BOSTON — Money talks--especially when it's a cash transaction over $10,000.
That's the point at which banks and other financial institutions have to report to the Internal Revenue Service the customer who withdrew or deposited cash.
These reports put IRS officials on the scent of money launderers, who then, the IRS hopes, lead to the mobsters who unload the "dirty" money in the first place.
"The surest way to get at the mob is to get at the mob's money," says James Harmon, director of the President's Commission on Organized Crime. "Organized crime today uses banks and other financial institutions as routinely, if not as frequently, as legitimate businesses," the commission's 1984 report states.
Bank Pleaded Guilty
Banks that don't report the cash transactions can get in big trouble. On Feb. 7, 1985, for instance, First National Bank of Boston--the largest bank in New England and the 16th-largest in the United States--pleaded guilty to a felony charge of "willfully and knowingly" failing to report $1.22 billion in cash transactions with nine foreign banks. First National was fined $500,000--the largest fine ever slapped on a financial institution for violating currency law.
A few days later it was reported that two companies owned by Boston's Angiulo family, reputed leaders of a large organized-crime ring, held accounts with the bank. The bank put the accounts on an "exempt list" of customers whose cash transactions don't need to be reported to the IRS.
As of this writing, it is not known whether there is any connection between these two events, but now a Senate subcommittee has announced it will investigate the bank, which is still being probed by the Justice Department's financial investigative task force here.
The case is significant because, for the last two years, the federal government has focused on cutting off the drug supply by choking the money channels that feed it. Thirteen presidential task forces and 12 Federal Bureau of Investigation task forces, as well as ad hoc groups, are on the laundering trail.
As the Feds crack down on financial institutions "alternate ways will be found to launder money, and they are going to become more sophisticated, but right now, banks are a very important process," says Patrick Walsh, special attorney with the Boston strike force, under the Department of Justice. Walsh was a key player in Operation Greenback, a successful government attack on money laundering in Florida initiated in 1980.
The term "laundering" means covering up the source of money generated by ill-gotten gains (narcotics, racketeering, etc.) to make the money appear legitimate (profits from a normal-looking business, loans, letters of credit, etc.).
Although banks play a key role, they are often unaware they are being used by organized crime, experts say. "We haven't found that bankers (themselves) are principally involved," says Charles Domroe, a special FBI agent who is an authority on money laundering.
Drugs are by far the biggest black-market cash generators in the country. In a very general estimate, the presidential commission put annual U.S. profits from the drug trade at $50 billion to $75 billion.
Of that, some $5 billion to $15 billion moves overseas each year, and "once it's in the financial channels of international commerce, it's like looking for a needle in millions of haystacks," said Harmon, the commission's director, at a recent conference.
"The ways to launder money are only limited by the imagination of the launderer," Harmon says.
The big challenge for launderers is pure bulk--how to get tons of cash out of the country for payoffs, and how to get the rest back in as profits. Drug dealers pull in wads of 10- and 20-dollar bills from street sales. As this cash works its way up the chain of brokers and wholesalers, it is literally carried about in boxes, suitcases, bags, and small trucks.
When Operation Greenback first started snooping around Florida, recalls Walsh, investigators discovered people unabashedly approaching teller windows with bags stuffed with cash. They would exchange the cash for larger bills or cashier's checks or deposit it in phony accounts. Bank officials either did not comply with reporting rules because the rules hadn't been enforced or were bribed by organized crime.
But as the investigation tightened its grip, the wash techniques got more creative.
Without a Trace
Private planes flew cash to the Caribbean. Couriers with phony names would collect cashier's checks, hand them to the proper party, and be out of the country before the Feds could trace the fake names.