Money Laundering And Mission Creep; The costly and intrusive money-laundering provisions put into the USA PATRIOT Act at the insistence of Democrats are in use for more than terrorism cases

0 Comments | Insight on the News, Jan 5, 2004

Byline: John Berlau, INSIGHT

It was widely reported as an outrage, a use of the USA PATRIOT Act by the puritanical Attorney General John Ashcroft and his Justice Department to go after a crime that had nothing to do with terrorism. FBI agents conceded using Title III, the section of the USA PATRIOT Act that covers money laundering, in Operation G-string an investigation of corruption allegations against a strip-club owner in Las Vegas. The agents used Section 314 to seize the financial records of local elected officials the FBI thought might have taken money from the owner. That section allows the government to conduct wide-ranging searches of "financial institutions" in cases involving suspected "terrorist acts or money laundering." And the "or" apparently is the key word in this case.

Rep. Shelley Berkley (D-Nev.), whose district includes Las Vegas, expressed anger about the use of these provisions in a case in which the FBI conceded terrorism was not involved. In a letter to Ashcroft, Berkley wrote, "In my opinion, the use of the PATRIOT Act in this context violates both the spirit and intent of this important legislation." She asked Ashcroft for a "full explanation of your views on the scope of the PATRIOT Act and other investigative areas [in which] you foresee using the PATRIOT Act in the future."

But other critics of the action say that, if Berkley really were concerned with the scope of the USA PATRIOT Act's Title III, she'd be better off addressing questions to members of her party in the U.S. Senate who wrote the money-laundering provisions and who insisted they be attached to the final bill. Sen. Paul Sarbanes (D-Md.), then chairman of the Senate Banking Committee, simply had tweaked a draconian money-laundering proposal already in the drawer before September 11.

After 9/11, Republican House leaders and the Bush administration wanted it considered only as separate legislation but, as confirmed by a LexisNexis database search of this period, Democrats were adamant that it be attached to the USA PATRIOT Act. To do otherwise is "just something we cannot accept," then Senate majority leader Tom Daschle (D-S.D.) was quoted as saying in October 2001 by The Hill newspaper. Sen. John Kerry (D-Mass.), now campaigning for president and vigorously criticizing the USA PATRIOT Act and Ashcroft, complained at the time that Republicans were trying to remove the money-laundering provisions "by fiat." An October 2001 Associated Press article quoted Kerry as declaring, "This is not a moment for politics as usual to rear its ugly head in the Capitol." The article noted that Kerry "underlined the political influence of Texas bankers."

The senatorial offices of Daschle, Sarbanes and Kerry did not return Insight calls asking for their views about the nonterrorism uses of the USA PATRIOT Act provisions they championed, and neither did Kerry's presidential campaign. News max.com reporter Wes Vernon has written that Daschle and Sarbanes did not answer his inquiries about their roles in creating this part of the act either.

"I don't blame this on Ashcroft at all," says David B. Smith, who serves on the Money Laundering Task Force of the National Association of Criminal Defense Lawyers (NACDL). When it comes to their populist causes many Democrats, Smith says, "have no appreciation for civil liberties, and they consistently are on the side of the government, more so than the most conservative Republicans in the House and the Senate." And money laundering, Smith and others note, is a populist issue that such Democrats use to bash business and "the rich."

Yet, in comparison to other USA PATRIOT Act provisions, the money-laundering provisions may be the most intrusive and costly, say experts. These provisions encourage the Treasury Department to mandate broad "know-your-customer" surveillance requirements not just for banks but also auto dealers, jewelry stores, travel agents and other businesses that earlier statutes put under a broad definition of "financial institutions." The financial-services research firm Celent Communications estimates that for banks, securities dealers and insurance companies alone, compliance with the regulation will cost $10.9 billion by the end of 2005. David Aufhauser, then general counsel of the Treasury Department, candidly admitted to the Washington Post in 2002 that "the PATRIOT Act is imposing a citizen-soldier burden on the gatekeepers of financial institutions." But he defended the provisions, saying that, "in many respects, they are in the best position to police attempts by people who would do ill to us in the U.S. to penetrate the financial systems."

But the costly mandates are not just being used for terrorism cases. Newsweek reporter Michael Isikoff found that two-thirds of the financial records obtained through the same Section 314 of the USA PATRIOT Act used in the strip-club cases "were in money-laundering cases with no apparent terror connection." Among the government divisions making requests were the IRS, the U.S. Postal Service and the Agriculture Department in "a case that apparently involved food-stamp fraud," he wrote.