ECONOMY: Task Force Threatens 19 Countries for Money Laundering

By Julio Godoy Reprint | | Print |

Julio Godoy

PARIS, Jun 22 2001 (IPS) - The main international organisation that fights money laundering, the Financial Action Task Force (FATF), Friday issued a “blacklistö of 19 countries that it said were not co-operating with global efforts to stop money laundering and threatened ôcountermeasuresö against three of them.

The organisation urged the governments of Russia, Nauru and the Philippines to “enact significant legal measures that address identified money laundering concerns” before next September 30.

Otherwise, the FATF members should apply “countermeasures” against them. The report did not identify these countermeasures.

However, it is understood that sanctions being considered include increased surveillance by US banks of the international financial transactions of the three countries.

Russia, Nauru and the Philippines are among 19 countries named by the FATF at the end of its meeting June 20-22 at the headquarters of the Organisation for Economic Co-operation and Development (OECD) in Paris where it presented its new 12th annual report.

This “blacklist” also includes Israel, Lebanon, and well known off shore financial centres such as The Marshall Islands in the Pacific and the Caribbean islands of St. Kitts and Nevis, and St. Vincent and the Grenadines.

The FATF specially identified Egypt, Guatemala, Hungary, Indonesia, Myanmar (formerly known as Burma) and Nigeria as showing “serious deficiencies” in their financial systems, and therefore prone to money laundering.

The FATF removed from its previous blacklist Panama, the Bahamas, the Cayman Islands and Liechtenstein. “These countries have, during the last months, improved their systems of monitoring the movements of money,” said the Spanish president of the FATF, José María Roldán. .. Between 600 billion and 1.5 trillion dollars generated by organised crime is laundered world wide every year, according estimates by financial institutions and economic experts.

The International Monetary Fund (IMF) estimates that “the aggregate size of money laundering globally (proceeding from criminal activities) could be somewhere between two and five percent of the world’s domestic product.”

François Chesnais, professor of Financial Economics at the University of Villetaneuse, near Paris, said to IPS, “An estimate of around one trillion dollars was recently made and this only related to the laundering of money coming solely from drug trafficking. This estimate seems realistic to me.”

The FATF does not confirm these figures. “We don’t have reliable estimates on the sum of money being laundered around the world,” said Roldán

The FATF has 25 criteria that it has been developing since 1990 to define a non-co-operative jurisdiction. The more criteria a country or territory fails to meet, the less it is deemed to be co-operating in the fight against money laundering.

Among other things, the FATF demands that governments of the world confiscate property related to money laundering and enforce the United Nations Convention against the Illicit Traffic in Narcotic Drugs and Psychotropic Substances, also known as the Vienna Convention.

The FATF also demands that ” secrecy laws of financial institutions be conceived in such a way as not to inhibit implementationö of its recommendations.

For instance, banks and other financial institutions should not accept fictitious names to identify anonymous accounts. Furthermore, the institutions should guarantee the proper identification of the source of all funds they accept and, in case of forward transfers, the final destination of the funds should be identified.

The FATF was founded in 1989 by the Group of 7 (G-7) leading industrial nations– the United States, France, Germany, England, Italy, Japan, and Canada.

Besides the G-7, another 22 countries belong to the FATF, including Argentina, Australia, Brazil, all members of the European Union, Mexico, Switzerland, Luxembourg, Hong Kong, China, Singapore, and New Zealand.

According to the FATF, money laundering is “the processing of criminal proceeds to disguise their illegal origin.” The list of illegal activities the FATF links to money laundering include drug dealing, gunrunning, smuggling, prostitution rings, embezzlement, insider trading, bribery and several computer fraud schemes.

The French specialised newsletter Lettre de Blanchiment (Newsletter on Laundering) in its May 2001 issue published money laundering centres that are not included on the FATF list. The newsletter mentioned the Luxembourg financial fund Clearstream as involved in such schemes.

The newsletter reported that a prosecutor in Luxembourg questioned more than 30 witnesses, including former computer experts of the fund.

Furthermore, the Lettre said, Clearstream’s President André Lussi, and two of his nearest collaborators, were suspended by the enterprise’s administration counsel.

Financial institutions in Monaco, Liechtenstein and Switzerland have also recently been involved in schemes of money laundering, related to political corruption scandals in France and Germany.

Asked why these activities were not listed in its report, FATF’s president Roldán said, the organisation does not react to press reports. “We simply don’t launch investigations into current financial affairs,” Roldán explained.

Roldán said that the FATF’s role is to “design policy recommendations to make the illegal circulation of money always more difficult and costly. If criminals know that a financial place is committed to complying with our recommendations, they will think twice before placing their illegal money there,” he said in an interview to IPS.

“Criminals prefer go to countries that are considered as non co- operative in the fight against money laundering,” he said.

Roldán also welcomed the recent creation of a Latin American organisation similar to the FATF, the GAFISUD (Grupo de Accion Financiera sobre el Lavado de Dinero para America del Sur), which will be based in Buenos Aires.

Countries participating in GAFISUD include Argentina, Colombia, Mexico, Uruguay, and Brazil, among other Latin American countries.