Almost two decades ago the government made an effort to initiate proceedings against some of the most powerful banks for money laundering in connection with the drug trade. The legislative history of the Bank Secrecy Act of 1970 gives overwhelming evidence that the legislators were looking at the banks as the source of the drug trade.
The purpose of the act was to uncover cash transactions between the bankers and the drug dealers. As a result of lobbying by the banks, however, the act was watered down somewhat and the appearance was given that it was aimed at international banking transactions of an illegal character, the kinds of fraudulent practices that are commonplace in international finance and don't specifically involve laundering.
However, the basic aim of the legislation was to deal with the collusion between the bankers and the drug dealers. It was supposed to clearly define laundering and prevent bankers from engaging in this illicit practice. Even in the weakened version, it clearly pointed to the source and the principal culprits: the bankers themselves and their accessories in the government.
This partnership exists on a far wider scale today, as it is impossible for drug profits in the billions to be amassed without modern banks where deposits and transfers are quickly handled using modern technology and telecommunications.
The big banks opposed the Bank Secrecy Act and subsequent legislation. The Congressional Quarterly of June 10, 1970, in its section on proceedings of the 91st Congress, Second Session, commented: "It is disturbing that some of the largest U.S. banks have opposed the legislation, chiefly on grounds that it would impose unreasonable record-keeping burdens." Then it quoted Robert M. Morgenthau, former U.S. Attorney for the very important Southern District of New York, who said: "The domestic banks that have opposed the bill are to a large extent the very same banks that have opened foreign branches which provide secret numbered accounts to their customers, who in all too many instances are U.S. citizens intent on violating U.S. law."
The Congressional Quarterly went on: The banks have resisted efforts to get them to produce records of their foreign branches on grounds that to do so would make them noncompetitive with foreign banks."
This problem continues to be the subject of new lagislation. The Wall Street Journal of Jan. 5, 1989, in an article entitled "Laundering Law Takes Aim Not Just at Foreigners" explained that "Tucked away in the massive Anti-Drug Abuse Act of 1988 is a provision aimed at shutting down a growth industry: laundering drug money abroad. While directed at foreign financial institutions, this provision serves notice on the U.S. business community that it must join in the effort to stop money laundering or be subject to increasing federal regulation."
For all the bravado about government toughness, however, the fact is that most of this kind of legislation is very weak, of an advisory rather than mandatory character.
There have been hundreds of drug busts where cash has been seized. At most these amount to several million dollars. But tens of billions of dollars collected by the drug dealers are in the banks, secure from government raids and drawing interest. Cash stashed away in suitcases or safe houses, on the other hand, is at great risk and unprofitable.
The banks themselves urgently need the cash, particularly in moments of crisis, to replenish the reserves required by the Federal Reserve Bank.
It has happened many times that progressive legislation, like the Civil Rights Act and others, gets bogged down and then is not enforced because adequate funds for prosecution are never made available.
As can be seen by its title, the 1970 act was directed at secret practices of the banks. Did this just mean the secrecy by which banks, while carrying out commercial transactions or financial manipulation, can become involved in commonplace fraud and deceit? No, because there have been laws on the books dealing with that for a long time. The secrecy which had to be uncovered was that between the banks and the criminal underworld of drugs.
More than a decade after passage of the act, little had been done to put the focus where it belonged. Many blamed the vagueness of the law. Another piece of legislation was passed in 1984 called the Comprehensive Crime Control Act. Its harsh provisions of a punitive character against drug dealers got the most publicity. It gave tremendous and unprecedented authority to the repressive forces of the U.S. government, allowing them to virtually disregard the civil liberties of the people in the alleged hunt for drug dealers and their accomplices.
But this act also contained more stringent provisions making it possible to expose the deadly partnership between the banks and the drug dealers. So that a beginning was made.
Finally, using both the Bank Secrecy Act of 1970 and the Comprehensive Crime Control Act of 1984, prosecutions began against some of the biggest banks in the country. But these were so low-profile as to go virtually unnoticed. The cut and dried way in which they were reported meant that the ordinary reader had no idea of the significance of these proceedings.
However, the importance of the prosecutions can be gauged in other ways. For instance, in February 1985, the Bank of Boston was ordered to pay a fine of $500,000 after pleading guilty to criminal charges that it failed to report $1.2 billion in large domestic and international cash transactions. This was a virtual admission of money laundering, of cavorting with underground drug crime dealers.
This was followed in June of the same year by prosecution of four of the biggest banks in New York City (and in the world) — Chase Manhattan, Manufacturers Hanover Trust, Chemical Bank and Irving Trust Company. These banks paid civil penalties ranging from $210,000 to $360,000 — which was really like letting them off virtually scot-free. No SWAT teams broke into their corporate offices; no bank directors were spread-eagled against the wall or thrown to the floor in handcuffs.
One has to remember that these unreported cash transactions were carried out by banks in New York, a huge drug center. The conviction of these banks should have attracted a tremendous amount of publicity. The only notice, however, was an article in the New York Times of Jan. 22, 1986.
It seemed that the basic reason for even this meager piece of publicity was that yet another financial institution, the Bank of America, was forced to pay a fine of $4.75 million for failure to report massive cash transactions. The bank's excuse was that its personnel were inexperienced, that monitoring and reporting transactions at 1,100 different branch banks placed too much burden on the bank, and that the law was difficult to understand.
The Reagan and Bush administrations have since made innumerable pleas for more funds for the repressive forces of the U.S. government — the FBI, CIA and law enforcement agencies of all sorts — but have paid little heed to clearly illuminating the partnership between the drug dealers and the bankers.
As it stands now the attention is drawn away from the basic cause. As always, whenever the ruling class is in a crisis, it projects a foreign country as "the enemy." The enemy is always somewhere else, never at home. The enemies are the poor peasants in the coca fields of Colombia, Peru and Bolivia over whom the Pentagon is planning to ride roughshod. Will the government reveal that the real profiteers are right here in Wall Street? That could turn into a self-indictment. The Bush administration could find itself in the position of the comic strip character Pogo, who said, " We have met the enemy, and he is us!"
The labor movement, the broad civil rights groups and the community organizations of all the oppressed now have a very real opening to intervene against the drug lords, if they can combine and take advantage of the present situation.
Consider this: The banks hold the money of tens of millions of depositors. The AFL-CIO alone represents a minimum of 20 million workers. Most of them deposit checks or money in the banks, as do millions of other workers. There are about another 30 million depositors in the oppressed communities, making a total of about 50 million people who could be represented by a coalition of the trade unions and community and civil rights groups.
Who are these depositors? They are the creditors of the banks. Look at any annual bank statement and you will see two columns — assets and liabilities. The deposits are listed as liabilities of the bank. The bank owes that money to its depositors. It is a creditor-debtor relationship in which even the smallest depositors, someone with $50 or less, is a creditor and the bank is the debtor.
The fact that the depositors are the creditors is an indisputable legal principle that has never been contested. Thus millions of depositors acting together could mount a considerable effort to participate in the investigation and prosecution of the drug lords and the banks.
Such organizations as the AFL-CIO and the innumerable strong civil rights and community organizations have a preponderant and overwhelming interest, both as depositors and as workers, to intervene in the phony drug war that the Bush administration is conducting and convert it into a real war against the real culprits. It is an initiative waiting to happen.
For decades, the banks have usurped any independent initiative by depositors, presuming to represent them. They could do this primarily because no other organization has intervened to represent the depositors — who encompass the mass of the working people of this country.
The Bush and Reagan administrations in their spurious war on drugs have thrown billions of dollars into all sorts of government agencies, primarily the most repressive ones, contributing nothing but chaos and more crime. Meanwhile, many of their own leading people have been involved in the drug trade. (The recent conviction of Rep. Pat Swindall (R-Ga.) for accepting $750,000 in what he thought was drug money is only the tip of the iceberg.)
The use of overwhelming force in the oppressed communities is a danger to their very existence and proves conclusively that the Bush administration will in no way improve the situation. Only an independent, united effort by organizations that are truly representative of the broad mass of the people, that is, the workers and people of different nationalities, can do it.
There are innumerable avenues to legally intervene and demand a role in the investigative process. The intervention of the labor movement and the broad mass of the oppressed communities cannot but change the character of the struggle completely and put the government and the bankers on the defensive. It only remains for a willing leadership to take the initiative.
The ultimate result will be to stimulate a spirit of militancy on the part of the working class and oppressed people against the Bush administration and the ruling class.
Last updated: 23 March 2018