The Bush administration pubicly admitted on Oct. 4 that over $100 billion in drug money is laundered by U.S. banks each year. Thus far there have been no criminal prosecutions.Civil penalties were levied against some of the biggest domestic banks in 1986 for failing to report large cash transactions. (See Workers World articles of Sept. 7 and Sept. 21.)
Treasury official admits banks are raking in drug money
The extraordinary admission came in the form of a carefully crafted announcement made by Salvatore R. Martoche, Assistant Treasury Secretary for enforcement, in testimony before the Senate Subcommittee on Terrorism, Narcotics and International Operations.
The "good news," according to Martoche, is that the government will open a financial crimes center next month in Arlington, Va., which will monitor the banks. Says Martoche, "It represents a substantial stride in the area of money laundering both domestically and internationally."
But the bad news is that the banks, especially the big ones, are raking in billions of dollars a year in profits as a result of the illegal transmission of drug money. This windfall, which flows into their coffers at breakneck speed, is now estimated at $110 billion a year! (New York Times, Oct. 5.)
How much of this drug money has been involved in the feverish speculation which is the symptom of every economic collapse?
It is not clear why the Treasury made this announcement so suddenly, or what events led up to this extremely significant admission, except that the amount of drug money transferred through the banks is so staggering that the Bush administration and its so-called enforcement agencies cannot maintain silence any longer. Such an acknowledgment is of course especially damaging to Bush's "drug czar," William Bennett.
The government to this day has not explained why its chief financial officers, who deal with the banks on an everyday basis, have not been called by the Senate or the House of Representatives to testify on the specifics, the when, where and who of drug money laundering. Nor have they been required to explain why the civil penalties enacted many years ago have been applied in only a few cases.
Why, for instance, has the government never made public the number of banks found guilty of civil violations for failure to file reports on their cash transactions over $10,000?
The administration says that electronic money transfers as a whole by U.S. banks amount to more than a trillion dollars a day. Martoche didn't explain how his agency arrived at the figure $110 billion in drug funds laundered each year. All of this leads to the conclusion that the situation between the government and the banks, which are so closely interrelated, may be reaching an explosion point.
The federal agencies responsible for dealing with the banks and the currency are the Treasury Department, headed by Secretary Nicholas F. Brady; the Currency, under Comptroller Robert L. Clarke; and the Federal Reserve Bank, headed by Chairman Alan Greenspan. While they all have made innumerable appearances before the House and Senate banking committees, no testimony has been elicited from them on this explosive issue, nor has it been volunteered.
Banks complain of paperwork
The subcommittee that heard testimony from Martoche is headed by John F. Kerry, Democrat of Massachusetts and chairman of the Senate Foreign Relations Committee. Thus far, this subcommittee seems to be so solicitous of the banks that instead of asking the principal federal agents named above any questions about money laundering, it instead is concerning itself with the proposed enforcement agency, which seems far up in the stratosphere.
The banks have come before the subcommittee to complain of how onerous it is to compile data on deposits because of the tremendous "backlog" of paperwork. No one has been called to testify about the backlog of arrests of thousands of youth who are regularly imprisoned precisely because the drug industry is flourishing on funds laundered by the banks, in secret alliance with the government.
The government's alibi for allowing all this to go on is that it is too difficult to monitor the electronic transmission of such gargantuan sums of money. This is pure fiction. The U.S. government has the world's biggest electronic establishment. In addition, it has technological and economic ties to every part of the capitalist world. It can avail itself of their technology and expertise as well.
Even if the government itself can't monitor the situation, which is doubtful, it can always hire consulting firms to do an independent study. But in this case, such a recourse is not even discussed.
The Kerry subcommittee, according to the Boston Globe of Oct. 1, is trying to steer the investigation toward the involvement of banks in Canada and some European countries, which are said to be receiving large transfers of laundered money from U.S. banks. But this line of inquiry is a way of diverting attention from the big U.S. banks--the Bank of Boston, for instance, in Kerry's home state, which had been cited earlier for concealing cash transactions from the government (as we detailed in our previous articles).
Gov't could seize banks' assets
There are numerous statutory provisions that require filing by the banks. The government has not addressed this with criminal penalties.
All of these statutory provisions under the banking laws and the federal criminal code can be invoked against the banks. Even under the old common law, on which the relevant statutory criminal provisions are based, it is a crime "to receive, hold or transfer stolen goods or money," which is what drug money is.
The U.S. government has the authority to seize these assets. Wouldn't that go a long way toward financing the social programs that are being cut so mercilessly? Certainly the government has wider authority to take such a step than to arrest individuals beyond its jurisdiction, or to kidnap them, as it has been trying to do with Noriega in an attempt to overthrow the Panamanian government under false pretenses.
However, it is not merely a question of the law. It's a question of the intimate, symbiotic relationship of the banks and the capitalist government. Sooner or later the lid is bound to blow off, as the drug profits grow larger and larger.
The vigorous intervention of the progressive, civil rights and working class movements can force the Bush administration to change its focus, which now is to throw money at the police, the military, the dozens of enforcement agencies and phony drug centers which are not controlled by the communities.
At the present time the target of the administration is the poor of the inner cities. Hundreds of arrests of innocent young people are made daily. The tremendous media attention focused on drugs and the inner cities causes racism to run amok.
The only way to effectively combat the drug profiteers and the bankers is for a nationwide, classwide movement of the workers and all of the oppressed people against the drug money banks and the government, which refuses to prosecute them and in fact protects and defends them.