FORMER AG MORALES TESTIFIES BEFORE GOVERNOR'S CRIME PANEL

Former Attorney General Dan Morales testified Tuesday about drug
cartels and money laundering before Gov. Rick Perry's Anti-Crime
Commission, saying Texas needs to update its money laundering laws.

Morales noted that the state's money-laundering statutes have not been
revised since he first wrote them in 1991, while the cartels continue
to target financial institutions along the Texas border to transfer
profits from drug sales.

"About half of all cocaine and marijuana comes into the United States
across the Texas-Mexico border," Morales said.

He noted federal estimates that indicate drug dealers launder about
$50 billion in U.S. banks nationally, including $30 billion in Texas.

Morales told the commission, co-chaired by Bexar County District
Attorney Susan Reed, that money laundering is a primary way that drug
dealers evade justice.

Texas ranks third in the country =E2=80=94 behind Miami and New York =E2=80
=94 in
the number of money laundering prosecutions, said Carter McDowell,
senior counsel for the House Financial Services Committee in
Washington, D.C.

The crackdown on money laundering must focus not just on financial
institutions like banks, but on informal institutions, such as casas
de cambio, or money exchange businesses, which leave fewer traces of
financial transactions, McDowell said.

"You are on the front lines," he told the governor's task force. "You
are in an incredibly high priority for the government."

McDowell said the war on terrorism presents unique
challenges.

While drug cartels typically launder "dirty" money =E2=80=94 money that was
obtained illegally =E2=80=94 terrorists tend to launder clean money and then
use it for illegal purposes.

Reed said money launderers are particularly difficult for prosecutors
to convict because most law enforcement organizations do not have the
high-tech capabilities they need to monitor the multiple banking
transfers that frequently are involved in money laundering schemes.

"It is a lot different from finding drugs on the street," Reed
said.

Noticeably absent during Morales' address to the commission Tuesday
were any of the campaign charges he leveled against Tony Sanchez
during the heated Democratic gubernatorial primary earlier this year
regarding similar issues.

"My role as a participant in this commission is strictly policy
oriented and I'm going to adhere to that," Morales said after he
talked to the commission, adding that he had been asked to avoid
partisanship and politics.

During the primary, Morales charged that Sanchez should have known
that Mexican drug cartels were using Tesoro Savings and Loan, which
was owned by the Sanchez family, to launder $25 million.

Morales did not mention Sanchez on Tuesday and declined to repeat
those charges. However, he repeated campaign assertions that financial
institutions were "the biggest political hurdle" he faced in trying to
pass Texas' money laundering laws.

Also at the commission hearing, state and local leaders called on
lawmakers to modernize Texas' 20-year-old wiretapping laws.

While federal law permits wiretapping in connection with a broad list
of suspected wrongdoing, Texas law limits it to cases involving felony
drugs, child pornography and capital murder for hire. Federal law
allows for an individual to be placed under electronic surveillance; a
court order in Texas is good for only a single phone.

That renders court orders virtually meaningless in an age of cell
phones and prepaid calling cards, Reed said.

Reed co-chairs the crime commission along with Former Supreme Court
Justice John Hill. The commission is having hearings across the state.