Graft, bank laws nourish Asia's dirty money

Graft, bank laws nourish Asia's dirty money

SYDNEY (Reuters): Money laundering is on the rise in Asia, and
reasons cited are official corruption, strict bank secrecy laws,
traditional ethnic underground banking networks and in some
countries a lack of anti-laundering laws.

A recent U.S. State Department report pinpointed China, Hong
Kong and Macau as major money laundering centers, and also named
Indonesia, the Philippines and India.

In Indonesia, the report said, money laundering "continues to
grow" due to bank secrecy laws and the archipelago's strategic
location in Southeast Asia.

"It's difficult to estimate the amount of dirty money
circulating through the financial system in Indonesia," said
Chairul Imam, director of the corruption division in the
Indonesian Attorney-General's office.

"It is very hard for a law enforcement agency to trace the
flow (of the dirty money) because we have no set of laws against
money laundering," Imam told Reuters.

Money laundering in Indonesia focused on drugs, fraud and
corruption, said the State Department's Bureau for International
Narcotics and Law Enforcement Affairs 2000 money laundering
report, released on the Internet on March 3.

"Indonesia's banks are not subject to adequate supervision or
regulation," it said, citing a 1999 Indonesian-commissioned
report which found nearly US$80 million secretly transferred out
of Bank Bali went into the accounts of people linked to former
Indonesian President B.J. Habibie's Golkar party.

And, Indonesia has no plans to introduce anti-laundering laws
soon. "I think it's not on our top priority. We have other more
pressing problems," said Imam.

Indian money laundering was estimated to be worth half or
equal to the country's legitimate economy, and focused on drugs,
people smuggling, corruption and fraud, said the report.

"Tax evasion and the financing of terrorist and insurgent
groups, issues related to money laundering, are also of concern
in India. Given India's population and emergence as a regional
financial center, Indian money laundering is a growing concern."

The former director of India's Central Bureau of
Investigation, Joginder Singh, estimated US$10 billion of dirty
money was laundered in India a year.

An anti-money laundering bill now being considered by the
Indian parliament describes money laundering as a serious
national threat. The new law would ban possessing, transferring
or concealing proceeds of crime and carry up to seven months'
jail and a fine of up to 500,000 rupees ($11,495).

But analysts are not very enthusiastic about the efficacy of
the new law, especially when it comes to tackling drug money.

Narcotics trafficking was the major source of money laundering
in Hong Kong because its organized crime gangs dominated
Southeast Asia's drugs trade, said the U.S. report.

Other sources of dirty money were loan sharking, gambling and
financial crimes, said the report.

"Foreign sources of criminal proceeds are likewise sent to
Hong Kong for laundering and Hong Kong serves as a major transit
point in international money laundering schemes," it said.

The report said Hong Kong had drawn up a serious crimes law in
January which requires money changes and remittance agents to
identify customers and keep records for six years of transactions
exceeding US$2,500. But it said no enactment date had been set.

The Hong Kong government said the new law would take effect in
a few months and that it had built up a "robust" anti-laundering
regime. It also cited a new bill which will raise the maximum
jail term for a person dealing with the proceeds of drug
trafficking from 14 to 20 years.

"Hong Kong is more advanced in measures that counter money
laundering compared with a lot of other places in the Asia
Pacific region," said the Hong Kong government in a statement.

On the Chinese mainland, spiraling crime, especially in drugs,
racketeering, people smuggling and intellectual property
counterfeiting, was fueling money laundering, said the report.

It said anonymous bank accounts, which China allows, aided
laundering, and official corruption protected laundering
operations. It added that state-owned funds had been transferred
to Hong Kong and then reinvested in China as foreign capital.

But the report said not all laundering in China was linked to
crime, but also fear of devaluation of the yuan, citing China's
recovery of US$10 billion worth of illegally converted yuan.

The report said organized crime groups in Macau laundered
their proceeds through joint ventures and real estate purchases
in China, cross border cash transfers, front companies, casinos,
currency exchanges and China's underground banking.

The Philippines was rated a "concern" by the report, with
rising crime, pervasive corruption and no anti-money laundering
laws making it "vulnerable to money laundering".

"The Philippines has experienced an increase in foreign
organized crime activity from China, Hong Kong and Taiwan.
Philippine drug lords are known to launder and invest their
proceeds in Taiwan and Hong Kong," it said.

"Insurgency groups operating in the Philippines fund their
activities through narcotics and arms trafficking and engage in
money laundering through alleged ties to organized crime."

An anti-racketeering bill, which will make laundering illegal,
is pending in the Philippines congress, but banks fear any
changes to their secrecy laws could case a flight of capital.

"Everyone should understand that it (bank secrecy act) is
essential to preserving confidence in the privacy of deposit
information which is necessary to prevent capital flight,"
Deogracias Vistan, president of Solid Bank Corp.