NCJ Number
198012
Journal
Criminal Justice Policy Review Volume: 13 Issue: 4 Dated: December 2002 Pages: 337-355
Date Published
December 2002
Length
19 pages
Annotation
This article examines the implementation of new Federal regulations designed to suppress, detect, and enhance the prosecution of money laundering.
Abstract
Until recently, currency-transaction reporting (CTR) was the primary anti-money-laundering policy tool. CTR required financial institutions to record and report cash transactions in excess of $10,000. Although the CTR regime produced a large quantity of reports, it yielded little useful information. First, launderers structured deposits in increments less than $10,000 to avoid the reporting threshold; second, inconsistent reporting standards across financial institutions and agencies made it difficult to discern patterns of activity. In April 1996, the Federal Government began implementing a two-pronged substitute strategy to counter money laundering. Based on mandatory suspicious-activity reporting, the new strategy, delineated in the Bank Secrecy Act, expands the role of the financial-services industry in both detection and prevention. Instead of indiscriminate reporting of all currency transactions greater than $10,000, banks are now required to report suspicions of client money laundering. In addition, the Financial Crimes Enforcement Network (FinCEN) is the designated Federal agency to which depository institutions provide standardized reports. The research reported in this article examined this new strategy to determine whether it poses a serious threat to money-laundering operations, particularly those for which the predicate offense is narcotics trafficking. The study examined State-level variation in Bank Secrecy Act (BSA) money laundering reports. Ordinary least squares regression was used to test the significance of trafficking offenses as predictors of BSA money-laundering reports, controlling for the general level of crime, economic indicators, population variables, and proximity to drug-smuggling routes. The study found that narcotics trafficking activity and proximity to smuggling routes each predicted significant increases in suspicious-activity reports; this suggests an identifiable spatial link between narcotics trafficking and "dirty money" bank accounts. The author advises that following the "dirty-money" trail may present authorities with a means to prosecute money-laundering cases against drug dealers who are the owners of such accounts. 5 tables, 2 figures, and 17 references