HEDGE FUNDS GOOD FOR LAUNDERING DRUG MONEY

||||||||||||||||||||||||||||||||||||||||||||||||||||||||


[We've been wondering about this for some time and found the following
in a 2006 Business week article]

BUSINESS WEEK - When drug runners and terrorists want to park illicit
cash, there may be no better haven than hedge funds. Despite tough new
anti-money laundering standards put out by U.S. regulators for banks,
mutual fund companies, insurers, and money transmitters, the highly
secretive hedge fund industry has no restrictions whatsoever. Says Peter
Djinis, an attorney and former executive assistant director for
regulatory policy at the Treasury Dept.'s Financial Crimes Enforcement
Network: "The lack of controls is conspicuous.". . .

The $1.3 trillion hedge fund industry has collected record amounts of
cash, some of which could well be from questionable sources.
Intermediaries who introduce hedge funds to investors often don't
divulge clients' names, and funds rarely ask. "This is a very opaque
industry," says Jeff Brenner of Intelysis Corp., a corporate
intelligence firm with offices in Cherry Hill, N.J. "There's no
indication of who is behind these accounts."

As it stands, hedge funds have no responsibility to determine the
sources of investor funds or to analyze whether they're questionable.
The industry argues that there's no evidence that funds are conduits for
abuse. But many observers counter that the lack of oversight creates an
imbalance in the overall regulatory system -- and a lure for wrongdoers.
"If you regulate from A to Y, the bad stuff goes to Z," says Jonathan M.
Winer, former deputy assistant Secretary of State and partner at the
Washington office of law firm Alston & Bird. . .

Some funds are taking matters into their own hands. Peter Turecek, a
managing director in the business intelligence and investigations group
at risk consul-tant Kroll Inc. who works on hedge fund matters, says
well-heeled funds that want to distinguish themselves as clean and
aboveboard have been doing background checks since September 11. But
plenty of small funds -- and less civic-minded big ones -- still accept
just about anyone who shows up with a check.

http://www.businessweek.com/magazine/content/06_25/b3989062.htm

||||||||||||||||||||||||||||||||||||||||||||||||||||||||