Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, September 23, 1994 TAG: 9409240049
SECTION: BUSINESS PAGE: A7 EDITION: METRO
SOURCE: TOM LOWRY NEW YORK DAILY NEWS
DATELINE: NEW YORK LENGTH: Medium
Wall Streeters are under federal investigation for allegedly violating racketeering statutes in connection with money laundering, federal agents said this week.
Among the firms being investigated are Merrill Lynch, Dean Witter Discover, Prudential Securities, PaineWebber and Bear Stearns, according to sources in the U.S. Customs Department, which is conducting the investigation with the Internal Revenue Service as part of its ``Operation El Dorado.''
The El Dorado Task Force is looking into whether Wall Streeters knowingly accepted illegal drug profits to invest, and whether firms engaged in transactions such as creating tax-advantaged trusts and offshore corporations knowing that the transactions were intended to conceal the nature, source or ownership of the illicit funds.
Court documents reportedly show that about $10 million has been seized from Wall Street accounts. It is not clear if or how many times this money had been laundered before it was deposited into the accounts.
Prudential, Dean Witter and PaineWebber officials said they were unaware of an investigation. Dean Witter and Bear Stearns declined comment.
A Merrill Lynch spokesman said company officials have not met law-enforcement officials regarding the suspicions and that the company has been ``in the forefront of cooperating with law-enforcement officials to combat narcotic trafficking.''
The money launderers apparently are zeroing in on a loophole to the 1970 Bank Secrecy Act that doesn't require reporting of money wire transfers.
Banks must report cash transactions exceeding $10,000 to the federal government.
New regulations outlined in the Annunizio-Wylie Act of 1993 plug the wire transfer loophole by requiring brokerages, as well as banks, to elicit more information about senders and recipients of wire transfers.
Apparently, the new regulations have not been implemented because of concerns about crippling the vibrant wire-transfer business. Several hundred billion dollars are wired around the world each year.
Robert Powis, a former Treasury Department official and author of the 1992 book ``The Money Launderers,'' said he believes internal policing at brokerage firms is good, but that ``like any other business, things slip by.''
Powis said a lot of brokerage firms stopped accepting cash to make investments, but that it all depends on the relationships between brokers and investors.
The federal government has estimated that the annual proceeds from drug sales in the United States is about $100 billion.
by CNB