SUCH LARGE CASH SEIZURES, SOME MONEY LAUNDERING GROUPS SWITCHED FROM BULK CASH TRANSPORTATIONS TO NEGOTIABLE BANK CHECK TRANSPORTATIONS. USING A TECHNIQUE DUBBED "SMURFING", THE MONEY LAUNDERS WOULD CONVERT THE BULK CASH TO CASHIER'S OR BANK CHECKS IN FALSE OR NOMINEE NAMES IN AMOUNTS UNDER $10,000 AND THEN TRANSPORT THE CHECKS OUT OF THE UNITED STATES. THE SMURFING TECHNIQUE WAS DEVELOPED SPECIFICALLY TO CIRCUMVENT THE BANK SECRECY ACT REPORTING REQUIREMENTS. IN RESPONSE TO THIS AND OTHER MONEY LAUNDERING INNOVATIONS, THE TREASURY DEPARTMENT

IS IN THE PROCESS OF AMENDING THE SUPPLEMENTARY REGULATIONS WHICH IMPLEMENT THE BANK SECRECY ACT IN ORDER TO STRENGTHEN AND CLARIFY

THE LAW.

THE MAIN POINT THAT YOU MUST REMEMBER ABOUT SMURFING IS THAT THE OBJECTIVE IS TO REDUCE THE VOLUME AND WEIGHT OF ILLICIT NARCOTICS PROFITS FOR EASIER MANIPULATION OR TRANSPORTATION OUT OF THE UNITED STATES. THIS CHART ILLUSTRATES THE LOGISTICS PROBLEM OF MOVING VAST AMOUNTS OF CURRENCY. FOR INSTANCE, $1 MILLION IN 20S WEIGHS 110 POUNDS. THAT SAME $1 MILLION IN 100S WEIGHS 22

POUNDS.

MONEY LAUNDERERS MUST CONVERT THEIR STREET MONEY, USUALLY $5, $10 AND $20 BILLS TO LARGER DENOMINATIONS,

PREFERABLY $100

BILLS, OR NEGOTIABLE BANK CHECKS, TO REDUCE THE BULK AND THUS
REDUCE THE POSSIBILITY OF DETECTION BY CUSTOMS AT THE BORDER.

NOT ALL MONEY LAUNDERING GROUPS HAVE FOUND THE SMURFING TECHNIQUE TO THEIR LIKING. THIS WAS MADE CLEAR IN THE FEBRUARY 7, 1985, SEIZURE OF $5,975,850 IN CASH IN SMALL DENOMINATIONS, DISCOVERED BY CUSTOMS ON A SMALL TEXAS AIR STRIP IN THE PROCESS OF BEING TRANSPORTED TO PANAMA.

THIS WAS NOT AN ISOLATED INCIDENT. A MAY 1985 CUSTOMS

NATIONWIDE OUTBOUND CURRENCY OPERATION, FOCUSING ON HIGH-RISK
BANK HAVEN OR NARCOTICS SOURCE COUNTRIES, RESULTED IN 43 SEIZURES,
TWENTY-THREE OF THOSE SEIZURES OCCURRED

TOTALING $4.8 MILLION.

IN THE MIAMI AREA.

REMEMBER! WHEN WE INVESTIGATE AN ORGANIZATION INVOLVED IN NARCOTICS TRAFFICKING WE MUST ASSUME THAT ONE OF SEVERAL THINGS IS HAPPENING. THE ORGANIZATION'S ILLICIT PROFITS LEAVE THE COUNTRY OF ORIGIN NEVER TO RETURN. THE ILLICIT PROFITS RETURN TO THE COUNTRY OF ORIGIN OR, A COMBINATION OF THE ABOVE IS OCCURRING. WE MUST NEVER BECOME TRAPPED IN THE THOUGHT THAT BECAUSE ONE ORGANIZATION LAUNDERS MONEY A CERTAIN WAY, THIS WILL BE TRUE OF ALL. MOST LAUNDERERS ARE MUCH MORE FLEXIBLE, AND MOST OF THE TIME MORE CREATIVE, THAN WE ARE.

WE MUST UTILIZE ALL LAWS AT OUR DISPOSAL (BOTH CIVIL AND CRIMINAL).

WE MUST THINK CONSPIRCY FIRST. ONE WILL ALWAYS EXIST.

WE MUST THINK COOPERATION! A MULTIFACETED, MULTIAGENCY,

MULTICOUNTRY APPROACH IS BEST!

$454,000

Mr. HUGHES. How was the cash detected in the teddy bear? Ms. TISCHLER. Well, what we were doing was again looking for anomalies. It's a lot of hard work when we go through one of these commercial blitzes because we have to have agents downstairs where the baggage is and agents upstairs where the people are. They tell me that the bear just looked funny. It was sort of hanging out of a bag. It was sort of lumpy looking. Due to the reasonable cause to believe language that was put in the comprehensive crime control bill, that plus some other information, led them to open the bear up, and they found the cash. The dog didn't get it. Mr. HUGHES. I wonder if you could describe for us briefly how your Financial Investigations Division operates, how many people you have in the Division, do you conduct both investigations and intelligence gathering?

Ms. TISCHLER. My Division used to incorporate our Customs analysts, who were devoted to financial investigations. We got reorganized in the early part of the winter. They are now part of our intelligence group. But my Division basically has three branches in it. We don't investigate anything. We sort of try to helpfully direct investigations that are going on in the field and coordinate our regions. We have seven regions. Most of our investigations stretch not only across the regions but, for instance, in the case of that $6 million business, it went all the way to Panama. We had to see that our Customs attaché there in fact did a lot of investigation. So, it is really more of a programmatic effect rather than an investigatory one. We don't gather intelligence anymore. That function now our 30 analysts were, in fact, transferred to the Office of Intelligence in January. They handle it all from over there. Mr. HUGHES. Do you analyze intelligence?

Ms. TISCHLER. Yes, they do. Those analysts are the people who support the TFLEC concept that you have heard about. They are strictly devoted to what we call financial analysis. They strictly handle intelligence not only garnered from the financial forms themselves but from collateral intelligence coming in from around the States.

Mr. HUGHES. How many people do you have in your Division?

Ms. TISCHLER. Our Division, agentwise plus some data processing people, is probably around 25 right now. But the 30 analysts are in a division of their own over in, as I said, the Office of Intelligence. At one time we had an entire fiefdom.

Mr. HUGHES. How much contact do you have with EPIC?

Ms. TISCHLER. I don't directly contact EPIC. Our analysts do. They have frequent contact with them to check. For instance, we were running an outbound currency project, and still are. The first project entailed dumping information out of the private aircraft reporting system base. What they did was, they were looking for frequent traveling airplanes coming in from bank haven and source countries. They dealt a lot with EPIC on current information in terms of enforcement. It's a collateral unit in terms of where we get our intelligence from, although a lot of it is just plain Customs information that has gone into the system.

Mr. HUGHES. Do you feed any information to the El Paso Intelligence Center at all?

MS. TISCHLER. Personally?

Mr. HUGHES. Out of your Division.

Ms. TISCHLER. No. My Division doesn't feed any information out at all.

Mr. HUGHES. Do you have Customs people at El Paso?

Ms. TISCHLER. Yes.

Mr. HUGHES. Do they provide on a daily basis, or periodic basis, information to your Division?

Ms. TISCHLER. Yes, they do. There are several operations that EPIC has knowledge of that provide intelligence on private aircraft that are returning to the United States. Most of that information, of course, is narcotics related. We are interested in it primarily because of the implications of outbound currency. So, they keep in touch with us about once a month to bring us up to date on various lookouts. We do access the information. It's all in there.

Mr. HUGHES. A lot of pressure has been brought to bear on financial institutions, particularly in south Florida. You have obviously been involved in this whole area of money laundering for a number of years now. Have you noted any changes on the part of those that are handling the money insofar as their modus operandi?

Ms. TISCHLER. Do you mean the bad guys or the banks?

Mr. HUGHES. I am talking about the bad guys, the people that are trying to clean up the money. Have you noticed any changes in the manner in which they are able to effectuate

Ms. TISCHLER. Well, they are not wholesale dumping, as far as we are concerned, the volume of cash into the bank, at one time. In the Sonal case, they were bringing in over $1.5 million a day into a bank in south Florida in cash. The analysts are just now completing a study on south Florida to bring up to date the scope of the problem in terms of what the banks are doing. They are looking at it in terms of a technique they have got established that throws out banks that are complying and banks that aren't complying, and so forth.

When I first got down to south Florida in 1980, we used to see people walk in there with boxes of cash. I don't think they are seeing that to the same extent. The smurfing technique, while it has always been there, certainly in the past couple of years it has been much ballyhooed but it has also been on the increase. It is not a logistically feasible way of moving cash around.

We think they probably are using much more of a combination of techniques now than they ever did when we were in south Florida. Mike was with me in Greenback as well. We saw just one method. It was to get the cash to the banks. That was it. Now they are trying to get cash to the banks, and they are trying to get cash in the casinos, and they are trying to get cash into real estate companies, and they are trying to get it offshore.

Mr. HUGHES. How about offshore? How much of an increase is there in transportation of cash out of the country by plane or ship? Has it increased?

Ms. TISCHLER. I wish I could tell you that. Mr. Sterling had asked me that question before. We don't have a universe to compare it to. We know that our seizures have increased. We seized over $40 million in cash last year, both in- and outbound. We seized this year, to date, over $58 million. Because the seizures are increasing, we can't tell basically if it's because we're blitzing the outbound flights