Ever since the famous book about the Watergate scandal, All the President's Men, was written, it has become a mantra that, in order to solve a crime, one must "follow the money." This mantra has been adopted by law enforcement in the United States. Since the 1970s, we in the U.S. government have emphasized a three-pronged approach to fighting crime: prosecute the underlying crime, follow the money trail through money laundering investigations, and forfeit the proceeds and instrumentalities of the crime. Only by following the money can the full scope of a crime be discovered and a criminal organization be destroyed.

When the United States first enacted money laundering laws in 1986, they were designed to address what was primarily a domestic problem. Since 1986, money laundering has increasingly become a global problem, involving international financial transactions, the smuggling of currency across borders, and the laundering in one country of the proceeds of crimes committed in another. Currency, monetary instruments, and electronic funds flow easily across international borders, allowing criminals in foreign countries to hide their money in the United States and allowing criminals in this country to conceal their ill-gotten gains in any one of hundreds of countries around the world -- with scant concern that their activities will be detected by law enforcement.

Yet despite the dynamic changes we are witnessing in the financial world, the basic problem for many money launderers, and especially those who launder the proceeds of illegal drug activity, remains the same -- concealing and moving the enormous amounts of illicit cash. For this reason, even in the international context, the U.S. government's primary area of emphasis has been the placement stage of money laundering, the stage at which the money launderer first seeks to enter the illicit proceeds into the financial system.

As a result of our focusing on this placement stage, U.S. banks and other depository institutions have been and continue to be our first line of defense against the entry of illicit cash proceeds. Although some exceptions occur, we have largely succeeded in barring launderers from gaining direct access to U.S. banks. As a result, money launderers increasingly must look to international mechanisms and non-traditional financial institutions to launder their illegal proceeds. Some of the frequently utilized methods of money laundering include the bulk cash smuggling of currency; trade-based money laundering through the Colombian Black Market Peso Exchange system (BMPE); and the use of money service businesses such as wire remitters, casas de cambio, vendors of money orders and traveler's checks, and check cashers. Here, I would like to discuss several recent successful investigations that have disrupted schemes using these methods of money laundering.

On July 1, 1998, the chief financial officer, president, and vice president of Supermail, Inc., a check cashing company, were arrested on money laundering charges stemming from a two-year investigation conducted by the Los Angeles office of the Federal Bureau of Investigation (FBI) and the Los Angeles Police Department. According to corporate filings, the company was one of the largest check cashing enterprises operating in the western United States and purported to be one of the leading U.S. money transfer agents providing services to Mexico and Latin America.

The three executives, along with six other employees and associates, were arrested after a federal grand jury returned a 67-count indictment against 11 defendants, including the Supermail corporation, charging conspiracy, money laundering, the evasion of currency reporting requirements, and criminal forfeiture.

The initial target of the investigation was a company store in Reseda, California. Investigators, working in an undercover capacity, approached the manager, who agreed to launder purported "drug" money in exchange for a cash fee. Specifically, the manager converted large amounts of cash into money orders issued by the company. As larger sums were laundered, the manager sought the assistance of his associates working at other store locations. When a new manager took over operations at the Reseda store in April 1997, he brought in the company's corporate officers. The corporate officers authorized the issuance of money orders and the wire transfers of large sums of "drug" money to a secret bank account in Miami, while the cash was used to maintain operations at the company stores.

In total, the defendants laundered more than $3 million of "drug" money. The investigation is believed to be one of the largest money laundering "sting" operations targeting a check cashing business in U.S. history. The defendants in the case pled guilty to money laundering charges and received sentences ranging from 46 to 72 months in prison.

While most of the large-scale money laundering schemes involve the proceeds of drug trafficking, laundering the proceeds of white-collar crime is becoming an increasingly significant phenomenon. Operation Risky Business was launched by the U.S. Customs Service and the FBI in 1994 after scam artists began placing ads in major U.S. newspapers and business publications. The ads offered venture capital loans to entrepreneurs in exchange for "advance fees." Victims worldwide began paying advance fees, ranging from $50,000 to $2.2 million, to get access to the venture capital. After paying the fees, victims were asked to sign a contract requiring them to promptly obtain a letter of credit, ranging from $2 million to more than $20 million, as collateral for the loan. If victims were unable to obtain letters of credit for such amounts so quickly, the scam artists told them they had violated the terms of the contract and kept their advance fees. In fact, the perpetrators had set up the scheme knowing that the victims would be unable to meet the terms of the contract and thereby defrauding the victims of the advance fees.

To hide the money they had stolen, the scam artists created the Caribbean American Bank, Ltd., in Antigua and Barbuda in 1994. Customs and FBI agents found that the bank was nothing more than a storefront operation, one of 18 such operations under the control of American International Bank, Ltd., in Antigua. Both banks have since been closed in connection with the fraud. Using these banks and numerous front companies, the scam artists were able to buy airplanes, yachts, vehicles, real estate, and other assets with the fraud proceeds. Some of the defendants were issued major credit cards -- in the names of the front companies -- by the Antiguan banks so they could spend stolen money on credit anywhere in the world.

At least 400 people around the world lost money to the scheme. Far more were targeted. The total dollar amount of the fraud may never be known, but $60 million is considered a conservative estimate. To date, 19 people have been convicted in Operation Risky Business. The United States is seeking the extradition of a defendant in Antigua accused of establishing Caribbean American Bank for the use of scam artists, as well as the extradition of another defendant in Thailand.

Operation Skymaster: One example of a recent successful investigation attacking the BMPE was Operation Skymaster, an investigation conducted by the U.S. Customs Service. From March 1997 through May 1999, Operation Skymaster operatives were able to gain the trust of Colombian peso brokers working for Colombian narcotics traffickers, who directed the undercover operatives to retrieve bulk cash narcotics proceeds. The undercover operatives placed this drug cash into government-controlled accounts.

After each pick-up, the peso brokers instructed the operatives to wire-transfer the money to designated bank accounts. Using the Colombian BMPE, the peso brokers "exchanged" the dollars on deposit in the undercover bank accounts for Colombian pesos obtained from Colombian importers of U.S. goods. The peso brokers arranged to have the dollars wired to the bank accounts of U.S. exporters as payment for the goods received by the Colombian importers and also to other third parties involved in BMPE exchanges. To complete the laundering cycle, the importers received confirmation that the dollar wire transfers were sent and then paid the peso brokers the equivalent in pesos. Later, the peso brokers delivered the pesos to the Colombian drug trafficking groups.

Operation Skymaster has already resulted in 14 indictments against 29 defendants; 12 convictions on money laundering or drug conspiracy charges have already been secured. In addition, civil forfeiture actions have been instituted against the bank accounts that received the wire-transferred drug proceeds in the United States and in foreign jurisdictions.

Operation Juno: In a similar case, Operation Juno combined the talents of the Drug Enforcement Administration, the Internal Revenue Service Criminal Investigation Division, and the United States Attorney's Office in Atlanta in a task force anti-money-laundering investigation. In December 1999, a federal grand jury in Atlanta indicted five defendants from Colombia who were involved in a multimillion dollar scheme involving money laundering and drug distribution. At the request of the now-indicted defendants, undercover agents participating in Operation Juno picked up drug proceeds usually ranging between $100,000 and $500,000 in U.S. currency. The pickup of drug proceeds occurred in a variety of other U.S. cities, including Dallas, Houston, New York, Newark, Providence, and Chicago, as well as in Madrid and Rome.

Operation Juno later wire-transferred the money from the collection city to an undercover bank account in Atlanta. At the direction of the now-indicted individuals, the money was then distributed to various accounts in the United States and around the world. As in Operation Skymaster, the drug proceeds in Operation Juno were laundered through the Colombian Black Market Peso Exchange, as peso brokers "exchanged" the dollars on deposit in the undercover bank accounts for Colombian pesos obtained from Colombian importers of U.S. goods. Again, civil forfeiture actions were filed to recoup the funds that were wire-transferred into the domestic and foreign accounts.

Operations Skymaster and Juno succeeded not merely in terms of criminal investigations, indictments, convictions, and forfeitures of assets, but also by exposing and destroying parts of the Colombian Black Market Peso Exchange. Yet the forfeiture cases spawned by Operations Skymaster and Juno investigations underscore the difficulties in forfeiting illegal proceeds sent outside of the United States, especially when those proceeds are transferred through correspondent bank accounts.

First, due to the existence of offshore banks with representative offices in other foreign countries, U.S. law enforcement officials often encounter difficulty trying to determine the actual location of the funds and in which jurisdiction to focus forfeiture efforts. Even where U.S. law enforcement requests the assistance of the correct foreign jurisdiction, our ability to forfeit these funds depends upon the strength of the forfeiture laws in that jurisdiction, which, if available, are frequently incompatible with U.S. law, and upon the cooperation of the foreign government.

Moreover, limitations of domestic U.S. forfeiture law can lead to complex, time-consuming legal issues with respect to jurisdiction and venue for the forfeiture case. This is particularly true in cases in which U.S. law enforcement does not know initially the final destination or beneficiary of the funds sent through a correspondent account and only determines this fact at a later point in time.

Problems presented by correspondent bank accounts in forfeiture cases have arisen not only in Operations Skymaster and Juno, but in other cases as well. For example, in Operation Casablanca, a money laundering prosecution based in Los Angeles involving foreign banks and their correspondent accounts, prosecutors in Washington, D.C., filed civil forfeiture complaints in the District of Columbia against the funds wire-transferred to foreign accounts. Our efforts to have these funds frozen and forfeited met with a variety of results, depending on the jurisdiction to which they were transmitted. In some cases, we received cooperation from our foreign counterparts, and in others we did not. In some cases where there was cooperation, challenges and questions were raised as to the appropriate venue and jurisdiction for the action, as well as to the actual location of the funds.

For example, in one instance funds had been wire-transferred to a bank account in a foreign location. After filing a civil forfeiture complaint, the Justice Department requested assistance from the foreign government in freezing these funds, pursuant to the 1988 Vienna Convention. As a result, our foreign counterparts interviewed employees of the bank and determined that the bank, as well as the account to which the funds had been transferred, was actually located in another jurisdiction.

Pursuant to a mutual legal assistance treaty with the second country, the department advised authorities that we had information concerning the transfer of drug proceeds to bank accounts within its jurisdiction. Because the laws of this second country only recognized criminal forfeiture and did not allow for assistance to the United States in a civil forfeiture action, the government of the second country opened its own investigation based on the information we provided, and subsequently froze the accounts. However, because the defendants were not then before that court, it was unclear whether the funds could be forfeited criminally. In addition, the bank did not appear to have any actual buildings or branches within the court's jurisdiction, and the assets securing the bank's obligations were not located in the country. Finally, having come almost full circle, it was determined that the assets we were pursuing were likely located in the foreign bank's correspondent account in a U.S. bank in New York City.

Indeed, there remains a great deal of uncertainty today as to the prospects for success in the U.S. civil forfeiture action because there is a potential claim that the assets in question were actually "located" in the foreign bank's correspondent account in New York -- thereby drawing into question whether the District of Columbia is the appropriate jurisdiction for purposes of the underlying civil forfeiture action. This scenario illustrates the difficulties we face in tracing, seizing, and forfeiting assets held in correspondent accounts of foreign banks.

It should be noted that the above examples describe a situation where the foreign governments were cooperative with the U.S. requests. In many cases, such cooperation cannot be obtained, and the difficulties are further exacerbated if we are dealing with a non-cooperative bank secrecy jurisdiction.

To defeat international money launderers, it is imperative that the nations of the world work together to exchange information and provide cooperation in investigations and asset forfeiture cases. It is the policy and practice of the United States, pursuant to statutory authority, to share the proceeds of successful forfeiture actions with countries that made possible or substantially facilitated the forfeiture of assets under U.S. law. As of July 2000, the Department of Justice, with the concurrence of the U.S. secretary of state, has transferred approximately $169 million to 26 countries in recognition of their forfeiture assistance. We believe that asset sharing among countries enhances international forfeiture cooperation by creating an incentive for countries to work together, regardless of where the assets are located or which jurisdiction will ultimately enforce the forfeiture order. The most important issue is to take the criminal proceeds away from the criminals.

A complete strategy against drug trafficking and organized criminal activity must focus on the financial aspect of the criminal activity. In order to accomplish this, there must be a comprehensive set of laws that criminalize money laundering, provide for asset seizure and forfeiture, and facilitate international cooperation. In addition, a full range of regulatory measures, such as comprehensive bank supervision and a system of suspicious activity reporting, are necessary to deter and detect money laundering. Only by working together on the interagency and international levels will we be able to stem the flow of criminal proceeds and cripple criminal organizations.