VIEWPOINTS : TYING UP DRUG PROFITS : Let’s wage war at the banks as well as the borders.

Though everyone admits that the illicit drug trade keeps growing because so many people make so much money out of it, the government’s efforts to reduce and control drug abuse focus pretty narrowly on the stuff itself rather than on the profits. We try to interdict supply and arrest suppliers, to reduce demand by education, advertising, testing and punishment. Once the customers’ money moves into the hands of the traffickers, however, they get the use and enjoyment of it without a great deal of hindrance.

Yet under the Bank Secrecy Act of 1970, the Secretary of the Treasury and the Comptroller of the Currency have the power to compel every bank that does business in the United States to keep records of all large dollar transactions and make them available to law enforcement authorities.

It doesn’t matter whether these transactions are by non-financial customers, by the bank’s own branch offices in foreign countries, or by “correspondent banks” that use a U.S. bank to gain access to the American financial system. It doesn’t matter where the home office of the bank many be, so long as it has a chartered subsidiary or branch in the United States.

On order of the Treasury secretary or the Comptroller, every bank doing business in the United States can be compelled to keep the records and produce them when subpoenaed to do so. If the country where the transaction originated insists on maintaining bank secrecy laws that permit numbered accounts safe from the prying eyes of drug enforcement agents, its banks could be barred from doing business in America.

One part of the law--the part that requires banks to report deposits or withdrawals of $10,000 in cash that occur inside the United States--has in fact been enforced, with fines running to several million dollars assessed against a dozen or so large banks. But large dollar deposits and withdrawals outside our borders are not policed, though few if any foreigners would have legitimate business reasons to be passing tens of thousands of U.S. dollars through teller windows in other countries. And the wire transfer of funds from and to customer accounts, which goes through the Federal Reserve on a basis that tells the Fed only the names of the banks, not the customers, has been kept beyond the reach of the law.

Closing down the secret use of banks by drug rings could be a major advance. “Many narcotics financial investigations have been frustrated by the invocation of bank secrecy laws,” Lowell Jensen told a Senate committee in 1983, when he was assistant attorney general. To knock down this barrier, Sen. John Kerry (D-Mass.) pushed an amendment into last year’s drug law, denying the use of Federal Reserve wire transfer facilities and the New York Clearing House Interbank Payments System to any bank that failed to honor a subpoena for records in connection with a narcotics investigation.

The Treasury Department and the Federal Reserve, I regret to say, went right up the wall: How dare Congress make the drug war more important than the expansion of the “private banking” divisions of the nation’s money-center banks! But as one of the most significant figures at the Fed said apologetically to a group of bank lawyers last spring, this was a drug bill, not a banking bill, so the usual scare tactics fell short.

But not very far short. Behind-the-scenes warnings to Senate and House conferees that adoption of the Kerry amendment, as written, might drive drug money to overseas banks and weaken the dollar watered down the amendment to the point where, at least until 1991, law enforcement can take aggressive action only if we have a treaty with the country where the offending bank is chartered. This means that a Swiss bank must worry about laundering drug dollars because we have a treaty with Switzerland, but a Luxembourg or Belgian bank can pocket the profits without concern.

The seven heads of state at the Paris summit last summer agreed to seek agreement on procedures to eliminate international money laundering by the drug syndicates, and the first meeting of the 15 largest bank-chartering countries occurred in Paris on Monday. Pierre Beregovoy, the French finance minister, opened it with what the Financial Times described as “an unusually forceful attack on the traditions of bank secrecy which have on many occasions prevented police and customs authorities from tracking down the estimated $300-billion-a-year traffic.”

But the apparent consensus for action has a little of the look of a con game. The only person at Treasury who ever spoke out critically of the banks, customs chief William von Raab, retired this year. Jack Blum, who was Kerry’s chief of staff on this issue, says nobody now at Treasury would know how to begin negotiating with the foreign authorities or the banks.

Talking about a proposal to monitor wire transfers of funds through the Federal Reserve, Julie Stanton in the Treasury’s office of financial enforcement said: “We’re not ruling out some type of reporting system, provided we can reach the proper balance between law enforcement and the burden to the financial community.” Bus drivers should be randomly tested for drugs, people caught with a controlled substance should lose their drivers’ licenses--but heaven forbid we should place a burden on the financial community!

Even if all we can do by squeezing information out of the banks is to force the drug traffickers to rely more on cash, there are benefits. Currency, in the elegant words of Britain’s Radcliffe Commission, is that part of the national debt on which no interest is paid. If making the banks cooperate with the cops means that cash in circulation rises from $250 billion to $350 billion, the government saves the carrying cost on $100 billion of interest-bearing Treasury paper. At 8%, that’s $8 billion a year, which pays for the whole drug program.

There was never any virtue to the argument that we will force business abroad if we require banks that wish to do business here not to do business with drug dealers. Now many Europeans have wisely concluded that they don’t want this business even if they could get it. Another drug bill is pending. Congress should restore the Kerry amendment as originally written, and strengthen it.