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Committee on Financial Services

United States House of Representatives

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TEXT OF TESTIMONY OF KENNETH RIJOCK, PREPARED FOR DELIVERY ON MAY 15, 2000, BEFORE THE SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT-FOR RELEASE


I'd like to thank the Subcommittee, and Chairwoman Roukema, for the invitation to testify today in support of HR 240, the Bulk Cash Smuggling Act of 1999. My name is Kenneth Rijock, and I am a veteran of over one hundred domestic and international bulk cash smuggling operations, all of them successfully completed. These activities were conducted by me in direct support of narcotics smuggling and trafficking operations that distributed most of their drugs in the New York-New Jersey metropolitan area.

My role was essentially that of attorney and offshore financial advisor, and my responsibilities included insuring that the proceeds of crime made it safely to the tax havens of Anguilla, Antigua and Panama, where they began the circuitous route unique to Money Laundering; Placement, Layering and Integration, more commonly known as wash, dry and fold. My trips involved sums of currency ranging from several hundred thousand dollars to six million. Obviously, I didn't keep permanent records of my activities, but the U.S. Attorney prosecuting only one of my client organizations stated that they earned in excess of two hundred million dollars.

The ever-expanding web of bank reporting requirements cause many criminals to avoid the domestic financial sector entirely, and to rely upon an underground pipeline to export their net cash profits. Bulk cash smugglers utilize every variety of international conveyance in use today to accomplish their goals. All forms of air, sea, land and communications transport are involved, and cash smugglers are only limited by the scope of their imaginations in contriving unusual and complex techniques in practicing their trade. The New York-New Jersey area, being a major international transportation hub, is a center for major bulk cash smuggling activity, as are Los Angeles-San Francisco, South Texas, and Miami.

To illustrate some of the tactics in current use, the cash is being carried on the person of a supposed tourist leaving JFK for a holiday in Antigua; it is concealed inside new computers in the hold of a ship at the Port of Newark, bound for Caracas and Cartagena; it is in the baggage of a group of businessmen on a Learjet leaving Teterboro Airport for Ft. Lauderdale Executive and the British Virgin Islands; it is stowed in the bulkhead of a passenger liner leaving for Bermuda; and it is onboard a New York-to-Toronto train inside the padding of a hockey shirt of a fan attending a sporting event there.

My personal methods of preference included the use of business jets carrying millions of dollars of drug cash, small, twin-engine aircraft owned by an affiliated charter service, taking scheduled airline service, meaning that I carried the cash right past the noses of airport security staff, and even small boats and water taxis.

In short, bulk cash smugglers secrete their illegal cargoes in the midst of the large flow of people and products on their way out of the United States and they are constantly fine-tuning and modifying their methods so as to totally deceive and confuse law enforcement seeking to intercept them and suppress their illicit operations.

The testimony of Assistant Customs Commissioner Bonni Tichler last year indicated that more than 700 million dollars has been seized by that agency in the past seven years, and that cash seizures are doubling every two years. Obviously, no accurate figures exist as to the total amount of bulk cash being illegally smuggled overseas, but if we take even the most conservative drug sales statistics and estimates, the 68.4 million dollars intercepted in 1998 represents less than one per cent of what was successfully exported to the Tax Havens of the Caribbean and the Drug Source countries of South America.

Why such a low figure ? Outbound traffic does not generate revenue, through duties levied, and historically law enforcement has been focused on incoming matters;. Therefore, we don't give exiting commerce sufficient attention; this is probably the single most important reason why bulk currency smuggling has become such a highly-successful activity for narcotics traffickers and others with dirty cash. If Congress doesn't approve additional inspectors and agents for the Customs Service, we cannot hope to stem the flow of illicit cash heading for the Tax Havens.

So, why are we here today? To impose a strict penalty that will punish and deter this criminal activity. Bulk cash smugglers have always been the foot soldiers, the infantrymen of Money Laundering, and the penalties levied in the past haven't been sufficient to stop them. A civil seizure and forfeiture of criminal cash is merely the cost of doing business; often, unless the cash smuggler could be placed within a major criminal conspiracy at a later time, he or she wasn't indicted . While the Money Laundering Control Act of 1986 made prosecution possible, there still exists the scenario where a connection to a criminal organization cannot be proved.

The importance of the Bulk Cash Smuggling Act is that it imposes serious penalties for transport or transfer, or attempted transport or transfer, as a separate and distinct crime, eliminating the requirement that there be a proven link to some other criminal activity.

The Act would, in my opinion, (1) operate as a deterrent to persons who choose to engage in cash smuggling in connection with tax evasion or some other white-collar crime, (2) discourage cash smuggling as an impulse crime, (3) give law enforcement an important tool in taking down career Money Launderers, and (4) open the door towards charging the Tax Haven banks and the whole offshore infrastructure with their role in the smuggling pipeline.

I do have a few suggestions for improving the act: just as the Currency and Monetary Instruments Form is applicable to the functional equivalent of over $ 10,000 in foreign currency, the Act must extend to foreign money, especially since the new 500 Euro note looms on the horizon. To do otherwise would encourage Money Launderers to simply convert from U.S. Dollars to some other stable currency.

I was the individual who originally proposed a ten-year term of imprisonment for sums of over $ 500,000, because a short jail term for moving major amounts of cash merely signals career criminals that they have but to cooperate with the authorities, and a one or two-year period of imprisonment will be the likely outcome. Most criminals are more than willing to assume the risk when they believe that the worst case scenario will not impose a major disruption in their lives. I have reached this conclusion as a result of many conversations with career criminals, both in and out of prison.

Professional bulk cash smugglers, who place large amount of currency in commercial transport every day, represent an important link in the delivery of drug cash to traffickers overseas, and any serious effort to incapacitate them and interfere with their activities must have sufficient teeth to be effective. All the seizures of large cash shipments from the New York-New Jersey area into Texas and the Mexican Border states illustrate the seriousness of the related issue of the interstate transportation of bulk cash; remembering that most drug proceeds are earned far from the offshore Tax Havens and Source countries, domestic transport, to a location convenient for export, becomes necessary. This presents both a target of opportunity for law enforcement interdiction, as well as the possibility of disrupting the entire narcotics distribution network, as drug distribution resources are frequently trusted with deadheading, with cash, to the organization's command structure or Money Laundering operators. I strongly suggest that interstate transportation of the proceeds of crime receive the same treatment as international bulk cash smuggling.

Another related issue is the Administration proposal in legislation that would confer jurisdiction over offshore financial institutions that transact criminal business in the United States. As a criminal who applied his knowledge of banking and corporate law, in partnership with Tax Haven banks, to effectively secrete the assets of drug clients, I made good use of the "black hole" that is correspondent banking in the United States. I would urge the Subcommittee to proceed, with all deliberate speed, to support any proposal that allows United States Courts to assert jurisdiction over the Money Laundering institutions of the "banking republics. "

Effective Money Laundering legislation, on Bulk Cash Smuggling, Correspondent Banking, and Jurisdiction over Offshore financial institutions, will go a long way towards giving law enforcement sufficient tools to effectively interdict, and suppress Money Laundering activities in the United States. Thank you; I will be happy to answer any questions at this time.



 

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