that there are 26 countries expected at the meeting and we have to try to arrive at some degree of consensus. This is not as simple as it might sound.

Q: The U.S. 1996 International Narcotics Control Strategy Report lists high concern or medium-high concern for money laundering activities in a number of developing as well as developed countries. Why is it important for countries to combat money laundering? After all, if you're a small country or have an economy with deep problems, as in parts of the former Soviet bloc, cannot a fair amount of money be made, by not questioning bank transactions?

Morris: It's interesting you asked that, because I think that was, in fact, the view a few years ago. And, indeed, I was in some countries in Eastern Europe and the former Soviet Union when I raised the issue that banks should report suspicious activity and not conduct activities of a certain nature. And they sort of looked at me in astonishment, saying, "We need capital of any sort."

That has changed. Indeed, I was quite impressed at the meeting in Buenos Aires that Secretary Rubin chaired, in which the finance and justice and central bankers all came together, and their concern was the following: that if we do not keep our banks essentially protected, that organized crime will flourish and that, given the new efforts, in many cases quite new, to permit free enterprise, that the bad guys, organized crime, will be able to out-compete honest business. They will drive out honest business within the societies. Dirty money does, in fact, drive out clean money, and what that would result in is economic power moving to organized crime. Economic power, of course, is convertible to political power in new, fragile democracies which suddenly find themselves beholden to criminal organizations. So almost without exception -- I think without exception -- every country indicated this was very important to them if they were going to operate as democracies with free markets. Those markets have to be fair and you couldn't allow organized criminals to pervert them.

So the issue here is not one of, "Well, we'll just let this capital come in." Letting the capital come in means the crooks come in, and it legitimizes the crooks and, pretty soon, the crooks are in charge. That, in the simplest terms, is why this is such a serious matter.

Q: Would you say that this feeling is also widespread in the Caribbean, where a number of countries have been accused of permitting money laundering?

Morris: I think that there is a growing world consensus that steps need to be taken to deal with this problem. I think that clearly there are varying levels of enthusiasm and political will, both in the Caribbean and elsewhere. I was in Jamaica just a couple of weeks ago, and they are having a busy debate there on some major new legislation. Aruba and The Netherlands Antilles have both created new laws, and Aruba has appointed -- I just met her -- a new head of the Financial Intelligence Unit. The Caymans have been, I think, taking important steps. The justice minister for Antigua, when he was up here, felt it important enough to come by FinCEN and spend some time here.

So I think that you're seeing a lot of renewed concern and interest among governments now. That doesn't mean that corruption doesn't exist and that government elements wouldn't, perhaps, look the other way or try to encourage this.

And that is, of course, the issue. We have to make sure that the forces of good are stronger than the forces of evil, and we need to make sure that the forces of good have the tools necessary to succeed.

Q: Would you include Panama in those countries that are now taking effective action? Along with some of the Caribbean countries, it has been singled out as a laundering haven.

Morris: Panama has taken some steps to create a financial intelligence unit, to create some laws against laundering. It has a very vibrant financial sector. They have a free-trade zone, which creates some problems. But there are clearly senior people in the Panamanian government who have strong commitments to try to ensure that Panama is successful in keeping out any illegal money, who are trying to reduce the size and power of organized crime. And it's important to note that none of these issues just belong to other countries. We may have maybe a tad bit of U.S. arrogance. The fact is that the reason the U.S. knows so much about this problem is that we've had it for so long, and we have our own issues of corruption and our own weaknesses. And so when we present steps that need to be taken, I tell my colleagues around the world that you can look not just at the U.S. successes, but also you can learn from our failures.

Q: Looking to some of your concerns about the future, you have voiced a great deal of concern about electronic transactions and how they might be used by money launderers. Would you please outline the problems that this new technology may present and what you're doing to try to head them off?

Morris: Well, change provides both opportunities and risks, and we see a major, and I don't think it's too strong to say, revolutionary change occurring in financial services. The nature of banking, I think, is undergoing fundamental reexamination, both in this country and around the world, driven by technology and new forms of payment services. And we have early on begun to see the potential, both in terms of opportunity and in terms of risk, of some of these changes. We've been working with the industry and with the U.S. Comptroller of the Currency, Eugene Ludwig, who is coordinating the Treasury Department's efforts, to make sure that we understand what is happening here, and then see what the risks are and what the opportunities are and try to make sure that we maximize the opportunities and minimize the risks.

Q: If money launderers can use modern technology, computers, and the Internet to quickly move money most anywhere in the world, doesn't this imply that you will need in the future even more international cooperation than you've needed in the past?

Morris: Yes. I think that this area, probably as much as any other, cries out for a close, cooperative arrangement, because money moves at the speed of light through financial institutions almost anywhere i the world. This makes the challenge of following the money very complex. That's why the establishment of these financial intelligence units is an important first step.

We also think these technologies present opportunities. We have developed Internet linkages -- I think we now have 14 hooked together so that we can immediately exchange information back and forth as to what we're seeing and what kinds of problems we're identifying and get help from one another. As I say, that can happen literally at the price of a local phone call and the speed of light. And so we have, I think, tried to pay attention to this and tried to view these technologies as opportunities for the good guys, not just opportunities for the bad guys.

Q: Have non-banking institutions become important in money laundering efforts?

Morris: Well, we find any time we begin to bring pressure in one area, then we begin to bring greater public light and attention to it. Light is not something that criminal organizations like. They like to operate in the dark and they run in areas that have less opportunity for exposure. And, in most of the major countries of the world, we have established fairly effective regimes that deal with traditional banking, and we have effective supervision over banks, financial ministries, central banks and the like.

There's less of a supervisory oversight over the nonbanks, whether we're talking about money transmitters or check cashers or, in some cases, casinos, broker dealers, insurance firms and the like, or the regulatory scheme is different. And so when we become more effective with banks, the bad guys will start moving their money through nonbank organizations who provide financial services -- a check casher who probably also has ties to a Western Union agent and maybe even loans money on the side; large casinos will often provide credit for gambling, wire money, issue checks, and the like. So, if you're going to be looked at very carefully at the bank and not looked at so carefully at the casino, you go to a casino.

As I said, one of the changes we hope comes out of the Financial Action Task Force meeting in Washington is a clear statement of the importance of examining the nonbank financial institutions with a rigor similar to that used on financial institutions.

Q: Finally, is there something that you would like to add, something that I didn't cover?

Morris: I guess I would just add, and I'm sure I've said it earlier, that the issue of dealing with money laundering is complex. The problem does not fit neatly into any particular bureaucratic box. It's important for complex problems to be dealt with with complex solutions, and governments, I think, really need to reexamine how they carry out their activities and build the kinds of cooperation between governmental elements that are necessary to succeed. There's an old quote from H.L. Mencken (a U.S. writer): "For every complex, difficult challenging problem, there's a low-cost, simple, easy solution that's wrong."

Jerry Stilkind writes on narcotics and other global issues for the U.S. Information Agency.