Lost in the Laundry

On a good day, Isaac Kattan Kassin deposited as much as $1 million. The money would be delivered almost every morning to three or four different banks in the Miami area. The convicted drug dealer's teams of Hispanic helpers, often aided by bank guards, would lug cardboard boxes and suitcases stuffed with cash to the tellers' windows. That simple method of handling his share of the $12 billion or so in "nar-cobucks" that flood Florida each year used to be the norm--until he and others like him began running afoul of Operation Greenback, the federally coordinated effort to control the drug trade by strangling its cash flow.

Making extensive use of computers, federal agents are now tracking drug dollars by correlating the currency-transaction reports that each bank by law must file for deposits of $10,000 or more. So far officials have traced $2 billion in suspect funds to their original source, a paper trail that has led to 51 indictments. They have also confiscated $20 million of drug cash and assets.

But every offensive in the war on drugs merely seems to prompt dealers to grow more ingenious in their evasive methods, and Operation

Greenback has had precisely that effect. The dealers have found a number of ways to move large amounts of money while avoiding detection by the feds. By this "laundering" process, ill-gotten gains are made to look like legitimate business receipts.

It is not uncommon in South Florida to see a stream of young people come up to a teller and count out just under $10,000 from overstuffed shopping bags for deposit. The major operators, who find this too cumbersome, have initiated a reverse airlift, sometimes using the same planes that fly drugs into Florida to take suitcases of cash out of the U.S. to discreet banks in places like the Bahamas or the Cayman Islands. Other dealers simply pay a commission, $ 10,000 a week or so, to the dwindling number of Florida bankers willing to fudge or forget their transfer reports. Says one former smuggler: "I was paying up to 2% of my deposits to bank managers not to fill out the forms."

Drug importers in South Florida commonly pay for their merchandise by opening a checking account in a local bank under a false name, then quickly transferring the money to a bank in Colombia or another country where drugs are produced. By changing account names every few months, the dealers can stay ahead of government sleuths. The transactions at the South American end are usually handled by professional money exchangers who trade the U.S. currency on the black market to avoid low official exchange rates. The FBI launched an undercover "sting" this summer by creating such a money-exchange company in South Florida. Dealers used it to send money back to their suppliers and avoid U.S. banking laws, until 25 people were arrested. One confiscated transaction was for $9 million.

Perhaps the most popular ruse to launder drug cash, and simultaneously hide it from the IRS, is the use of phony companies in the Caymans or anywhere else with low business taxes and helpful bank secrecy laws. It is one of many devices the dealers have learned by following the example of shady U.S. businessmen. Money is sent to the dummy firm, deposited in a local bank that U.S. government auditors cannot penetrate, and "loaned" to a company owned by the dealers back in Florida. That company can engage in some legal business, pay its owner a salary--giving him a sizable means of support--and even take a tax deduction for interest payments on the "loan."

Newly tightened enforcement of bank reporting laws has made it vastly more difficult to send large sums anonymously from the U.S. to Colombia, yet the money still manages to get through. Every week a Colombian air force C-130 transport plane flies to Fort Lauderdale with wooden crates containing up to $10 million from Colombia's central bank. The surplus greenbacks are being legally returned by Bogota to the Federal Reserve System in exchange for credit.

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