MORE THAN $10 billion a year in profits from the illegal drug trade is deposited in American banks, the President's Commission on Organized Crime has concluded. The money goes into the banks in the form of cash, and comes out in the tidier and safer form of checks. This process of laundering can provide a trail for the law enforcement agencies but only if the banks report it. The president's commission supports legislation to make laundering a crime and, at the same time, to allow banks to override privacy regulations and report suspicious transactions without fear of being sued. The invasion of privacy here is minimal, and the public interest in tracking drug money is urgent.

Banks are required under present law to report cash transactions over $10,000, but the level of compliance is very much open to question. The First National Bank of Boston pleaded guilty two weeks ago to handling $1.2 billion in unreported transfers of currency to foreign banks. To businesses that routinely take in large amounts of cash -- supermarkets, for example -- the law allows banks to grant exemptions to the reporting requirement. But the Bank of Boston apparently granted exemptions to companies controlled by people connected to organized crime. The bank denies that the unreported transactions involved the profits of crimes. Then what did they involve? Two congressional committees are currently looking into that interesting question.

Meanwhile, the Treasury Department and the Internal Revenue Service are carrying out an investigation of compliance throughout the banking industry in Florida. The president's commission was in Miami this week taking testimony on the heroin trade, and the subject of laundering money came up repeatedly. Drug operations there are now on a scale at which banking connections are essential, but are also a point of vulnerability, for the smugglers and dealers. The case for legislation is getting stronger.

What about other businesses that provide ways to launder cash -- casinos, for example? Casino owners complain that reporting cash transactions would offend their customers, who cherish privacy. No doubt. But the Treasury, with good reason, published regulations last week requiring identification of people who arrive at casinos or leave them with more than $10,000 in cash.

Nobody thinks that tighter financial reporting rules alone are going to choke off organized crime. But they would provide the government with valuable help in curbing it and particularly the drug traffic that is both the most corrupting and the most profitable of criminal enterprises. It can make life a little less profitable for the drug dealers, and a lot riskier. That's worth doing.