Congressional
Report:
Citibank
Facilitated
Salinas
Money
Laundering
12/11/98
A Congressional report, released last week (12/5) says that executives of Citibank took in more than $100 million from Raul Salinas, brother of ex-Mexican President Carlos Salinas, and helped him to set up a complex web of offshore shell corporations, without attempting to verify the source of the money. Much of Salinas' fortune has since been seized by the Swiss government on suspicion that it represents protection money paid by drug traffickers. The New York Times reports that Salinas' personal Citibank banker advised him to move the money offshore in the wake of his 1995 arrest for murder. According to the report, Citibank officials did finally warn the U.S. government about Salinas' suspicious transactions, but even then did not tell the government about the network of accounts and corporations that the bank had set up for him to shield the money. Federal officials say that they have yet to determine whether or not Citibank broke any laws. According to the Times, both the Justice Department and the Federal Reserve Bank refused to cooperate with congressional investigators compiling the report. Money laundering, and efforts by the federal government to attack the drug trade through the monitoring of financial transactions, has become a contentious issue in recent years. Frustrated in their attempts to make headway in the drug war, federal agencies have sought greater and greater powers both against financial institutions and individuals. Currently, the federal government requires institutions to report any transaction larger than $10,000. In addition, federal regulators are hoping to see the 106th Congress pass the controversial "Know Your Customer" legislation, which will make financial institutions responsible for investigating the source of nearly all of their clients funds, as well as for monitoring all transactions to determine if any "unusual" activity is instigated by a client, regardless of the size of those transactions. Earlier this year, "Operation Casablanca," an 18-month investigation into drug-money laundering on both sides of the U.S.-Mexican border, was hailed as a success by the justice department. That operation netted $135 million, according to government estimates, and several dozen arrests, although none of those arrested were considered high-level players. Critics questioned the impact of even this "largest-ever" bust, when it has been estimated that proceeds of the drug trade laundered back into the legitimate economy total hundreds of billions of dollars annually. Many economists believe that the idea of money laundering is itself problematic. Richard Rahn, former Chief Economist of the United States Chamber of Commerce and author of the book, "The End Of Money: The Struggle For Financial Privacy" told The Week Online, "In the first place, money laundering is very poorly defined. So much so, in fact, that the government can pick almost any financial institution, go through their records, and make a case. Further, to make private industry responsible for policing private citizens is an improper abdication of the job of the enforcement agencies. There are very many legitimate reasons why a person would want to keep the details of financial transactions secret, and so the requirements, which are in effect due to the government's inability to enforce other laws, is invasive. The record-keeping required of these institutions is also quite costly and makes those businesses far less efficient. "For my book, I did an analysis which found that the average cost to taxpayers per conviction for money laundering is over $100 million. And the truth is that in the digital age, where money can be moved so quickly and easily around the globe, only those who blunder will ever be caught. Clearly the bulk of the problem of illicit money stems from the unenforceable drug war. It is highly unlikely that we will ever put so much as a dent in the trade. It is exactly like Prohibition in the 1920's." Read about the proposed "Know
Your Customer" rules in Wired Online's "Banking With Big Brother" article,
online at http://www.wired.com/news/news/politics/story/16749.html.)
Also worth checking out is the Dec. 10 issue of the Wall Street Journal,
available online for a fee, at http://www.wsj.com.
Richard Rahn is was interviewed for this week's DRCNN radio show, previewable
online at http://www.drcnet.org/drcnn/.
4. Exciting Resources Available Online "Drug War Facts," an extensive compilation of facts, stats and general background on a wide range of drug policy issues, is published online by Common Sense for Drug Policy and updated monthly. Check out Drug War Facts at http://www.csdp.org and visit it regularly to brush up on your numbers, prep for your next debate, or enhance your next letter to the editor. "Win At All Costs," a landmark ten-part series that is the fruit of a ten-year investigation into federal prosecutorial misconduct, has been published by the Pittsburgh Post-Gazette. The series, which will undoubtedly be considered for a Pulitzer Prize, details a culture of lawlessness among federal agents and prosecutors whose pursuit of convictions has come to overshadow their ostensible role as seekers of justice. You can find the series online at http://www.post-gazette.com/win/. Last week, famed Harvard Law professor Alan Dershowitz granted an interview to DRCNet, in relation to his testimony before the House Judiciary Committee regarding perjury. Dershowitz touched on drug policy issues, and the corrosive effect of drug enforcement on police scruples (see http://www.drcnet.org/wol/069.html#perjury). We forgot to mention that the testimony itself is available online, at http://www.c-span.org/guide/executive/investigation/ -- follow the link to December 1. The Lindesmith Center has a variety of new documents in its online library, including a "focal point" compilation of the research on safe injecting rooms, the National Research Council's 1982 report, "An Analysis of Marijuana Policy," articles on methadone maintenance, use of herbicides in drug crop eradication, Latin America drug policy, including discussions of militarization and the certification process, and more. Check out TLC's Recent Additions web page at http://www.lindesmith.org/library/new.html.
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