Already on the horizon are demands for stricter controls on brokerages, which make handy cash conduits, and perhaps life insurers too. "We want to see a level playing field," American Bankers Association laundering specialist John Byrne has announced, "and we won't be satisfied until every financial service provider in some way is accountable for knowing its customers in a similar way that banks are being asked to know theirs." Also looming is an even stranger fight over what might be called "merchandise laundering": Treasury and Customs are threatening legislation aimed at retailers who accept cash payment for bulk purchases of various goods--two of the most-publicized instances have involved sunglasses and home appliances--without investigating the buyers' bona fides.
Fear of financial freedom is also shaping up as a major impediment to the emergence of new transaction-settling technologies, such as Internet banking and smart cards. If genuine anonymity is permitted in such instruments, officialdom fears, the war against laundering is as good as lost. As a result, national regulators are tending to attach the kind of conditions to such technologies that significantly limit their usefulness: restricting the "stored value" in a smart card to a low denomination, for example, or providing that only banks can issue such cards and only to their depositors. The other possibility--requiring full documentation on every transaction--is a privacy invader's dream. An anti-laundering panel of the Organization for Economic Cooperation and Development has discussed not only requiring a trail for transactions done on smart cards but also forcing all card issuers to enter such transactions into a central database.
From his side, drug czar McCaffrey has identified the issue clearly enough. "Money will flow to whatever market is willing and available," he told the bankers association, which means victory in the drug war "requires us to close all markets to tainted funds." In plain English, that means imposing controls, presumably barbed with today's Draconian penalties, on all markets. Not just the occasional Caribbean money order wired from a Miami bank but every transaction in the economy is to suffer the resulting inefficiency, friction, and privacy loss.
Lindsay, the former Fed governor, argues that the laws against money laundering have proved ineffective. "We are ask-ing for a lot of compliance to catch a few people," Lindsay told a Cato Institute gathering in 1997. "We have overstepped the bounds of balance and reason today," he added, "and we as citizens should start reining our government back before [its] powers increase even further."
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