Asia Times: Russian, Nauru and Philippines rapped for dirty money


	June 27, 2001	atimes.com

Central Asia/Russia

Russia, Nauru and Philippines rapped for dirty money
By Julio Godoy

PARIS - The main international organization that fights money-laundering, the Financial Action Task Force (FATF), on Friday issued a blacklist of 19 countries that it said were not cooperating with global efforts to stop money-laundering and threatened countermeasures against three of them.

The organization 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 exhorted its members to 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 June 20-22 meeting at the headquarters of the Organization for Economic Cooperation and Development (OECD) in Paris where it presented its new 12th annual report. This blacklist also includes Israel, Lebanon, and well known offshore financial centers 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, 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, Jose Maria Roldan.

Between US$600 billion and $1.5 trillion generated by organized crime is laundered worldwide every year, according to estimates by financial institutions and economic experts. The International Monetary Fund estimates that "the aggregate size of money-laundering globally [proceeding from criminal activities] could be somewhere between 2 and 5 percent of the world's domestic product".

Francois Chesnais, professor of Financial Economics at the University of Villetaneuse, near Paris, said, "An estimate of around $1 trillion 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 did not confirm these figures. "We don't have reliable estimates on the sum of money being laundered around the world," said Roldan.

The FATF has 25 criteria that it has been developing since 1990 to define a non-cooperative jurisdiction. The more criteria a country or territory fails to meet, the less it is deemed to be cooperating 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 implementation 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, gun-running, smuggling, prostitution rings, embezzlement, insider trading, bribery and several computer fraud schemes.

The French specialized newsletter Lettre de Blanchiment (Newsletter on Laundering) in its May 2001 issue published money-laundering centers that are not included on the FATF list. The newsletter mentioned the Luxembourg financial fund Clearstream as being involved in such schemes. The newsletter also 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 Andre 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, Roldan said the organization does not react to press reports. "We simply don't launch investigations into current financial affairs," Roldon explained. He 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. "Criminals prefer go to countries that are considered as non-cooperative in the fight against-money laundering," he added.

Roldan also welcomed the recent creation of a Latin American organization 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.

(Inter Press Service)

back to the top

©2001 Asia Times Online Co., Ltd.

Building B - 5th Floor, 102/1 Phra Arthit Road, Chanasangkhram, Bangkok 10200, Thailand