Pubdate: Sat, 11 Mar 2006
Source: Wall Street Journal (US)
Page: A4
Copyright: 2006 Dow Jones & Company, Inc.
Contact:  http://www.wsj.com/
Details: http://www.mapinc.org/media/487
Author: Robert Block
Graphic: You Paid How Much? http://www.mapinc.org/images/youpayhowmuch.gif
Bookmark: http://www.mapinc.org/topics/money+laundering
Bookmark: http://www.mapinc.org/find?203 (Terrorism)

POLICING TRADE TO NAB TERRORISTS

New Effort Spots Illegal Exports Masking Money Laundering

WASHINGTON -- The U.S. government has quietly launched a program to
crack down on the use of trade by drug lords, gangsters and terrorist
financiers to mask money laundering.

Law-enforcement agencies traditionally have focused on
money-laundering activity through banks, but the use of international
commerce to move money undetected from one country to another is one
of the oldest techniques used by criminals to avoid government scrutiny.

It works like this: If an imported product is overvalued, the exporter
receives an inflated price for the product, and wealth is shifted from
the importer to the foreign exporter. Normally, this wouldn't be a
profitable deal for the importer, but if the parties are in cahoots
they can share the proceeds. Likewise, when a money launderer converts
illicit cash into goods and then sends them abroad at below market
prices, the importer can resell them at real market prices and thus
transfer value out of a country under the noses of
authorities.

In the first formal effort to combat these techniques, the U.S. in
January teamed up with the governments of Argentina, Brazil and
Paraguay to create "Trade Transparency Units" that allow the countries
to share detailed information about each others' import and export
transactions. Armed with a U.S.-designed data-mining computer program,
investigators sift through the information looking for anomalies in
commerce that could indicate terrorist financing or other criminal
activity.

"The idea behind the scheme is simple," said Charles Allen, deputy
head of the Trade Transparency Unit at U.S. Immigration and Customs
Enforcement. "If a foreign business says it is exporting $100 worth of
hammers to the U.S., but the importer's paperwork is for $1 million of
machine parts, something is wrong. What goes out should match what
comes in. If they don't, then we take a look to see if there is a
connection to criminal activity." His agency, dubbed ICE, runs the
program with $2.25 million provided by the State and Treasury
departments.

Although difficult to quantify, some experts believe as much of 67% of
U.S. money being washed abroad may be moved out of the country in
undervalued exports. According to an analysis of U.S. trade figures by
John Zdanowicz, an international-trade expert at Florida International
University, a total of $391.1 billion moved in and out of the U.S. in
irregularly priced trade in 2004. The goods include dishtowels priced
at $153 per towel sent from Pakistan to the U.S. and bulldozers priced
at $1,700 each sent from the U.S. to Colombia.

Mr. Zdanowicz and others believe this is the preferred method of
terrorist financiers because low-priced goods seldom attract the
attention of customs authorities, who are usually concerned with
higher-priced, more-taxable goods.

Washington holds particularly high hopes that the program will shed
light on the tri-border region covering parts of Argentina, Paraguay
and Brazil, where a large illicit economy thrives, resulting in
trafficking in everything from drugs to arms to counterfeit car parts.
It is also thought to be a haven for terrorist financiers.
Intelligence and military experts say the region harbors radical
Islamist terrorists and represents a growing threat to U.S. security
interests.

Historically, trade has been mislabeled or undervalued to avoid paying
duties or to smuggle prohibited goods across borders. "This is not
something we can afford to ignore anymore." said Julie L. Myers,
assistant secretary for Immigration and Customs Enforcement.

"For too long, criminal organizations have benefited from the barriers
created by a lack of information-sharing about trade. This program
brings down those barriers and exposes some of the practices affecting
billions of dollars."

Despite the urgency brought on by antiterror efforts, the program took
years to develop. The notion of using trade data to track dirty money
initially faced resistance from U.S. law-enforcement agencies that
didn't understand it, according to ICE officials. And though the idea
gained traction after the Sept. 11, 2001, terrorist attacks, the
program was stalled by interagency feuding for control. In 2004, ICE
began a pilot project with Colombia that led to some high-profile
arrests linked to gold smuggling.

The key to the effort is a software program that mines trade data for
discrepancies between exports and imports. It can also link exporters
to importers and commodities over time. The U.S. has provided funds to
Paraguay, Brazil and Argentina to help purchase computers and the
software program, known as DARTT, as well as to train personnel units
in each country. Mr. Allen says the program has already resulted in
leads involving the smuggling of gold, computer parts and other
commodities in and out of the U.S.

Officials from Brazil, Argentina and Paraguay say they embraced the
program because it allows them to investigate and recoup unpaid or
underpaid tariffs. Many developing countries are dependent on customs
duties as a vital source of revenue.

"For us, this is a very important concept because these trade
transparency units should help us in not only combating transnational
crime such as money laundering but also trade fraud," says Marcos
Vinicius Pinta Gama, head of Brazil's Transnational Crime unit at the
Foreign Ministry.

Panama, the Philippines and India, excited about the program's
potential to identify tax fraud, have all expressed an interest since
learning about the program from the State Department. But a shortage
of funding is preventing a further rollout at this time, Ms. Myers
says. 
- ---
MAP posted-by: Richard Lake