Regulators seeking to block off all potential avenues for money laundering through the U.S. financial system have left one conspicuous opening for drug dealers and terrorists to exploit: hedge funds. The absence of any anti-money laundering regulation for an industry that ballooned to more than $1 trillion in assets at the end of last year from an estimated $300 billion in 1998 worries James Harmon, chief executive officer of Harmon Firm LLC in New York, which provides due diligence services for hedge fund investors. "There is a relationship between the degree of regulation and the risk of money laundering," said...
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