08 February 2000
(ONDCP chief outlines strategies to counter illicit drug trade) (1320) Following is the text of an article that appeared in the Mexican newspaper El Universal on February 8, under the byline of General Barry McCaffrey, director of the White House Office of National Drug Control Policy (ONDCP): [Note: In the text, billion = thousand million.] (begin text) "Stopping Money Laundering Requires International Cooperation" by Barry R. McCaffrey, Director Office of National Drug Control Policy Recent news about increased drug consumption in Mexico is one more example of the internationalization of the cost of drug trafficking. A meaningful distinction can no longer be made between transit and consuming countries because aspects of the drug trade are experienced by most regions. For this reason, international cooperation is more important than ever to minimize the damage illicit drugs cause. An essential aspect of the fight against illegal drugs is an attack upon the profits made by the drug cartels. Traffickers enter the drug business as a quick way to make money. By attacking the financial gains made by drug organizations, this illegal activity can be hurt where it is most vulnerable. According to estimates by the United Nations, illegal commerce in drugs reached a global level of five hundred billion dollars annually -- more than the profits generated by the international oil and gas industry and twice as much as the auto industry. Money laundering allows drug dealers to invest ill-gained funds in legal ways. Initiatives against money laundering are extremely useful in redirecting the success of this destructive industry. The multimillion-dollar profits from the drug trade have to be laundered daily through the international financial system. The communications revolution, the globalization of financial markets, and a wide range of new technologies have transformed the way we do business. These advances are being used by narco-traffickers for their own benefit. Today, traffickers can transfer drug monies to jurisdictions with few legal obstacles. Drug dealers also use a variety of financial mechanisms, such was front companies, to hide assets or disguise their origin and destination. The International Monetary Fund estimates that more than a million corporations of this type exist worldwide. The IMF calculates that money-laundering transactions represent about 8 percent of the total value of international commerce. A large part of this money comes from narco-trafficking. Apart from the incalculable social cost that these sums generate, drug trafficking corrupts financial markets and political systems. It damages democratic institutions, ignores the rule of law, and destroys civic order with impunity. Money laundering also creates inexplicable changes in the demand for currency, endangers the stability of banking systems, contaminates legal financial transactions with greater volatility in the flow of international capital, and distorts exchange rates. The United States spends about fifty-seven billion dollars annually on illegal drugs. Considering that approximately 80 percent of this sum is converted into profit after the payment of costs, forty-six billion dollars from narco-trafficking are laundered each year as a result of U.S. drug consumption. The United States government has attacked this problem with two laws: the Money Laundering Control Act and the Bank Secrecy Act. Money laundering is a serious federal crime with more than 170 related acts which entail sentences of up to twenty years in prison along with fines exceeding a half-million dollars. The Bank Secrecy Act is administered by the Treasury Department and provides investigators with tools to follow money of suspicious origin. The name of this law is a bit misleading since the law reduced bank secrecy in the United States. The act obliges financial institutions to present reports about any cash transaction of more than ten thousand dollars as well as all suspicious transactions. Not presenting reports or dividing a transaction to avoid a report have been classified as crimes. In the past three years, the Department of Justice tried more than six thousand defendants who were accused of money laundering. Approximately half of these cases involved narco-trafficking. U.S. authorities have struck back at money launderers through successful federal operations. For example, Operation Polar Cap is a continuing investigation headed by the Drug Enforcement Agency, which confiscated $105 million and led to the arrest of 111 people. Task Force El Dorado involves a dozen federal, state, and local agencies in New York. The Task Force confiscated 150 million dollars in cash and arrested more than seven hundred people. This Task Force dramatically reduced the flow of funds to Colombia via money transfers from New York. In the international arena, the U.S. supports international cooperation through participation in the Financial Action Task Force against money laundering. Twenty-six countries and territories that are members of Financial Action Task Force (with its seat at the Organization of Economic Cooperation and Development) established forty recommendations that set a universal standard for combating money laundering. The U.S. Congress approved the Money Laundering and Financial Crimes Strategy Act of 1998, which asked federal authorities to develop a five-year strategy against money laundering. The Departments of the Treasury and Justice recently presented the first of five reports requested by Congress. The National Money Laundering Strategy of 1999 sought to interrupt the flow of illicit money, increase regulatory efforts and cooperation with the private sector to prevent money laundering, promote coordination with local and state governments within the U.S., and increase international cooperation. New laws may classify as crimes a greater number of offenses related to money laundering, identify areas susceptible to money laundering, reinforce the scrutiny of suspicious transactions, and establish rules requiring financial service businesses and casinos to present reports about suspicious activities. Currently, such reports are only demanded from banks. The United States is clearly committed to reducing money laundering. In a global world where millions of transactions take place daily by wire or the touch of a button, international cooperation is critical. Mexico and the United States must continue working against money laundering on a bilateral and multilateral level. Only by cooperating in the struggle against a common enemy can our two nations protect citizens and ensure respect for the rule of law. (end text) (Distributed by the Office of International Information Programs, U.S. Department of State)