Banking: Cleaning Up the Cash Laundry

Bankers used to pride themselves on being discreetly incurious about their depositors, even those who walked in with suitcases full of cash. But nowadays any American banker who looks the other way is looking for trouble. Reason: the Federal Government is trying to stamp out money laundering, the process by which banks often unwittingly help drug dealers, loan sharks and other criminals convert their conspicuous piles of small bills into checks and other instruments.

Last week four major New York City banks -- Chase Manhattan, Chemical, Irving Trust and Manufacturers Hanover -- paid fines totaling $1.2 million for failing to tell federal authorities about more than $1 billion in cash transactions. While the banks were not accused of knowingly laundering money, they admitted laxity in complying with a 1980 rule requiring financial institutions to report any cash transaction involving more than $10,000. At the moment, the federal clampdown is relying on tools like the reporting regulation because there is no law that defines laundering as a crime. Earlier this month the Reagan Administration introduced legislation that would make it a felony punishable by up to 20 years in prison.