By Erin Sherbert
By Howard Cole
By Erin Sherbert
By Erin Sherbert
By Leif Haven
By Erin Sherbert
By Chris Roberts
By Kate Conger
In times past it was possible to prop up a flimsy, ill-conceived, or downright disingenuous idea by adding the appellation "dot-com."
Now the proper way to burnish hokum involves tacking on the words "against terrorism."
Take, for example, George Bush's promise Friday to "strike at the financial foundation of the global terror network." The announcement, along with the banking rules that accompanied it, was played as a dramatic change of heart by Republican lawmakers, who prior to Sept. 11 had opposed tighter financial rules to stop money laundering.
But in San Francisco, local implementation of the federal government's 2001 National Money Laundering Strategy released last month suggests Bush's promise may be hard to take seriously.
The Strategy, which was released by the Treasury and Justice departments Sept. 18, yet has gone unreported in the Bay Area media, designates the San Francisco area as one of six High-Intensity Money Laundering and Related Financial Crime Areas. Aside from suggesting that the San Francisco financing industry is swimming in criminally derived funds, the new designation is supposed to call for greater cooperation between local and federal law enforcement agencies. Yet when I called the S.F. District Attorney's Office to find out how this new policy was being implemented, the special prosecutor for white-collar crimes knew nothing of the report, nor of San Francisco's new High-Intensity Money Laundering designation. He went so far as to say that he considered money-laundering prosecutions the purview of federal, not local, authorities.
The Strategy says that in 1999 San Francisco-area banks handled 1.5 million cash transactions worth more than $10,000 each. By comparison, in the New York/New Jersey area, whose banking industry dwarfs San Francisco's in almost every other respect, there were 878,460 such transactions reported.
Why the difference?
"San Francisco represented a cash-intensive environment," says an official with the U.S. Treasury's Financial Crimes Enforcement Network. No kidding: The San Francisco area appears to have been a cash-only Valhalla in 1999, with these transactions totaling $80 billion.
But federal investigators charged with pursuing financial crimes in the U.S. Customs Service and in the IRS special investigations division were at a loss when I asked them what to make of these figures, apart from suggesting that Bay Area banks are more scrupulous at keeping cash-transaction records. If true, this would mean banks in other regions are failing to file legally required reports on tens of billions of dollars' worth of cash transactions.
Now, I don't think S.F. federal investigators are asleep on their watch; instead, this sounds more like a case of mixed messages from Washington.
Before the terrorist attacks, Treasury Secretary Paul O'Neill openly scoffed at the need for or effectiveness of greater international money-laundering cooperation. Cracking down on this kind of crime had been a perennial no-go in Congress thanks to effective lobbying by banks and wealthy individuals. Just last week congressional Republicans had joined banks in seeking to separate anti-money-laundering rules from the rest of the anti-terrorism package Bush signed Friday. The hope was that the money-laundering provisions might be easier to dismantle if considered separately.
So it's not hard to imagine last month's National Money Laundering Strategy being delivered with a wink and a nudge.
In a column earlier this month I described how an S.F. accountant, who admitted to specializing in Third World flight capital, had aided the former prime minister of the Ukraine, who was under investigation in a multimillion-dollar money-laundering enterprise. I noted that the Ukraine case mentioned dozens of San Francisco bankers, lawyers, real estate brokers, and other professionals who had all helped further the alleged money-laundering scheme.
Reading those court documents, one could imagine a New York Mafia-style dragnet, where prosecutors indict money-laundering accountants, then force them to give up their client lists and other evidence; they indict money-laundering bankers, whose employers henceforth forswear helping hide criminal proceeds. It's conceivable that our local DA's Office could do this kind of work; the original indictment in the Ukraine case was handed down under statutes prohibiting receipt of stolen property. There's nothing obvious stopping Terry Hallinan's attorneys from using the same sorts of anti-fencing laws to pursue local professionals who abet money launderers.
There actually are plenty of local jurisdictions that do aggressively pursue financial crime; San Bernardino County, to name one, dedicates detectives specifically to money laundering. Sadly, expert money-laundering investigators in other local jurisdictions cut their teeth pursuing money derived from drug sales. And our local DA proudly shuns drug investigations.
That leaves the job up to locally posted federal agents, who are supervised by a U.S. administration that was until recently openly hostile to the idea of aggressively curtailing financial crime.
I posited the idea of sweeping accountants and other financial professionals into an anti-money-laundering dragnet to Wayne Yamashita, assistant special agent in charge of the U.S. Customs Service's San Francisco office of special investigations. This was a nonstarter.
"That has a chilling effect on the entrepreneurial desires of aggressive businesspeople," Yamashita said. "My personal sense is that we would be going after the substantive violators, not the people who are working with them. But that's a policy decision."
It's a Washington decision that may be tilting in the wrong direction, and that's too bad. If money-laundering lawyers, bankers, and accountants are granted an informal form of official impunity, as they now appear to be, criminal enterprises are allowed to flourish. Business and civic life becomes more corrupt and more dangerous.