NCJ Number
191330
Journal
Economic Perspectives Volume: 6 Issue: 2 Dated: May 2001 Pages: 19-23
Date Published
May 2001
Length
5 pages
Annotation
This article described the money laundering process, summarized the evolving statutes and laws, and described the role of the Federal Reserve System, the United States central bank, in assisting in their enforcement.
Abstract
Money laundering has gone on since the first crime was committed for profit, but it has been explicitly illegal in the United States only since 1986. To understand money laundering, there is the need to understand the wash cycle basics of money laundering which involve three steps: placement, layering, and integration. These three steps are discussed. The article continued with discussion on key legislation instituted and seen as sometimes more effective than a direct attack on criminal activity. The foundation of U.S. money laundering laws is the Bank Secrecy Act (BSA) of 1970 which did not criminalize the activity but did require financial institutions to create and preserve a “paper trail” for various types of transactions. Since the BSA, several additional statutes and legislative laws have been passed to aid in the fight against money laundering and include: the Money Laundering Act (1986), the Anti-Drug Abuse Act (1988), the Annunzio-Wylie Anti-Money Laundering Act (1992), Money Laundering Suppression Act (1994), the Terrorism Prevention Act (1996), and the Civil Asset Forfeiture Reform Act (2000). In addition to domestic legislation, the Federal Reserve works actively to deter the use of financial institutions for money laundering. The Federal Reserve has many ongoing responsibilities, as well as promoting the concept of “enhanced due diligence.” Under this concept, banks experiencing problems are required to enter agreements to ensure future compliance. In summation, over the last 30 years, U.S. lawmakers have enacted a broad array of domestic legislation, striving to forge the enforcement tools to combat money launderers’ continuously evolving techniques for circumventing the previous piece of legislation. However, the benefits of legislation must be weighed against the costs they potentially impose on financial institutions and their customers.