Top Money Laundering Havens Named

by Julio Godoy

(IPS) PARIS -- The number of countries listed by the Financial Action Task Force as money-laundering havens has been reduced from nine to seven. But that may not mean much.

The not so magnificent seven now are Cook Islands (a country with a population of 21,000 in the south Pacific), Guatemala, Indonesia, Myanmar, Nauru (a country of 21 square kilometers in the south Pacific, with a population of 12,000), Nigeria and the Philippines.

Egypt and Ukraine were taken off the list earlier this week.

"We call on our members to maintain their advisories requesting that their financial institutions give especial attention to businesses and transactions with persons, including companies and financial institutions based in these listed countries and territories," FATF acting president Claes Norgren said at a press conference in Paris Friday.

Norgren praised efforts by Guatemalan authorities to fight money laundering. "Guatemala recently brought its offshore banks into a supervisory framework," he said. "We welcome these efforts in the fight against money laundering, and will continue evaluating its measures to this objective." But Guatemala was kept on the list of countries failing to crack down enough on money laundering.

Many critics of the Financial Action Task Force (FATF) find the list arbitrary. The FATF, which describes itself as "the international body in charge of safeguarding the global financial system against money laundering and terrorist financing" has never carried out an exhaustive evaluation of the financial system of all countries.

The FATF was established in 1989 by the group of seven leading industrialized nations (the G7 which includes the United States, Canada, Japan, Britain, France, Germany and Italy). It works out of the offices of the Organization of Economic Cooperation and Development (OECD) in Paris. The OECD is a group of 30 industrialised countries.

The FATF which has a membership of 31 countries does not include its own members in its list of money-laundering havens, even though questions arise frequently about bank accounts held in Switzerland, Luxembourg and tax havens under British jurisdiction.

Nor has the FATF evaluated countries such as Saudi Arabia and Pakistan which are often accused of recycling money to finance terrorism.

"We're about to review the financial practices in Saudi Arabia," FATF executive director Patrick Moulette told IPS. But no review of Pakistan is scheduled.

The FATF also has no information about the Palestinian financial system which Israel has alleged finances terrorist activities. Israeli authorities seized millions of dollars after occupying Palestinian banks last week.

"We have no information on that matter," Moulette said. "We're not supposed to have information on all territories' financial systems."

The executive body of the FATF held discussions with representatives of non- FATF countries in Paris Feb. 24-27 to discuss action against money laundering, particularly with a view to curbing terrorism.

Norgren said the three-day meeting had focused on analysing money laundering practices in terrorist financing, such as abuse of charity organizations, irregular international remittances, and cash couriers.

An FATF document released Thursday, 'The Financial War on Terrorism' mentions two examples of irregular remittance structures, Al Barakaat and Dahabshiil. "They emerged out of more than a decade of tribal and civil war in Somalia to serve the needs of an estimated 750,000 migrants and refugees," the FATF says.

Al Barakaat and Dahabshiil at first provided a vital financial link for people too marginalised to have access to the global banking system. "But in the wake of Sep. 11, investigators in the United States identified them as a funding channel for al-Qaeda, successfully prosecuting three Barakaat officials for carrying out more than 10 million dollars in illegal international fund transfers," the FATF claims in the document.

Less than a month after the Sep. 11 attacks the FATF produced eight policy recommendations against money laundering and terrorist financing, in addition to 40 set out earlier.

These call for ratification and implementation of United Nations instruments to combat money laundering, such as the UN Security Council resolution 1373, and the UN International Convention for the Suppression of the Financing of Terrorism.

They call also for freezing and confiscation of suspected terrorist assets, reporting of suspicious transactions, evaluation of alternative international remittances and wire transfers, and revision of laws and regulations related to non-profit and charity organizations.

The FATF also launched a voluntary self-assessment exercise for all countries, based on the recommendations. The self-assessment comes through a questionnaire for governments and financial territory administrations.

It is from this questionnaire that the FATF has determined which countries and territories are not cooperating against money laundering.

The FATF defines money laundering as "the processing of criminal proceeds to disguise their illegal origin." Money laundering "enables the criminal to enjoy these profits without jeopardising their source," the organization says. Illegal arms sales, smuggling, and organised crime such as drug trafficking and prostitution rings are known to generate huge amounts of money. Embezzlement, insider trading, bribery and computer fraud schemes can also produce large profits and create a desire to "legitimise" ill-gotten gains through money laundering.