Regulating terrorism

Over the past months, as part of the Bush administration's broader war on terrorism, the US Treasury Department has set out a thicket of new anti-money laundering regulations affecting a wide range of financial institutions. The regulations may ultimately reach not only banks, brokerage houses, insurance companies, mutual funds and other investment companies, but also diverse small businesses such as automobile and boat sellers, check cashiers, jewelers, pawnbrokers, and travel agencies. There is one problem with the US government's approach: there is scant indication that it will work. Already, tens of thousands of suspicious activity reports are filed each year by US financial institutions. Unfortunately, most of these reports are stashed away in basements and remain unread by overworked and under-resourced government employees. The US government has not put forward any strategy for analyzing and making effective use of the thousands of more reports to be filed under the new regulations or for the revitalization of the federal agencies charged with this critical function. More fundamentally, financial institutions themselves will simply never have the resources to find terrorists that have eluded the US government with its far greater resources.