Wire Function and Drug Money Laundering

• NCJ Number: 159789
• Journal: Issues in Bank Regulation Pages: 23-27
• Author(s): R V Joers
• Date Published: Unknown
• Length: 5 pages
• Publication Format: Article
• Publication Type: Report (Technical Assistance)
• Language: English
• Country: United States of America
• Note: DCC

Annotation

The use of bank wire transfers to launder money from drug trafficking is examined, with emphasis on possible countermeasures and the likely government actions to deal with the problem.

Abstract

The Treasury Department is preparing regulations detailing alternatives for the screening or routine reporting of wire activity. These regulations may be part of an attempt to forestall new congressional legislation that mandates wire reporting and that could be difficult for both the banking industry and its regulators to manage. The three systems used to complete the transfer of United States funds are Fedwire, Chips, and SWIFT. The complexity of the financial system impedes the tracking of possible misuse of the wire system by money laundering operations. The bank actually performing the transfer often uses correspondent networks to complete a transfer and thus has no knowledge of the business purpose of the transfer. Only the authorizing bank has a responsibility to understand the source of the customer's funds. The best place to catch the drug money launderer is when the cash comes into the bank, and reporting suspicious activity is the single most effective means to catch illegal activity. The banking duty to know their customers is the best method available to understand when activity is inappropriate for a customer's business. However, focusing on the wire system alone is insufficient. Although a real solution would be to develop artificial intelligence screening devices to tie cash deposit, check writing, and wire transfer services together, current political considerations will require banks to focus on the wire function. Important needs are to consider all noncustomer transactions suspect, to develop methods of tracking patterns of activity, including an extensive exemption process in a wire reporting system, and targeting reporting solutions at the banks that originate or are final recipients of the wire.