Caught In The Wrong Net

At first sight, the scandals that brought down Eliot Spitzer, the former governor of New York, and Klaus Zumwinkel, the former president of Deutsche Post (the German corporate behemoth), didn't seem to have much in common. Spitzer fell two weeks ago for hiring prostitutes; Zumwinkel, two weeks before that, for tax evasion. Yet there's a thread that binds them together: money laundering. Both men were brought down by a new system for tracking money that was created in reaction to the 9/11 terrorist attacks—but that has since spread its net far beyond jihadists.

The inquiry into the Emperors Club, a call-girl service, began last year, when a bank, HSBC, reported to U.S. authorities that the accounts of two companies, QAT and QAT Consulting Group, were regularly receiving deposits from questionable sources. Several of the transfers had come from accounts that seemed set up to mask the sender's identity. The investigation ultimately revealed that the person in question wasn't a drug dealer or a terrorist. It was the governor of New York.

That revelation was made possible by new "know your customer" laws passed after 9/11 that also require banks to regularly file SARs: Suspicious Activity Reports. Banks must now know who exactly controls each of their accounts, and must report to the government any questionable transactions.

Zumwinkel's disgrace was also linked to new post-9/11 attitudes toward bank secrecy and the increased willingness to act against it. In his case, agents of the BND, Germany's secret service—empowered by the new culture—paid a former employee of Liechtenstein's main bank, the LGT, €4.2 million for data discs that he'd stolen from his employer. The discs held names of foreigners who'd used LGT accounts to evade taxes in their home countries. Zumwinkel's name turned up on the list, and he was forced to resign amid great scandal.

Liechtenstein has refused to join the post-9/11 trend to tighten money-laundering laws. After the LGT scandal broke, authorities in Germany and elsewhere responded by launching raids, detaining and interrogating those named on the discs—and holding them accountable. Cries to further toughen European laws on money laundering mounted, as did pressure on havens like Liechtenstein, Monaco and Andorra to comply.

These efforts have their detractors. Michael Lauber, director of Liechtenstein's Bankers' Association, was quoted on March 2 saying that money laundering by terrorists and traffickers is not a problem in the principality, and that "we don't consider [tax evasion] a crime."