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Copyright 2003 The Financial Times Limited

Financial Times (London)

April 9, 2003, Wednesday USA Edition 2

SECTION: INTERNATIONAL NEWS; Pg. 14

LENGTH: 786 words

HEADLINE: War on terror is helping to clean up money laundering: The crackdown on funding for extremists has
raised costs for criminals and hindered flow of drug money, says Gary Silverman:

BYLINE: By GARY SILVERMAN

BODY:
No one can know for sure whether America's war on terrorism will achieve all its goals. But if the word on the
streets of big US cities is any indication, the crackdown has already produced some results - in the war on drugs.
Evidence from federal undercover operations suggests that efforts aimed at disrupting terrorist networks are also
forcing criminals to pay more to launder money - in some cases almost double the previous street rate.
A senior federal prosecutor specialising in money laundering says: "We are getting a lot of law enforcement effort
looking at terrorist money and that may be having an effect. Any time it's tougher to do business, they are going to
charge you more for it."
Money launderers, who make criminal proceeds look like legitimate income so the money can be used more easily,
typically set their fees as a percentage of the cash total involved. The prosecutor says such commissions have been
holding steady at about 7 or 8 per cent until recent months.
"In the last year or so, we have seen the rate going up," the prosecutor says. "If you have a good system, you don't
have to pay as much. But on the street, I heard rates quoted as high as 12 or 14 per cent."
Measuring prices in an illegal business is, of course, tricky. Actual charges vary depending on factors including the
sophistication and desperation of the people involved.
However, the federal prosecutor's data is consistent with the increased focus on money laundering that followed the
September 11 attacks.
A month later, President George W. Bush signed the Patriot Act, which dramatically increased federal supervision
of financial activity to stop terrorist groups moving money.
Juan Zarate, the deputy assistant secretary of the Treasury overseeing terrorist financing issues, says: "You have a
greater attention to the money trail, as we refer to it - to financial crime, writ large."
Money laundering by criminals and terrorists has its differences. Organised crime needs large amounts of cash to be
broken up into small amounts to be laundered. Terrorists typically have less substantial bankrolls.
But Mr Zarate says both take advantage of similar channels to avoid detection - such as money transmitters or the
cover provided by trade in high-priced legal goods.
In one popular scheme, drug dealers use their US dollars to buy cars, boats or jewels. These are then shipped home
and sold to raise "clean" funds in the trafficker's national currency. The Patriot Act requires a wider variety of
companies to report suspicious activity, such as large cash transactions, to the government.