By Pete Kotz
By Michael Musto
By Michael Musto
By Capt. James Van Thach told to Jonathan Wei
By Kera Bolonik
By Michael Musto
By Nick Pinto
By Steve Weinstein
The major economic powers, led by the United States, have failed to challenge the structures that facilitate money laundering by Russians and others. They have refused to act to end the corporate and bank secrecy that lets crooks hide behind shell companies and anonymous offshore accounts. On the contrary, major American and international banks have subsidiaries offshore where they assiduously help clients evade the laws of their own countries.
Congress shares the blame. Yegmenov's clients might not have moved their illicit money undetected so easily had Congress not killed the "Know Your Customer" rule proposed by U.S. bank regulators last December. The law already requires banks to perform "due diligence" on their big customers and report "suspicious transactions." The proposed rule would have made them spell out their proceduresto identify the owners of accounts, to determine big-money customers' sources of funds, to monitor large transactions, and to flag those that were not normal.
Now, the scandals have put anti-money-laundering legislation back on the agenda. House Banking Committee Chairman Jim Leach (Republican of Iowa) and senators Charles E. Schumer (Democrat of New York), Paul D. Coverdell (Republican of Georgia), and Carl Levin (Democrat of Michigan) have introduced measures requiring banks to keep records of account owners' identities and to ban correspondent or concentration accounts that commingle funds of an institution's customers without identifying them, a way offshore banks commonly move clients' money. The bills would make it a crime for banks in the U.S. to knowingly handle money traceable to foreign government corruption, and they would expand the list of crimes that trigger money-laundering charges.
The Clinton administration, with a Treasury Department strongly influenced by banks and investment companies and a traditional policy of welcoming capital no matter what its origins, has introduced a much weaker bill that would merely expand the list of money-laundering crimes to include theft of public funds by officials, arms trafficking, and crimes of violence, and would give U.S. courts jurisdiction over foreign banks that violate U.S. money-laundering laws. It would not address offshore bank and corporate secrecy or the need for clear identification of U.S. company owners and bank customers.
The American Bankers Association, which fiercely lobbied against the Know Your Customer regulation, is now opposing new laws to flush out dirty money. John J. Byrne, ABA senior counsel, worries about "pressure from examiners and media and the public that may force the bank to report possible criminal activity more frequently than they would have in the past." He said international clients would say, "I don't think it's anybody's business in the U.S. how I do my business. I'm going to go to a country where they're not going to ask all these penetrating questions and take my business elsewhere."
For now, in other words, no effective law forces a bank to screen out the likes of Yegmenov and his clients.
Hiding the Money
Lax state regulations make it easy for crooks to hide their connections to shell companies and bank accounts.
Neither New York nor Delaware, for example, demands that owners and officers be listed on incorporation filings. Company directors are supposed to be listed on the annual Delaware franchise tax filing, but lawyers often name themselves or leave a blank. A clerk at the New York State Division of Corporations said a requirement for biannual filings signed by the chairman of the board was not enforced, because the legislature hadn't passed an implementing law. A Delaware corporation division clerk said when papers come through with directors not listed, the lack of data is ignored.
Immigration agent Thomas O'Connell and Anthony Russo, the IRS agent on the Alexandr Yegmenov investigation, agreed that company owners and officers should be named in incorporation papers and that state incorporation computers should be configured to facilitate searches of owners, officers, and filers. Then, Russo said, "If we had an allegation against a suspect, we could go there right away and see that he formed 5000 corporations," instead of having to hunt for them by hand.
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