LEGALIZE DRUGS TO END LAUNDERING

"Money laundering by organized crime groups is rampant at Canadian
casinos but police are essentially doing nothing to combat it," Herald
readers learned last week.

The source was an internal RCMP report that acknowledged, despite
being tipped off by financial watchdogs about the existence of
suspicious casino transactions worth millions, the police force hadn't
made a single arrest.

Now, money laundering is far from an average person's consciousness.
And even if one is interested enough to pay attention, the laundering
process quickly devolves into a financial maze that seems impossible
to decipher.

For that reason alone, it's no wonder there's a lack of citizen outcry
to force authorities to do their jobs.

But let's use this casino story to simplify our understanding. Simpler
yet, allow me to explain money laundering in a way I heard about
during some random bar talk not long ago.

"I can't believe the draw of those video poker machines," someone at
our table mentioned. "Well," said another, "those guys might be 'on
the job.' I used to work with a guy who dealt cocaine on the side and
he said that's how he cleaned up his money. He'd have to pour a lot of
cash in, but the winning tickets he got back were now legitimately
earned."

Voila, money laundering at its most primitive.

Everyday money laundering also occurs in more prosaic locations. Do
you ever notice those video stores and steak-and-pizza restaurants
that never seem to have patrons? In fact, their books tell a different
story.

Yeah, they had some great months this year. Solid earnings. And their
taxes are all up to date.

Now those legitimate business-folk can use their profits to buy
duplexes, and collect rent, and pay more taxes.

One can readily see, then, that the economic system as a whole has a
disincentive to stop that money train before it leaves the station.

If the problem were confined to small-time drug dealers, maybe it
wouldn't be so important to combat. In fact, however, money laundering
permeates our financial system at the highest levels, creating a
culture of corruption that mocks every straight-shooting citizen in
the world.

Consider, for example, the revelations in this month's Bloomberg
magazine about high-level laundering by U.S.-based Wachovia Bank,
which in March admitted to authorities that it failed to perform
legally required due diligence in absorbing funds from Mexican
currency conversion offices between 2004 and 2007.

The sum involved: $378.4 billion US.

Banks are trusted to vet the origins of such funds. But when Martin
Woods, the head of Wachovia's antimoney-laundering unit, alerted
company executives to documents showing that drug dealers were
funnelling money through Wachovia's branch network, they simply
ignored him.

Woods eventually quit in disgust, saying, "If you don't see the
correlation between the money laundering by banks and the 22,000
people killed in (the drug wars of) Mexico, you're missing the point."

Considering the astronomical sums involved, and their inherent ability
to bribe regulators or even cops to look the other way, it would be a
miracle if governments ever got serious about preventing drug profits
from entering the broader financial system.

It would also be naive to think that Canada is exempt from this
widespread corruption, wherein criminals, banks and the government all
play a duplicitous role.

I don't often agree with former Mexican president Vicente Fox, but I
did last week when he wrote, "We should consider legalizing the
production, distribution and sale of drugs. Legalizing in this sense
doesn't mean that drugs are good or don't hurt those who consume.

Rather, we have to see it as a strategy to strike and break the
economic structure that allows the mafias to generate huge profits in
their business."

That alone would shut down the laundries.