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Money-Laundering Risk Of Hedge Funds Gauged
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For example, a typical hedge fund requires an individual investor to have a net worth of $5 million or more, according to Richard Baker, president of the Managed Funds Association, which represents the industry's interests in Washington.
They also place strict limits on how frequently investments can be withdrawn.
Terrorists need to have access to money on an "as-needed basis," Lormel said.
Hedge funds are also deemed to be a fairly risky investment -- too risky to be a reliable means of laundering money.
For similar reasons the Treasury Department last year exempted casinos from a requirement that they report currency transactions on slot machine jackpots and video lottery terminals.
The Treasury "accepts that customers who win more than $10,000 in jackpots will have won those funds because of the workings of the random number generator and . . . are not likely to form part of a scheme to launder funds through casinos," they announced at the time.
The issue has not stirred much passion in Congress, either.
Baker, of the Managed Funds Association, says the group does not oppose requiring hedge funds to adopt anti-money-laundering programs and noted that many already do so, voluntarily.
Rep. Barney Frank (D-Mass.), chairman of the House Financial Services committee, said that while he has not studied the rules that were withdrawn, many financial institutions have been overburdened by anti-money-laundering regulations.
"They are requiring too much routine reporting," Frank said. "We are requiring law enforcement to find needles while we are building these haystacks."
