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Task Force Targets Money Laundering

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The Financial Action Task Force on Money Laundering

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By John Burgess
Washington Post Staff Writer
Thursday, June 22, 2000; 12:48 PM

The United States and its allies in a global fight against money laundering today formally identified 15 countries – Russia, the Philippines and Israel among them – as potential havens for the proceeds of crime. The "name and shame" list escalates a decade-and-a-half old effort by industrial countries to force tightening of banking laws globally.

The United States intends to follow up with other forms of pressure if the list does not produce the desired effect, U.S. officials said. Congress is working on a bill that would authorize severing of banking relations with individual countries.

Treasury Secretary Lawrence Summers called the list a "landmark step to limit the capacity of drug dealers, terrorists, organized criminals and corrupt foreign officials to launder their ill-gotten gains through safe havens." It was issued by the Financial Action Task Force, a grouping of 26 countries that collectively fights money laundering.

U.S. banks will be asked to pay special attention to transactions flowing to and from the 15 countries, Deputy Treasury Secretary Stuart Eizenstat said. The purpose of the list is not to punish countries but to bring them "into international compliance with high standards."

Economic globalization and electronic technology have made it possible to transfer funds across oceans and continents at the touch of a key. While most of these transactions serve legitimate business, the ease of flow has also played into the hands of people who want to disguise the origins of money.

By U.S. estimates, money being laundered all over the world rings up at a minimum of $600 billion.

The Financial Action Task Force was formed in 1986 by the Group of Seven industrial countries. It has drafted standards of acceptable openness in banking and set out to make the world adopt them. The standards have no binding power in international law; task force countries agree to abide by them, and prod non-members to adopt them, through such tools as the list.

Often targeted are countries that have courted foreign funds as an economic development tool, enacting banking laws that provide near impenetrable secrecy. Often, no real bank exists in countries on the list, with their role being limited to collecting fees.

The countries on today's list: the Bahamas, Cayman Islands, Cook Islands, Dominica, Israel, Lebanon, Liechtenstein, Marshall Islands, Nauru, Niue, Panama, Philippines, Russia, Saint Kitts and Nevis and Saint Vincent and the Grenadines.

Eizenstat said that being on the list does not mean that the countries are money-laundering centers, only that their banking laws make it possible.

At least one of the 15, the Cayman Islands, responded angrily today. "The designation is entirely contradictory with efforts made by the Cayman Islands in the global fight against money laundering," a government statement said. "Moreover, the decision was made without due process, and is inconsistent with reports made by [the task force] as late as last week."

Last week, the Organization for Economic Cooperation and Development took the Caymans off a separate list of countries that are deemed to be unfair tax havens, following action by the government there. But U.S. officials contend that on the money-laundering issue, the Caymans are not yet up to snuff. "They don't have any legal requirements for customer identification and record keeping," Eizenstat said today.

The shaming tactic has already had some success. Today Eizenstat cited Israel and Lichtenstein as two countries that have moved to bring their regulations into line due to pressure of the list.

Austria, a task force member that was under threat of expulsion, last week won rights to stay, due to pending legislation that would end secrecy on passbook accounts. The country of 8 million people has about 24 million of the accounts, which can be opened without providing identification.

© 2000 The Washington Post Company

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