By Lloyd Williams, Senior Associate EditorASSETS FORFEITURE plays a key role in money laundering investigations. The major problem international drug traffickers face, the world over, is the sheer volume of the cash that their operations generate, especially from cocaine sales. And they have to launder it to get it into the legal system. Indeed, no self-respecting crack-cocaine house in Kingston will these days accept any coin less than $20.
The International Narcotics Control Strategy Report (INCSR) 2004, published by the U.S. State Department's Bureau for International Narcotics and Law Enforcement Affairs, gives an illustration of the returns which international cocaine dealers get on their investments and the volume of cash they usually have to launder.
"Assuming an average U.S. retail street price of $100 a gram, a metric tonne of pure cocaine is worth $100 million on the streets of the United States; twice as much if the drug is cut with additives. That same metric tonne would have cost around $3,000,000 ($3,000 per kilogram) when it left Colombia.
"Few legitimate businesses can boast of a 30-fold return. At $100 per gram the approximately 100 metric tonnes of cocaine that the U.S. Government (USG) typically seizes each year could theoretically be worth as much as $10 billion to the drug trade more than the gross domestic product of some countries. Even if only a portion of these profits flows back to the drug syndicates, we are nonetheless speaking of hundreds of millions, if not billions, of dollars."
The trouble is that the drug dealers who end up with such vast amounts of cash have a problem disposing of it from getting it up to the next level, to when it reaches their regional or top headquarters or to whatever designated place, to getting it into the legal system. At some stages of the transferral, couriers must be used to move the money from place to place or from one country to another.
PROFESSIONAL HELP
At the more sophisticated level, financial and legal professionals, such as accountants and lawyers, are brought into play, laundering the money through the acquisition of property and assets, investment in front companies or through high-cash businesses such as restaurants, nightclubs, fast food outlets, taxi companies or car sales and repair companies, with high cash turnovers. Also, they often use money service businesses, cambios, and remittance services and of course, banks, if they can get around the suspicious activity reports.
To get at international drug traffickers (including those operating in Jamaica), who rake in millions of US dollars, law enforcement agents not only have to arrest the suspects and seize their drugs, but seize also the assets they buy with the money they earn from the drugs, whether the cash is laundered or not. The drug traffickers have to distance themselves from the money, so law enforcement won't catch them with it. So the seizure of laundered money can often lead to the 'Mr. Bigs' of drug trafficking, if the investigators are diligent and skilful enough to follow complex paper trails.
Since 9/11, the spotlight in the United States, a major money laundering country by its own assessment, has been focused on terrorist financing and also on its more widely recognised twin, money laundering. Money launderers are as shrewd as the international drug traffickers they launder the money for and over the years they have combined traditional money laundering techniques with complex money laundering schemes in keeping with the latest aids that technology offers. According to INCSR 2004, "they routinely evade the scrutiny placed on banks by developing sophisticated money laundering techniques in attempts to avoid financial transactions reporting requirements and manipulate facets of the economy unrelated to the traditional financial services industry."
LIFE INSURANCE
INCSR reports that 'Operation Capstone', a two-year multinational investigation involving the U.S. Bureau of Immigration and Customs Enforcement (ICE), the Isle of Man Customs and Excise Service, and Colombia's Depart-amento Administrativo de Segu-ridad, revealed that Colombian drug trafficking organisations, through a small number of insurance brokers, were purchasing investment-grade life insurance policies in the USA, the Isle of Man, and other locations, with cartel associates as the beneficiaries.
It revealed that cartels were routinely liquidating their drug-financed life insurance policies after relatively short periods. "Despite paying stiff penalties for early liquidation, the cartel beneficiaries would receive a cheque or wire transfer from the insurance company that, on its surface, appeared to be legitimate insurance investment proceeds. The cartels could then use these 'clean' funds virtually unquestioned."
MORE TO BE DONE
While acknowledging that the Jamaican Government had made progress in fighting money laundering, INCSR 2004 said that further work was necessary to bring its regime into line with international standards. Specifically, it suggested that the scope of predicate offences for money laundering should be extended to encompass all serious crimes, not just drug trafficking.
As the US President's National Drug Control Strategy for 2004 states, "The drug trade is not an unstoppable form of nature but rather a profit-making enterprise that can be stopped." Two weapons that have proven most effective in weakening the drug trade have been forfeiture of assets and stiff laws against money laundering.
However, INCSR 2004 states, the complex nature of money laundering transactions these days makes it difficult in many cases to differentiate between the proceeds of narcotics trafficking and the proceeds of other serious crime.
Moreover, financial institutions engaging in transactions involving significant amounts of proceeds of other serious crimes are vulnerable to narcotics-related money laundering.
