No Evidence For Tax Haven Involvement In Money Laundering In FinCEN Study

by Mike Godfrey, for LawAndTax-News.com, New York

07 September 2004

The US Treasury's Financial Crimes Enforcement Network (FinCEN) has just issued a study demonstrating that criminals do not rely on so-called tax havens to launder dirty money. The report also admits that it is almost impossible to stop money laundering.

The Financial Crimes Enforcement Network's latest review of trends in suspicious activity reports highlights concerns over money laundering through foreign shell banks and shell companies, automated teller machines, and fraudulent consumer loans. FinCEN, the Treasury Department's anti-money laundering unit, said information filed along with suspicious activity reports identified specific Eastern European countries as homes for shell firms, including Armenia, Belarus, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Georgia, Greece, Kazakhstan, Latvia, Lithuania, Moldova, Poland, Romania, Russia, Slovenia, Turkey, Turkmenistan, Ukraine, Uzbekistan, and Yugoslavia. It'll be news to some of the countries in this list that they're in Eastern Europe. But only Cyprus, in the list, is traditionally viewed as a tax haven, and since joining the EU its offshore regime has in fact been dismantled.

Money launderers (aka financiers of terrorism in contemporary demonology) use a wide variety of ways to move money outside the law, the FinCEN review found. One method is food stamp fraud using electronic benefit transfer cards. The Department of Agriculture's Food and Nutrition Service estimates that some $395 million of food benefits are diverted each year from their intended purpose through food stamp "trafficking and associated money laundering activities."

Of course it's possible that there are Russian-owned money-laundering rings specializing in US food stamp fraud, but it seems more likely that most of such fraud is committed by petty criminals who meet single mothers and the unemployed in the local drug store.

This sort of nonsense is what you get when massive national resources are applied to indeterminate goals in pursuit of politically fashionable targets. Commenting on the study, the Centre for Freedom and Prosperity says that law enforcement resources should be focused on catching and prosecuting people for real crimes rather than imposing huge regulatory burdens that have very little practical impact.

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