IN 1979, Ken Rijock, an American lawyer based in Miami, met “a real nice guy” — a Cuban expatriate. In fact his new friend was a bridge between Colombian drug traffickers and gangs of Cubans who distributed narcotics in America.

“All of a sudden, I had all his friends and clients as my clients,” said Rijock. “I would go to a Fort Lauderdale private airport, meet six customers and dress them up in navy business suits. In their briefcases, each of them would carry $1m in cash.

“We would fly to Anguilla, a small Caribbean island that back then had 8,000 inhabitants and 300 banks. My clients would get a certificate of deposit and bearer shares without a name on them. Later a bank in New York would take the money and lend it out. Everyone made money except the American taxman.”

Rijock played his part in this for 11 years without interference, until he was arrested in 1990 and charged with racketeering. He agreed to co-operate with the authorities, was released in 1992 and became a game-keeper rather than a poacher. He is now a consultant to organisations that try to prevent money laundering.

Rijock’s message for the City of London and its regulator, the Financial Services Authority (FSA), is stark: “Do not underestimate your opposition. The reality is that people involved in money laundering are just as well qualified, if not more so, than compliance people. Many of them are multi- talented, multilingual and financially sophisticated.”

This warning will make many in the Square Mile uneasy. The City is devoting an increasing amount of money and human resources to stamping out the laundering of criminal funds, without being sure that the effort is having any impact. In the process, customers of financial institutions are being put to great inconvenience — such as having to provide passports or driving licences to confirm their identity before getting approval for a transaction or a new account.

THIS new red tape is not bad news for everyone. Britain’s anti-laundering industry is growing fast. A total of 9,223 people are approved by the FSA as money-laundering reporting officers. There is even an Institute of Money Laundering Prevention Officers, with members in banks, investment-management firms, accountancy and legal firms, estate agencies and casinos.

Novel job titles have sprung up, such as “financial crime director”. Big organisations have trained staff to perform “know your customer” checks, and are using expensive software to spot suspicious transactions.

Nobody has an exact figure for the cost of it all, but in May 2003, the accountancy firm Price Waterhouse Coopers, after interviewing 100 institutions, put the total bill — including the salaries of reporting officers, the cost of doing customer checks, the purchase of software licences, and training — at £170m a year.

Few doubt that the cost to the financial sector has risen substantially since then, probably to £250m or more this year.

One measure of the action taken against money laundering is the soaring number of reports of suspicious activity made by companies’ reporting officers to the National Criminal Intelligence Service. In 2000 it received 18,000. In 2004 it received more than 150,000. This year the total is likely to be even higher.

Jeremy Thorp, at the British Bankers’ Association, said: “The jury is out on the results of this. The fight against money laundering is taken very seriously these days and firms are clearly spending a lot of money. They would like to see evidence that it is reducing financial crime.”

Some are even more pessimistic. Chris Hamblin at the compliance consultancy Complinet said: “Is the regime working? Obviously not — the figures on how much money the authorities are impounding are pitiful.”

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