Money Laundering and Bulk Cash Smuggling across the Southwest Border
Today, the U.S. Senate Caucus on International Narcotics Control announced that three of its members, Senators Dianne Feinstein (D-Calif.), Chuck Grassley (R-Iowa), and Sheldon Whitehouse (D- R.I.), were urging Treasury Secretary Timothy Geithner “to immediately propose and finalize a rule to make prepaid access, including stored value cards, subject to cross-border reporting requirements,” as written in a letter sent to Geithner by the caucus on Monday. These actions follow the March 9 hearing held by the caucus, “Money Laundering and Bulk Cash Smuggling across the Southwest Border” in which the topic of debate was regulations surrounding stored value cards. At the hearing, opening statements from chairwoman Dianne Feinstein (D-Calif.) and co-chairman Chuck Grassley (R-Iowa) both called for regulations to curtail the estimated $18-39 billion being laundered each year to Mexican and Colombian drug trafficking organizations, much of it across the southwest border between the U.S. and Mexico. Senator Grassley summed up the views of the two, saying, “We urgently need to update our money laundering laws in response to emerging trends.” Witness testimony was focused on the new technology utilized by the drug gangs to smuggle money across the border, most notably stored value cards, which witness Alan Bersin, Commisioner for U.S. Customs and Border Protection, said has been a major problem recently, recounting an operation discovered in 2008 in which drug traffickers had laundered $7 million from the U.S. to Medellin, Colombia, much of it through stored value cards. Richard Stana, Director of Homeland Security and Justice Issues for the Government Accountability Office, pointed out in his testimony that detecting smugglers is very difficult, no matter what technology the smugglers utilize because “Customs and Border Protection has limited technology to assist with outbound inspections.” This is a serious problem, Stana said, because money laundering by drug trafficking organizations “represents a significant threat to our nation’s well-being,” a stance reiterated by Jamal El-Hindi, Associate Director for Regulatory Policy and Programs at the Financial Crimes Enforcement Network (FinCEN) of the Treasury Department. El-Hindi said in his testimony that “It’s more important than ever for our government to be particularly vigilant” with respect to money laundering. A run-down of the highlights of the heated Q&A session that followed starts below. Senator Feinstein: Why has the Treasury Department not yet imposed a rulemaking on cross-border requirements and when will the treasury do so? Jamal El-Hindi: Our rulemaking with respect to prepaid access is a top priority. Senator Feinstein: Are you going to do it? Yes or no? El-Hindi: With respect to the reporting of prepaid access at the border. . . . If it were as simple as that, we would have done it. Senator Feinstein: So the answer is no, you’re not going to do it? Richard Stana: No timeline is set. I’d like to stress too, that creating the rules is only a first step. Senator Feinstein: Would additional legislation help? Stana: No, we have to take care of these regulatory gaps. El-Hindi: If we don’t have a broader requirement with respect to the industry as a whole, the reporting has less meaning and less utility. Senator Feinstein: All you need to do is have some methodology to check it at the border. El-Hindi: Right now, with respect to stored value, we don’t have the rules in place.” Senator Grassley: Has FinCEN met with providers of prepaid access cards? El-Hindi: The general comments from the industry asked us to be more specific . . . [to have] more clarity with respect to our rule-making [and] how the proposed rule affects the business model. Senator Grassley: How much of a factor does comment have in the delay of it? El Hindi: We’re balancing a variety of interests brought to us by stake-holders. It’s very important when we come out with this rule to get it right. Senator Grassley: You better get something out there that applies to today and worry about tomorrow tomorrow or you’re never going to get a regulation. Senator Whitehouse: When you’re talking about organizations that have access to that kind of money, you’re talking about organizations that have a huge cap. What would be the most useful things for us to provide you? Alan Bersin: (With regards to the figure of $18-39 billion laundered each year) We need a better estimate. . . . We need to continue to invest in technology both in the inbound and on the outbound. Senator Feinstein: We need a ruling on stored value. . . . This is ridiculous. Senator Feinstein called for a letter to raise priority for regulations. Senator Grassley: We’ve got to take small steps and do whatever can be done. . . . If you can cure part of this problem, cure part of this problem. Senator Feinstein: It’s not going to be a perfect regulation no matter what you do. . . . You sound like you’re never going to get it done.” Watch the full hearing here. This post was written by CIP Intern Erin Shea