*EPF209 02/08/00
Text: McCaffrey Urges Global Cooperation Against Drug Trafficking
(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). The article appeared in Spanish, and is presented here in English translation:

[Note: In the text, billion = hundred million.]

(begin text)

Now more than ever, narco-trafficking is a universal phenomenon. It is no longer possible to make a distinction between transit and consuming regions, as the affected countries are experiencing both problems related to drug trafficking within their territory. For this reason, international cooperation is more important than ever to minimize the damage that illicit drugs can wreak on society.

A cornerstone of the fight against the scourge of drug trafficking has been to attack the profits of the traffickers. This is why international conferences, like the third meeting of Western Hemisphere finance ministers held last week in Cancun, Mexico, emphasize the search for measures to counter money laundering.

The traffickers are motivated to get into the drug business primarily as a quick way to make money. By attacking the financial gains of trafficking, the trade can be hit where it is most vulnerable. According to estimates by the United Nations, illegal commerce in drugs reached a global level of 500 billion dollars annually, more than the international oil and gas industry, and twice as much as the auto industry. The multimillion-dollar profits of this illicit commerce, the ultimate goal of the traffickers, is laundered daily through the international financial system.

The communications revolution, the globalization of financial markets and new technologies that have transformed the way we do business, have been used by international narco-traffickers for their own benefit. Today, traffickers can transfer their ill-gotten gains to jurisdictions with few legal obstacles -- or they can use a variety of financial mechanisms, such as front companies, to hide assets and their true origin and destination. The International Monetary Fund estimates that there are more than a million corporations of this type in the world. The IMF also calculates that money laundering transactions are equal to 300-400 billion dollars annually, which represents 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 it generates, drug trafficking places the costly and dangerous burden of corruption on financial markets and political systems, which damages democratic institutions, undermines the rule of law and destroys civic order with impunity. However, its insidious effects do not stop there. Narcotics trafficking-related money laundering has serious economic consequences that affect the international community. Inexplicable changes in the demand for currency, risks to the stability of banking systems, contamination of legal financial transactions and greater volatility in the flow of international capital and exchange rates are just a few of these effects.

In the United States, we do not have a precise estimate of the amount of money that is laundered each year in our country. According to the Office of National Drug Control Policy, about 57 billion dollars are spent annually on illegal drugs. Considering that about 80 percent of this is converted into profit, about 46 billion dollars from narco-trafficking are laundered each year. This raises a question: what is the United States government doing to attack this problem? The federal government's fight against money laundering is based on two laws: the Money Laundering Control Act and the Bank Secrecy Act. The Money Laundering Control Act classifies money laundering as a serious federal crime, with more than 170 acts for which there are sentences of up to 20 years in prison as well as fines of half a million dollars or more (up to twice the amount of money involved). The Bank Secrecy Act is administered by the Treasury Department and provides investigators with the tools to trace money of suspicious origin. The name of this law is a bit misleading, as the law reduced bank secrecy in the United States in an important manner. The law obliges financial institutions to report any cash transaction of more than 10,000 dollars, as well as any suspicious transactions. Failure to report such transactions, or dividing transactions into smaller amounts to avoid the reporting requirements, are also classified as crimes. In the past three years, the Department of Justice has prosecuted more than 2,000 cases annually for violations of these laws against money laundering. Approximately 50 percent of those cases were related to monies from narco-trafficking. U.S. authorities have struck back at money launderers in successful federal operations. For example, just one of these operations -- Operation Polar Cap, a continuing investigation headed by the DEA -- has up to now confiscated 105 million dollars and has led to the arrest of 111 people. Another example is the Task Force El Dorado, comprised of more than a dozen federal, state, and local agencies in New York. Up to now, the Task Force has confiscated 150 million dollars in cash and arrested more than 700 people. This Task Force has dramatically reduced the flow of narco-money to Colombia via money transfers from New York. In the global arena, the U.S. has undertaken essential efforts to increase international cooperation against money laundering, such as participating in the Financial Action Task Force against money laundering.

The 26 countries and territories that are members of the Financial Action Task Force (with its seat at the Organization of Economic Cooperation and Development) closely examined of their anti-money laundering stratgies and established 40 recommendations that have set a universal standard for combating money laundering at the national level. Are these measures sufficient? No. Conscious of the need to increase efforts to attack money laundering, the U.S. Congress approved the Money Laundering and Financial Crimes Strategy Act of 1998 that asked federal authorities to develop a five-year strategy against money laundering. The Treasury and Justice Departments recently presented the first of five reports requested by Congress. The National Money Laundering Strategy of 1999 sets an ambitious agenda designed to reach four general objectives: strengthen the application of the law internally to interrupt the flow of illicit money; increase regulatory efforts and cooperation with the private sector to prevent money laundering; and promote coordination with local and state governments within the U.S. and increase international cooperation efforts. Included in the many proposed measures for the strategy are: the elaboration of new laws to classify crimes; a greater number of offenses related to money laundering; the identification and concentration of efforts in areas most susceptible to money laundering; the improvement of training in the financial area; the search for more efficient ways to reinforce the scrutiny of suspicious transactions; and the establishment of rules so that financial service businesses and casinos present must report suspicious activities, reports that at this time only banks are obliged to present.

The strategy reflects the national commitment of the United States to advance a coordinated and effective fight against money laundering within its own territory. Without a doubt, international efforts are just as important.

In a globalized world where there are 700,000 daily financial transactions by wire and where millions of dollars can be moved with the touch of a button, national efforts without the cooperation and support of the international community are not worth much.

In this context of international cooperation, Mexico and the United States must continue working together and increase their efforts against money laundering on the bilateral and multilateral levels. Only by working in total cooperation with each other in the struggle against a common enemy can our two nations ensure respect for the rule of law and the effective protection of their citizens.

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(Distributed by the Office of International Information Programs, U.S. Department of State)
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