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Money Laundering: Prosecutorial Conference On Organized Crime

Money Laundering: Prosecutorial Conference On Organized Crime

Excerpts: Worldnet Conference on Money Laundering with Moscow, St. Petersburg. Source: Washington File, distributed by the Office of International Information Programs, U.S. Department of State.EUR312, May 17, 2000.

The U.S. Department of Justice's Scott Boylan and J. Kenneth Lowrie appeared May 16 on the Department of State's "Dialogue" television program to discuss money laundering and two upcoming conferences: The Northern Europe Initiative (NEI) Regional Prosecutor's Conference on Organized Crime in St. Petersburg, Russia, May 18-19 at the St. Petersburg Law Institute, and a Prosecutorial Conference on Organized Crime May 21-24 in Tallinn, Estonia, for regional police officials.

Boylan is regional director for the Newly Independent States in the Justice Department's Office of Overseas Prosecutorial Development, Training and Assistance. Lowrie is Deputy Chief, Organized Crime and Racketeering, Justice Department's Organized Crime Division.

The Northern Europe Initiative (NEI) is the U.S. strategy to promote prosperity and stability in Northern Europe through projects linking Russia with its neighbors around the Baltic Sea. Web site: www.state.gov/www/regions/eur/nei/index.html

 Following are excerpts from the program: [In the text, 1 billion = 1,000 million]

Worldnet "Dialogue", U.S. Department of State, Office of Broadcast Services: Guests:Scott Boylan, Regional Director, Newly Independent States, Office of Overseas Prosecutorial Development, Training and Assistance, U.S. Department of Justice. Kenneth Lowrie, Deputy Chief of Organized Crime and Racketeering, Organized Crime Division, U.S. Department of Justice.

Topic: Money Laundering: Prosecutorial Conference on Organized Crime. Moscow, St. Petersburg. Host: Rick Foucheux, May 16, 2000.

Q: Mr. Boylan, I understand the Department of Justice has several representatives participating in the St. Petersburg conference. Can you briefly describe what the Department of Justice and its partners at the U.S. Department of State hope to accomplish there?

MR. BOYLAN: Well, we hope to have the prosecutors in attendance sharing their knowledge and information and their experience in money laundering, and talking about how they can further cooperate in combating money laundering, because what money laundering is is a method of taking the profit out of organized crime and other types of crime.

Q: Mr. Lowrie, can you briefly tell us why international legal cooperation in the 21st century is so vital in combating money laundering and organized crime?

MR. LOWRIE: Well, movement of money and people and information is much easier than it was years ago. Consequently, it is possible for a person to begin the commission of his crimes in one country and carry them through to another country. Consequently evidence is frequently needed in one country to prosecute -- investigate, prosecute and detect crime. And that evidence exists in another country. And without international cooperation it would not be possible for the exchange of information and evidence to lead to a successful eradication of this crime problem. ...

MR. BOYLAN: Money laundering is an international problem, it's a problem for the U.S., it's a problem for Russia, and it's a problem for just about every other country in the world that has a banking system. ...

Q: Do you have any problems when you investigate cases which deal both with things in Russia and in the United States, especially when you need to gather evidence here in Russia?

MR. LOWRIE: There are problems of delay and problems in communicating back and forth. I think we are attempting to resolve those problems with our Russian colleagues. We have regular dialogue with them in an attempt to improve our methods of communication, and I think we are moving ahead on that. And this is also true with not just Russia but also with other countries.

MR. BOYLAN: I might add that Russia has more requests to the United States for information on ongoing investigations in Russia -- the Russian bureaucracy does -- than the U.S. Department of Justice has pending in Russia. And one of the things that is fairly consistent that we see in these requests is there isn't a real good understanding of how our system works in the United States. And that's something that's necessary in order to put together requests that will be efficient and following through efficiently. And it's also an issue that's important for Americans, because I frequently get calls from people in U.S. Attorney's offices asking about various aspects of the law of Russia. And that's why these types of programs where we get together and can exchange information, can talk about each other's systems and the peculiarities of those systems are really beneficial for the practitioners and getting the work done and getting the crime prosecuted. ...

Q: I would like to ask you to name some specific examples of cooperation between the U.S. and Russian law enforcement authorities, especially in the area of combating money laundering.

MR. LOWRIE: Recently there was a case in Los Angeles in which a quantity of money stolen in Russia was located. After a prosecution in the United States and forfeiture proceedings related to that money, that money was returned to Russia. There is another case now pending out of New Jersey in which money stolen in Ukraine was -- has been seized -- nearly a million dollars -- and that money will be returned to the victims of the crimes in Ukraine shortly. So those are two examples.

Other examples of international cooperation are the Ivankov case in which an MPD officer from Russia participated in uncovering evidence and conducting investigative activity within Russia which benefited the prosecution of Vyacheslav Ivankov here in the United States. And there are numerous other examples, probably too many to mention. ...

Q: Can you tell me if possible in your opinion how much money is being laundered illegally?

MR. LOWRIE: I don't know that I could really come up with a figure on that. It's probably -- well, worldwide it is certainly in the billions of dollars. From Russia it's an extremely large amount of money. How much I don't really know. That's one of the problems. I think we are making progress in determining how much is illegal money which comes to the United States and how much is people merely bringing their own assets over here to invest as they wish. ...

Q: At the time of the money laundering scandal -- I am talking about the Bank of New York -- in American and European mass media there were some publications about the Russian Mafia. Is it true can we say that some organized criminal groups which are related or linked to Russia is a problem for the United States, is relevant for the U.S.?

MR. LOWRIE: Well, without commenting specifically on the Bank of New York case, which I cannot do, in general we have experienced a phenomenon in the United States in which people newly immigrated from Russia to the United States have engaged in criminal activity here. Sometimes these people still have links back to Russia. I think the crime is committed across borders with people both in the United States and in Russia being victimized by that criminal activity. I think that points out the need for enhanced and streamlined international cooperation between U.S. law enforcement agencies and Russian law enforcement agencies.

MR. BOYLAN: One of the important aspects of our work in Russia relates to organized crime and Russian organized crime. The one thing I want to point out is that in American law enforcement our description of Russian organized crime can be a little misleading in that that includes all the former Soviet republics. Russian organized crime can be Uzbek organized crime or Kazakh organized crime, and so it is all lumped together.

Another aspect of it that has to be pointed out is that organized crime tends to grow with immigration, and we have had a large influx of immigration in Russians in the United States in the last 10 years, and that's just a pattern that we have experienced with a number of immigrant groups in different waves of immigration in the United States. ...

Q: What is the most complicated thing when you investigate such cases? What presents the most difficulties?

MR. LOWRIE: I think that probably the most difficult thing for us to do is finding witnesses who are willing to come forward and provide us with evidence regarding the internal functioning of organized crime groups. That's been historically true of our own attacks on our own domestic organized crime here in the United States. I think it's true with organized crime, some of which has come to the United States with a small minority of some of the Russian immigrants to the United States -- finding people who are willing to provide us with information which will lead us to effective investigations of those organized crime groups.

MR. BOYLAN: And I know speaking with my Russian colleagues on frequent occasions they have a very similar problem with witnesses, in getting witnesses to testify. And they have frequently expressed interest in the U.S. witness protection program. Everyone I think is aware of the famous, most expensive program that we have. But there are also other methods that we use to protect witnesses from identification. And our Russian colleagues have always shown a lot of interest in how we deal with that problem, and we are continuing to try to come up with better methods to deal with that problem. ...

Q: Do people understand that the money that gets to the U.S. from Russia -- let's say through the Bank of New York and so on -- is often not the result of criminal activity but sometimes the result of faults of the Russian law, which make things inconvenient for Russian businessmen?

And, secondly, to what extent would you like to make sure that the money that comes from Russia for example is the proceeds of criminal activity? In other words, to what extent -- how thorough are you going to investigate this criminal source of the money?

MR. LOWRIE: We don't want criminal money to come into the United States. It tends to undermine and corrupt our banking system, and we are just not interested in that. As to private investment, I think that's a little bit outside my bailiwick, and I really can't comment on why people in Russia or individuals in Russia might wish in individual cases to invest their money here or elsewhere. But I think that our function is to find the source of the money, determine whether or not it is the proceeds of one of several specified types of crimes; and, if it is, we can forfeit that money, prosecute the people who used it in financial transactions here in the United States, and return that money to the victims of the crime.

MR. BOYLAN: Part of the issue is economic: Where is your money going to work better for you? And it is difficult for us to determine, as Ken was saying, what is the illegal money coming from Russia and what is not. And that's why we need to cooperate with our colleagues in Russia, our law enforcement colleagues, and those are the people that we seek to get this type of information from.

The one thing that the United States doesn't want to do with its banking system is deter investment, because our system likes to have that money, and it helps our economy. So there needs to be a balance, because all countries would like to have investment and economic growth fueled by that investment. So you need to balance the law enforcement interests with the economic interests of the country. ...

Q: I would like to, if possible, to make sure what exactly are the mechanism, the schemes of money laundering that you investigate ...

MR. LOWRIE: It's kind of a difficult question. Most of the money moves the way any type of money moves. Legitimate business activities frequently transfer money to various places around the globe, and they do so electronically. I think the same thing happens with illegal money. Much of it goes from bank to bank, and sometimes if the money, if criminal money is generated in Russia, it might go to some intermediate country, come to the United States, stay in the United States for only a brief period, and then move outside of the United States. I don't -- sometimes illegal money is carried. People have been found at the border with money strapped to them. We have stopped ships at sea with large quantities of money. There are a variety of mechanisms people use, some very specific others quite crude. And I suppose one's imagination could come up with any variety of schemes that I haven't thought of.

MR. BOYLAN: I think it's important to note that money laundering is really something that grew out of combating different types of crime. Al Capone, who is a famous former mobster, died a rich man, even though he had been convicted of crimes. He still had lots of money from his criminal life and criminal enterprise. And money laundering is relatively new on the criminal scene, and it's part of the effort to take profit out of criminal enterprise, that criminals are going to know that if they are going to commit crimes and make money from those crimes that that money is going to be taken away from them if they are convicted. And it's a way of combating crime. ...

Q: Did I understand correctly that in order to try to prove that the money is illegal and is being laundered you should have some piece of information about its criminal source? Otherwise it would be impossible to prove that this money is actually being laundered.

MR. LOWRIE: There are two types of crimes related to money laundering in the United States. One relates to the reporting of that money. It is illegal to bring more than $10,000 into the United States without reporting it. It is illegal to take more than $10,000 out of the United States without reporting it. And it is illegal to engage in a currency transaction in the United States, like depositing money in a bank, in an amount greater than $10,000 without having that amount reported. It is legal to do all three of those things as long as the money is reported. So that is one type of money laundering violation.

The other type of money laundering violation relates to the conducting of financial transactions with funds which are the proceeds of certain specific types of criminal activity. Those types -- there is an extensive list of types of crimes which would generate income. And it is illegal to engage in a financial transaction with those proceeds. It is also illegal to engage in a financial transaction with money with the intent to promote or otherwise carry on certain types of criminal transactions. With the second type -- well actually the second two types -- the conducting of a financial transaction with the proceeds and the conducting of a financial transaction with the intent to promote -- it is required that we establish the existence or the plan to commit some sort of criminal activity of a nature which is specified in the statute. Otherwise we might be able to prosecute somebody for buying a house with perfectly legitimate proceeds, and we don't want to do that. We want people to engage in legitimate commerce, and so the law attempts to strike a balance between legal money and illegal money.

MR. BOYLAN: One example of this is here in the Washington, D.C. area. There were a number of drug dealers, narcotics traffickers, who would purchase large luxury automobiles. And they would do so for cash. And they would avoid the currency reporting by dealing with car salesmen who would sell them a car without reporting that they were paying 40, 50, 60, 70 thousand dollars for a luxury automobile. So there was an effort to go after the car salesman, to prosecute the car salesman for violating these currency reporting transactions. And now you can't buy a car for cash. You have to do it with the reporting requirements because of that effort by law enforcement. And that is just an example of how it has been made more difficult for narcotics traffickers in the Washington, D.C. area to use the proceeds of their crime. And that's really the point, to make the profit, even if they have it, difficult to use and enjoy. ...

Q: After all those scandals, including the Bank of New York scandal, is there some restriction, some regulations that restrict or limit the amount of work American banks can do with Russian banks?

MR. LOWRIE: The answer to that is no. Banks can engage in legitimate activity with anybody who walks in the door.

MR. BOYLAN: And that's the one thing that I think is important to point out. We at the Justice Department deal with, thankfully, minorities of people, the criminal element. And the majority of activity is legitimate. So Russia is not singled out. It is not by any means labeled as a criminal state. That is beyond question. And so it needs to be emphasized that we are dealing with a minority, a small group of people, and people that do damage and harm. But the Russians are not labeled as criminals or activity restricted by any means. And I think that needs to be emphasized. ...

Q: I would like to ask in your opinion what is the percentage of criminal proceeds among all the money that gets to the U.S. from Russia. Thank you.

MR. LOWRIE: I think it's probably a small amount. I am recalling one estimate that I heard and one over a period of time which was less than 10 percent. Most of it is people who bring their money here -- and it doesn't only come to the United States -- I want to also say that -- it goes to a lot of other countries. But I think it's probably -- it's certainly not the majority. It's probably less than 10 or 20 percent of the money that is actually criminal. ...

Q: What exactly is the threat for the U.S. national security? I am talking about the money taken out of Russia. We know about huge sums of state money, money belonging to the state, which is deposited in the United States and other countries. But what happens is that the U.S. economy ultimately gets the money. So where is the threat to U.S. national interests if this money gets there?

And, secondly, are you satisfied with your cooperation with the Russian bureaucracy and the Ministry of Justice in Russia?

MR. LOWRIE: I think our level of cooperation with the Russian bureaucracy is evolving. I think it is improving. It has improved over the years. There are difficulties because you have a different legal system in Russia than we do here in the United States. We don't always understand your legal system, and your prosecutors don't always understand our legal system.

I think, however, that we are communicating. We do have an ongoing dialogue, and we keep trying to improve it. And I think that there is a similar effort on the Russian side. ...

MR. BOYLAN: I believe the threat to U.S. national security in the criminal area is that, as you said, state budget money sometimes disappears and goes elsewhere. And if pensions aren't being paid in Russia, and that has an impact on the development of democracy and the development of a market economy in Russia, which we really as the United States want to see develop, we want to see a strong, healthy Russia, that is in our national interests. It is also not in our national interests to have criminals being able to operate in our country, maybe corrupt our banking system or corrupt our own government by having money to pay bribes to government officials. All of this is not in our security interests. And I think it is a mutual interest of both the U.S. and Russia.

As for cooperation, Ken and I are going later today to a meeting of U.S. and Russian law enforcement officials, and other government officials, State Department, Ministry of Foreign Affairs, to talk about cooperation, and what we have done in the past and how we can do it better in the future.

MR. LOWRIE: Well, I just wanted to echo that it is in our mutual interests. The removal of money from Russia has an adverse impact on Russia, and we don't want -- we want a strong and viable government and economy, and society in Russia, and at the same time we don't want criminal money coming here, because it tends to corrupt our financial institutions, and we don't want that. ...

Q: I would like to know how relevant is the money laundering problem specifically with respect to Russia. Or is this money as acute with regard to other countries with unstable economies?

MR. LOWRIE: I think that we have a variety of -- you have to remember what money laundering is. Money laundering is the use of illegal money with the intent to conceal its source. It is engaged in for a variety of reasons. One is to prevent law enforcement from detecting that money, and thereby investigating crime. One is to conceal the money from government to prevent its taxation. And a third is to allow a criminal to enjoy and use his money in a fashion which will prevent its being viewed as the proceeds of his criminal activity. For -- you know, I think that for us to -- you have to narrow your view of money laundering that way. We don't want to frustrate legitimate investment. People have, in our country and yours, have the right to invest money as they see fit for their enjoyment and profit -- as long as it is legitimately obtained money. And we don't want to stop that.

MR. BOYLAN: And one of the things that also goes hand in hand with that is in addition to money laundering laws and legislation, and I know that there is work being done on a new money laundering law in Russia, is banking regulations and the creation of a banking system that benefits the Russian economy, Russian investors, Russian small business. And so when you are developing a mechanism to deal with money laundering, you are also dealing with a mechanism to strengthen your own banking system. And probably that is probably more important to Russia than the actual money laundering legislation, which is really a small part of the establishment of a modern banking system within Russia, or within any country that is developing a market-based economy. ...

Q: Could you tell us -- you mentioned that the cooperation in the legal area is becoming better. Could you tell me specifically what steps were taken by the U.S. or by Russia to improve this cooperation? For example, in Switzerland there was a trial of Mikhailov, who was called in Russia and in the U.S. the leader of the Solntsev Criminal Group. He was considered not guilty, although there were two witnesses of the FBI, one a former agent of the FBI and another one an acting, present agent of the FBI. I must say that their testimony was pathetic -- was ridiculous. Now, was it Russia that did not help the U.S. in this case where this man was acquitted, or was it the fault of the FBI who didn't do enough?

MR. LOWRIE: I really can't comment on that particular case. I am aware that it happened. I am not familiar with the details of that case. There have been cases in which Russian law enforcement has assisted in the prosecution of criminals in the United States, those criminals having come from Russia, having either committed crimes in the United States or having committed crimes in Russia and then come to the United States with their ill-gotten gains.

Some of the steps we have taken include a mutual legal assistance agreement [MLAA], which is now in force, with which we exchange information and evidence with Russian law enforcement. We have also negotiated and signed a mutual legal assistance treaty [MLAT], which is now pending for ratification before the Duma and before the U.S. Senate.

MR. BOYLAN: And under the MLAA and MLAT, there are procedures by which U.S. and Russian law enforcement can ask for information and assistance from their counterparts in Russia or the United States. And one of the things we will be discussing at this conference in St. Petersburg is how we can do that in a more efficient manner. And one of the important ways that we can do that is by learning about each other's systems and how those systems work and how when we make a request we can do that in a proper way, in an efficient way, that we can get the information that we are after. And that is one thing we will be discussing today here in Washington, and we will be discussing in St. Petersburg at the end of this week. ...

(end excerpts)

 

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Directeur de la publication : Joël-François Dumont
Comité de rédaction : Jacques de Lestapis, Hugues Dumont, François de Vries (Bruxelles), Hans-Ulrich Helfer (Suisse), Michael Hellerforth (Allemagne).
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