Fight Against Terrorist Money Laundering Going Nowhere

by Julio Godoy

(IPS) PARIS -- The fight against money laundering for terrorism is making little headway, and could be diverting attention from organized and corporate crime, experts say.

The Financial Action Task Force (FATF) set up by the Organization for Economic Cooperation and Development (OECD) has found only nominal success, they say. The OECD, a grouping of 30 of the richer nations, funds the FATF.

But because the FATF "doesn't have sufficient means of pressure against states and private financial institutions, it is seen as an inefficient controller," Gilles Favarel Garrigues from the French Centre for International Studies and Research (CERI after its French name) told IPS.

The FATF, he said, could be reducing its activities to no more than a "definition of international standards."

The FATF based in Paris has a staff of just ten, and a budget of less than two million dollars. Its assessment of money laundering is based on self-assessment by governments.

As a result, the FATF blacklist of countries seen not to be cooperating on money laundering now comprises Cook Islands (in the south Pacific with a population of 21,000), Indonesia, Burma, Nauru (in the south Pacific with a population of 12,000), Nigeria and the Philippines.

"Such a list would mean that money laundering has almost disappeared, which is not the case," Christian Chavagneux, editor of the French monthly Alternatives Economiques told IPS.

Chavagneux says the draft first list produced by FATF in 2001 included 29 countries including European tax havens such as Monaco whose financial system is monitored by France, and Jersey and the Isle of Mann which are both said to be financially independent, but under British political jurisdiction.

"France put pressure to get Monaco off the black list, and so did Britain with Jersey and the Isle of Mann," Chavagneux said. "In the end the list was reduced to 15 countries, leaving out all the European tax havens."

FATF president Jean-Louis Fort has acknowledged that in 2001 "only $125 million was seized as part of international operations against the financing of terrorism." That is undoubtedly only a tiny fraction of all the money that gets laundered every year. Some experts estimate that figure at around a trillion dollars (a trillion is a million million).

"This estimate appears realistic to me," Francois Chesnais, professor of international finance at the University of Villetaneuse near Paris told IPS. "Experts estimate that during the 1990s some $100 billion from drugs trafficking and other illegal activities were laundered in Europe alone."

A new FATF initiative in what it calls "the financial war against terrorism" is to urge countries to curb cash couriers.

A resolution adopted last month says "countries should ensure that their competent authorities have the legal authority to stop or restrain currency or bearer negotiable instruments that are suspected to be related to terrorist financing or money laundering, or that are falsely declared or disclosed."

It adopted a specific recommendation setting a limit of 15,000 dollars on carrying cash across borders without declaring the amount. It also proposed control over cash couriers through intervention of national authorities on the basis of intelligence or police information.

"We want to put an end to cash smuggling used to fund terrorism and criminal activities," Fort said. "We're going to make it tougher to move terrorist money across borders and make it harder for terrorists to operate."

But critics say such controls and intelligence measures exist already in most countries. The FATF did not demand further sanctions for cash couriers suspected of terrorist links.

After the Sept. 11, 2001 attacks in New York and Washington, the FATF produced eight policy recommendations against money laundering and terrorist financing, in addition to 40 proposals 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.

It recommended the 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.

But with no enforcement powers, the FATF can do little more than list countries that it considers have failed their own evaluation. Those too it lists selectively.