Mon, 06 Mar 2000

List of hot money centers getting longer

By Sue Kendall

PARIS (AFP): Work is progressing on the first official "hit list" of global money-laundering centers, with the ultimate threat of an international boycott of those who refuse to mend their ways.

Working groups from the 28-member Financial Action Task Force on money laundering (FATF) are studying a number of suspect jurisdictions, and hope that a preliminary list could be ready for a meeting here in June, said FATF head Patrick Moulette.

The inquiries are based on an FATF report published in February which for the first time detailed 25 criteria for identifying jurisdictions not cooperating in the fight against money-laundering and possible sanctions against offenders.

These included as an "ultimate recourse" the possibility of restricting or even banning all financial transactions with such jurisdictions.

The FATF would like to have a list of non-cooperating territories ready by June, "but we are not committing ourselves to that. We are trying to progress quickly, but this is not a task that can be undertaken lightly," Moulette said.

He said he could not give a list of countries being investigated, stressing that an inquiry did not mean a country was necessarily going to be declared "non-cooperative," and that before such a judgment were made, the territory would be asked to give its views.

The subject is a delicate one, and in a bid to ensure that its action was seen as treating all equally, the FATF began by drawing up a list of policies and regulations seen as "non- cooperative" with international efforts to curb money-laundering.

These range from "excessive" bank secrecy to jurisdictions which refuse outright to cooperate with international criminal enquiries.

The FATF has stressed that its action will cover FATF members as well as non-members and in a striking example of its willingness to be tough, last month announced it would suspend member Austria if it does not end its own system of anonymous savings accounts.

"The FATF is the only international organization" to have taken such action, and "this kind of measure can strengthen our position when we talk to non-members" as it shows the FATF is willing to act even against its own members if necessary, Moulette said.

The FATF says it cannot put a figure on the amount of criminal money being laundered worldwide, but the problem is a huge one.

In the case of Austria, for example, there are an estimated 25 million accounts in existence for a population of just eight million people, containing some 120 billion euros (dollars) according to official figures. Austrian banks say some 90 percent of it is in anonymous accounts.

The European Union has not waited for the FATF to start taking action -- EU finance ministers last Monday asked the European Commission to investigate Liechtenstein, described by Germany's finance minister as "a worm in the European fruit" for allegedly fostering a myriad of money-launderers and tax dodgers.

Leichtenstein responded that it was willing to cooperate, but said it had been used by money-launderers to a far lesser extent than other European countries.

The FATF acknowledges that identifying non-cooperative jurisdictions and persuading them to mend their ways is likely to take time, and in the meantime money-laundering has already become such a problem for private banks that some are taking action of their own.

Deutsche Bank and Bankers Trust, who operate the SWIFT fund transfer system used by 300 banks worldwide, in December banned all U.S. dollar transactions involving the Pacific territories of Nauru, Palau and Vanuatu because of alleged use of these centers to launder money by the Russian mafia or South American drug cartels.

The Bank of New York and Republic National Bank in the United States followed suit.

"When the banks themselves take such action, it means the problem is serious," Moulette noted.

The latest FATF action is part of moves to reform the international financial system in the wake of the Asian and Russian crises.

Finance ministers from the Group of Seven (G-7) industrial countries in a statement after their meeting in Tokyo in January urged the FATF to complete the list "expeditiously."

Both the G-7 and the FATF are also urging the International Monetary Fund and World Bank to play a greater role in the anti- money-laundering battle, although quite how is not clear.

Moulette said that the FATF could not "dictate" to these institutions, but "in an ideal world they could play an important role."

The FATF members are: Australia, Austria, Belgium, Britain, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, Turkey, United States, plus the European Commission and the Gulf Cooperation Council.