For example, in 1985 we initiated a total of 338 money laundering investigations. We were only able to establish that the proceeds were connected to narcotics in 162 cases. Now the difference could well be――

Chairman ST GERMAIN. Approximately 50 percent.

Mr. WASSENAAR. About 50 percent in each of the last 4 years. The difference, however, could be that many of those involve narcotics proceeds. It is just that we were not able to prove, in the course of that investigation, that it came from that particular

source.

I submit that some of the difference might also be accounted for by normal tax evasion attempts on the part of individuals, like skimmed receipts from restaurants and organized crime money that does not necessarily deal with narcotics but could be from some other illegal source.

The bill that Congressman Pickle talked about this morning I think would be of help to us in this respect, in that looking at the cases we worked last year we were able to establish 162 cases tied into narcotics. Seizure and forfeiture is relatively no problem in those cases because once we are able to establish a narcotics connection and prove that the income came from an illegal source, we are able to seize it.

But in many of the remaining 180 cases, where we were not able to tie it in to narcotics, although we were able to prosecute the individuals involved in the money laundering, we were not able to seize or seek forfeiture of the money that was being laundered.

Since 1981, we have completed 873 money laundering cases. At the present time, we have in our inventory or under active investigation, over 300 money laundering investigations. Included in that 300 number are over 60 financial institutions that are currently under investigation. I use the term "financial institutions" in the fairly broad sense. I do not mean to imply that the 60 financial institutions is limited to banks. Indeed, it is not. It includes savings and loans. It includes credit unions. It includes brokerage houses, et cetera.

Last year we recommended criminal prosecution in 317 cases. Since 1981, the Internal Revenue Service has been successful, along with the Department of Justice, in convicting some 31 financial institutions. Eight of those were last year alone.

In response to a question that was asked earlier this morning, or a concern that was expressed, since 1984, we have also prosecuted 34 officers and employees of financial institutions.

With your permission, I would like to talk about a couple of cases. I have another poster that we can put up that I think will graphically depict the flow of funds in this particular case.

[The poster referred to during this part of the testimony was presented during the hearing to illustrate money laundering activities and is not available as a page-sized document.]

This case involved an individual in Florida by the name of Botero. In the course of 8 months, Mr. Botero laundered some $57 million through a branch of the Fort Lauderdale Bank. In this particular case, Smurfing was not involved. He didn't need the Smurfs. He had the cooperation of three bank officers. Each of the

bank officers received as their share, a commission ranging from one-half to 1 percent.

One of the interesting aspects about this case is that Mr. Botero was a prominent Colombian businessman, the first Colombian national ordered extradited to the United States by the Supreme Court of Colombia. He was convicted last year, in 1985, and is currently under a 30-year sentence in prison.

If I could spend a minute trying to interpret this fairly large poster, the black dot at the very top of the poster reflects that $56 million was directly deposited into the Landmark Bank, into the accounts of false El Salvador individuals. He had five accounts at this bank.

Chairman ST GERMAIN. Nonexisting individuals?

Mr. WASSENAAR. Nonexisting individuals. With the cooperation of these three bank officers, of course, Mr. Botero would bring large amounts of currency into the bank on a regular basis, and all of the currency was deposited into one of those five accounts. Most of that money or $38 million, was subsequently transferred to another bank in Florida, to the correspondent accounts at the Pan American Bank. Correspondent accounts for the Banco de Bogota and the other three Colombian banks listed.

Once the money was on deposit in those correspondent accounts, of course it could then be wire transferred to the parent bank in Colombia; $38 million was remitted to Colombian banks in that manner in a period of 8 months.

The $38 million in that particular case, as we were able to discover after we had completed our investigation, was primarily to pay source suppliers of narcotics, just to pay for the wholesale cost of the narcotics being shipped to this country.

If one can accept the fact that the average markup on wholesale narcotics is roughly nine times wholesale value, then we are talking about a very substantial amount of narcotics' dollars that were paid for with 38 million dollars' worth of wholesale of narcotics. We are talking about 10 times the $38 million, whatever that figure comes to.

Chairman ST GERMAIN. $380 million.

Mr. WASSENAAR. Close to half a billion dollars in street value of narcotics was laundered, and the proceeds were laundered through this Landmark Bank.

Chairman ST GERMAIN. Excuse me. It says Botero, $56,692,000. Are you telling me he deposited all of that into the Landmark Bank? Where did he put the rest of that money?

Mr. WASSENAAR. What he did with his profits or the excess, the retail price, is really unknown. It wasn't until after we had finished this investigation that we were able to tie this into narcotics, which really prevented us, even though we knew there was a substantial money laundering operation here, from seizing and seeking forfeiture on the money that was going through this illicit conduit. There again, I think Mr. Pickle's bill that he talked about this morning would be of some aid in that respect, and we would not have permitted the full $38 million to go over to Colombia to pay for the narcotics that were being purchased.

The next case—

Chairman ST GERMAIN. Excuse me. Would you finish the chart for us? We covered Pan American and the $38 million that went to Colombia. Explain the rest of that chart to us, please.

Mr. WASSENAAR. That is where most of the money went. Of course, that is the money that was of greatest concern to us. Chairman ST GERMAIN. Below there, you have checks.

Mr. WASSENAAR. We had $10 million in other distributions, consisting of 20 wire transfers and 132 cashier's checks. Those were deposited or transferred to accounts over which Botero had no direct control. The exact purpose of each of those transfers is really uncertain to us.

Chairman ST GERMAIN. The "blue."

Mr. WASSENAAR. The amounts on the right, those were domestic transfers, to accounts that were under the control of Mr. Botero himself. He controlled all of the accounts on the right and he also controlled all of the accounts on the left.

It is very possible that the other distributions, going down, the $10 million in distributions, could have been to Smurfs, to other individuals assisting him in his business.

Chairman ST GERMAIN. You said there were people within the institution that cooperated, commission checks to bank officials for nonfiling of CTR's.

Mr. WASSENAAR. Right.

Chairman ST GERMAIN. You don't know what that amount was? Mr. WASSENAAR. The officers in this particular bank were receiving a fee ranging from one-half to 1 percent of the currency they were taking in. In the course of 8 months, they took in $56 million. The amount they received was therefore very sizeable.

Chairman ST GERMAIN. You initially said it didn't involve Smurfs, but indeed, it did. He was the Smurf, but he had the cooperation of bank officials. Isn't that the case? He brought the cash in and the CTR's were not filed.

Mr. WASSENAAR. Right. Traditionally, we think of the term "Smurf" as the individual who scurries about from bank to bank, converting $9,000.

Chairman ST GERMAIN. We will refer to Botero here as the super-Smurf.

Mr. WASSENAAR. Right; indeed, he was. It is very possible above him, in the organization, there could have been some type of Smurfing activity.

Another case I would like to bring to your attention is a case again where we had the complicity of bank officers. This was a case that took place in California. It involved the Garfield Bank. It also involved an attorney by the name of Nathan Markowitz. Nathan Markowitz had been a fairly prominent attorney within the L.A. area, who for all practical purposes, had given up the practice of law because he could make more money by laundering money.

Nathan Markowitz had made an arrangement with the president of the Garfield Bank to assist him in laundering money. Nathan Markowitz had a lot of contacts with individuals involved in narcotics. He would receive whatever currency they would bring to him. He would bring it into the Garfield Bank, assuring the narcotics trafficker that no CTR was filed with the Internal Revenue Service. Markowitz, being an attorney, would create foreign corpo

rations for these narcotics traffickers. Once the currency was brought into the Garfield Bank without a CTR report being filed, the Garfield Bank could wire transfer that money to the same country where the foreign corporation was created. The money is immediately offshore. That money could then come back to the narcotics trafficker under the guise of a loan from a foreign corporation.

It is, at a minimum very difficult for the Internal Revenue Service to charge an individual with receiving income when he has loan documents from some foreign corporation, and that is his primary means of buying his house or his Mercedes.

Chairman ST GERMAIN. Could you describe the wire transfers from Garfield Bank to foreign bank X. How was that accomplished?

Mr. WASSENAAR. The same thing really happened in the Botero case. Once the money is in the financial institution

Chairman ST GERMAIN. Let's use Garfield Bank.

Mr. WASSENAAR. The money was delivered by the narcotics trafficker directly to Mr. Markowitz. He or one of his associates would then physically transport that money to the Garfield Bank. Once it was on deposit at the Garfield Bank, in the accounts of nominee names, whatever, then that money, the balance in that account or any part of that account, could be wire transferred to virtually any financial institution.

Chairman ST GERMAIN. They can't put the money in a wire. When I was a kid at Woolworth's and some of the shoe stores, you could go downstairs and buy your shoes, and then they would put your money in this little cup that was on a wire and it went upstairs to the office and down came the change and the receipt. That money, those $20, $50, $100 bills can't go through the wire to foreign bank X; right?

Mr. WASSENAAR. That's correct.

Chairman ST GERMAIN. Describe to us how that happens. How does the money get from Garfield Bank to foreign bank X?

Mr. WASSENAAR. It is just a matter of crediting and debiting, by way of electronic transfer of funds.

Chairman ST GERMAIN. Garfield Bank doesn't sound to me like the type of institution that would ordinarily be dealing with foreign banks. It sounds like a smaller bank.

Mr. WASSENAAR. That's true.

Chairman ST GERMAIN. They don't have credits and debits back and forth.

Mr. WASSENAAR. Right.

Chairman ST GERMAIN. Tell us how that money arrived at the foreign bank.

Mr. WASSENAAR. I assume that money would then go to the Federal Reserve in that particular district. That Federal Reserve district would give proper credit to the bank that really should be holding that particular amount of currency.

Chairman ST GERMAIN. The foreign bank?

Mr. WASSENAAR. Right.

Chairman ST GERMAIN. What I am trying to determine is, is it possible to monitor wire transfers in excess of $10,000 or $20,000?