Terrorists' Money Trail
October 1, 2001
An unprecedented campaign to track down and eliminate the sources of funding for global violence is underway. But banking experts caution that funds for terrorism are a drop in a global sea of money being laundered in banking centers around the world.
- Between $800 billion and $1.5 trillion in illicit money is flowing around the world at any one time, according to estimates by the Center for International Financial Crimes Studies at the University of Florida.
- Regulators in the U.S. and Europe have been trying to put the squeeze on bad money flows for years.
- Some of the 27 individuals and groups listed by President Bush last week as targets to have their assets frozen had already had them cut off.
Bank secrecy laws and privacy rules set up by the banks to gain customers will have to be overcome, say experts. Many of the customers of off-shore banks are attempting to hide assets from various nations' income taxes. Thus 47 of the world's top 50 banks are operating in the Cayman Islands, where bank secrecy protects customers from the scrutiny of tax collectors. With 500 banks in total on the islands, the Caymans are the de facto fifth largest banking center in the world.
- Furthermore, so-called "correspondent accounts" in which one bank moves funds for another has left many big banks vulnerable to providing services for suspicious customers who have accounts outside of the U.S.
- The rise of Internet-only banking and stock trading has ushered in new worries for those on the money trail.
- And authorities speculate that terrorists' money avoids the international banking system altogether, using a long-running system of informal banking networks in the Middle East.
A report on money laundering sponsored by Sen. Carl Levin (D-Mich.), published in February, found enormous lapses in controls at some of the biggest U.S. banks, particularly in their relationships with international financial institutions.
Source: Emily Church, "Tracking the terror paper trail," September 28, 2001, CBS.MarketWatch.com; "Report on Correspondent Banking: A Gateway For Money Laundering," February 2001, Minority Staff of the Permanent Subcommittee on Investigations, U.S. Senate.
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