Money laundering plan targets bulk cash, trade

By David Lawder

WASHINGTON (Reuters) - U.S. federal agencies on Thursday announced a new anti-money laundering strategy that boosts emphasis on combating bulk cash smuggling and trade-based activities as traditional bank transfer avenues are shut down.

The strategy is based on a money laundering threat assessment report issued last year, which highlighted the rise of non-traditional methods of moving tainted funds.

Updated for the first time since 2003, the strategy, led by the U.S. Treasury, Justice and Homeland Security departments, aims to safeguard the U.S. banking system while tightening regulation of non-bank money services businesses, such as currency exchanges and firms that redeem stored value cards.

The shift in emphasis marks some success by the Treasury and bank regulators to enforce the Bank Secrecy Act, which requires U.S. banks to maintain strong anti-money laundering controls including customer due diligence and regularly filing reports on suspicious transactions.

"As it gets more difficult to move money illicitly in the formal (banking) system, people are moving to other methods, like bulk cash smuggling, like trade-based money laundering," said Pat O'Brien, the Treasury's assistant secretary for terrorist financing.

"We're seeing more of that so I think this strategy probably has more of an emphasis on some of those areas than in previous strategies, he said.

In trade-based money laundering, cash is converted to goods which are then moved across borders and sold in seemingly legitimate transactions, but often with artificially inflated or deflated invoice prices.

O'Brien said the U.S. plans to work with trading partner nations to try to examine both sides of transactions to determine their legitimacy and whether they match up in value.

The Treasury also will investigate how free-trade zones, in which customs duties are often eliminated, reduced or deferred, affect illicit imports and exports.

The strategy also aims to examine casino regulation to ensure that such establishments do not fall victim to laundering in the exchange of cash for casino chips. The agencies plan outreach programs to fast-growing Native American-run casinos to help them comply with Bank Secrecy Act requirements.

The agencies are also targeting insurance companies after finding a number of schemes which have exploited life insurance policies, annuities and other investment products.