Money Laundering Is Now a State Crime in New York

Gov. George Pataki on Thursday signed into law a bill that makes money laundering--a big concern because New York City is the world’s financial capital--a new state crime punishable by up to 25 years in prison.

Pataki, at a news conference, said the state handles about $2.7 billion in money transfers a day. New York needed its own law because until now local prosecutors have been handicapped. They either had to refer money laundering they uncovered to federal investigators or uncover other crimes they could prosecute, he said.

Last year, the Bank of New York, one of the nation’s oldest commercial banks, was alleged to have been used as a conduit to move billions of dollars in illegal transfers out of Russia. The New York City-based bank, owned by the Bank of New York Co. Inc., has since agreed to monitor money transfers more closely and make periodic reports to U.S. regulators.

The governor and the district attorney denied federal prosecutors had fallen down on the job, saying the local prosecutors would be able to bring many more cases.

Pataki said the new law, which makes money laundering a felony, parallels the existing federal law. Some 75% of all U.S. dollars moving around the world are routed through the state of New York.

Money launderers, such as drug lords and crime kings, wash illegal profits through legitimate businesses or deposit them in offshore accounts as a way of re-injecting their funds back into the legitimate economy.

The new law gets rid of the definition of “equivalent property,” which means that wrongdoers who exchange ill-gotten gains for luxury items can now be prosecuted. It creates four new money-laundering offenses, with the severity of punishment determined by the value of the property involved and the intent of the offender.

Transporting money becomes a new crime, as do violations of state tax laws committed by money launderers.

Lacking a New York state law against money laundering recently forced prosecutors to conduct a much longer investigation of a midtown Manhattan perfumery, so that they could put together a different kind of case, a prosecutor said. That case was nicknamed “Stinky Money.”

Some money launderers are fairly bold. Manhattan Dist. Atty. Robert Morganthau said one New Jersey operation that was recently prosecuted called itself “Central Cleaners.”

Pataki, saying the state will get some of the illegal revenue that is seized, added he expected to give Morganthau more money and staffing to prosecute the new crime. “He’ll request more than we’ll give him, but he’ll get enough to do the job well.”

Pataki said Morganthau was the driving force behind the new law.