DRUGS, MONEY AND THE PATRIOT ACT

American policymakers have long balanced a desire to preserve personal
privacy with efforts to bolster transparency and accountability in the
financial system, understandably prefering to err on the side of privacy.
September 11 changed the calculus. The USA Patriot Act, which Congress
passed in October, has myriad provisions regarding financial- transaction
reporting. Some are more useful than others. A new money- laundering case -
involving, allegedly, a broker at one of America's most prestigious
financial institutions, 200 tons of cocaine and a corrupt Mexican
politician - highlights one of the law's well- conceived provisions.

Prior to the passage of the Patriot Act, brokerage houses didn't have to
report to the government their clients' suspicious activities and could
potentially serve, therefore, as the back-door gateway to America's
financial system. Today, brokerage houses have to report to the government
if they get eyebrow-raising requests from their clients, as banks have long
had to do.

But in 1995, when Consuelo Marquez was a broker for Lehman Brothers, those
pesky forms weren't necessary, which certainly made things easier for
Lehman's compliance arm. So if you happened to be a Mexican state governor
with a pile of drug money, an obliging Ms. Marquez could be much more
helpful than a regular bank employee.

Federal prosecutors have charged the former Lehman Brothers broker with
helping to launder $15 million for Mario Villanueva from 1995 to 2000. For
those millions and more, Mr. Villanueva, who was governor of the Mexican
state of Quintana Roo from 1993 to 1999, helped usher through 200 tons of
cocaine into the United States, via his governor's airplane and bribed
police officers, U.S. prosecutors said. He was arrested in Mexico last year
after living as a fugitive for two years. America is seeking his extradition.

Ms. Marquez used a "blizzard of transactions" to try to throw off
investigators looking for Mr. Villanueva's money, said James Comey, the
U.S. attorney for the Southern District of New York. She set up several
accounts at Lehman in the name of offshore companies and fictitious third
parties, and moved $63 million in and out of internal and offshore
accounts, he said.

If Lehman's compliance arm had been forced to file reports to the
government on suspicious brokerage activity, Ms. Marquez would have known
she could more easily come under fire for her smoke-and-mirrors transactions.

"A lot of people think it's guys with Hispanic names coming in with
suitcases full of cash," said Patrick Jost, a compliance expert for
Complinet.com and a former government investigator. "This whole
private-banking business has been abused," he said, adding that the
suspicious activity reporting for brokerage houses helps close a critical
loophole.

This is one piece of legislation that, though belatedly enacted, the public
should appreciate.