FATF Releases Money Laundering Report

5 July 2001
FATF Releases Money Laundering Report

The Financial Action Task Force on Money Laundering (FATF) has published its 12th annual report on the state of money laundering around the world.

The group identified its current list of non-cooperative countries and territories (NCCTs) to include six new nations: Egypt, Guatemala, Hungary, Indonesia, Myanmar and Nigeria.

Reaction to the list, which was released late last month, has been mixed. Many of the newly added countries have been outspoken about their disapproval of being added to the list.

In addition to adding six new non-complying countries the FATF singled out a handful of countries for their work in improving measures to cut back on money laundering. The group removed the Bahamas, the Cayman Islands, Liechtenstein and Panama from the list, but will closely monitor future developments in those countries.

FATF President José María Roldán said that awareness of money laundering schemes has been increased around the world since the report's inception.

"We see that this initiative has triggered significant improvements in anti-money laundering systems throughout the world," he said.

Two online gambling jurisdictions that are home to online gaming were able to prove themselves unworthy of the list, although many still remain blacklisted.

The list centers on a country's adoption of the FATF's 40 recommendations, which are focused on doing away with money laundering.

According to the report, Liechtenstein, home to lottery website PLUSlotto, was able to enact laws addressing the reporting of suspicious transactions and took other steps to address the 40 recommendations.

Joining Liechtenstein in getting off of the FATF list was Vanuatu, a South Pacific island nation that also hosts online gambling services, in part because the country passed its Financial Transactions Reporting Act.

While Liechtenstein and Vanuatu have found themselves in good graces with the FATF, plenty of other gaming-friendly jurisdictions haven't.

The report noted efforts by the Cook Islands, for example, but still sees the country as non-conforming. It also pointed to improved efforts by the government in Dominica in passing its Money Laundering Prevention Act and initiating its Money Laundering Supervisory Authority. But according to the report, Dominica still has work to do in customer identification procedures, the retention of records and the ability to administrate authorities to access and share specific information.

St. Kitts and Nevis also improved its control over money laundering activities within the last year, but according to the FATF there is still work to be done.

"There remain several issues to be resolved, including the ability of the FIU (Financial Intelligence Unit) and the financial regulators to co-operate internationally and the identification of the beneficial owners of legal entities," the report said.

Not all countries that have made the blacklist are taking the medicine and going about trying to make the proper improvements.

Egypt rejected charges in the report that it is a haven for money laundering. "Egypt has never been and will never be a base for money laundering," an unnamed Egyptian economy ministry official told the government newspaper, Al Akhbar. Egypt "has laws and monitoring institutions which guarantees that it categorically fights such operations," he added.

The legislature in Indonesia lashed out against the FATF, saying it was a big mistake putting the country on the black list while the country was struggling to defuse a prolonged economic crisis.

Kwik Kian Gie, a legislator from the Indonesian Democratic Party of Struggle (PDI Perjuangan), said it was impossible for Indonesia to crack down on money laundering at this time.

He argued that most of the laundered money deposited in banks was gained from corruption rather than other illegal activities such as the narcotics trade or smuggling.

"The majority of the bank deposits raised from corruption will move to other countries such as Singapore and Switzerland if the legal authorities are forced to investigate money laundering in the country," he told The Jakarta Post. Kwik, who is a former coordinating minister for the economy, said the government was unable to fight money laundering effectively because of a 1967 government regulation that bars law enforcers from monitoring bank deposits.

"The regulation was issued by former president Soeharto when the economy was at a low point and the inflation rate was 600 percent," he said, adding that the regulation had yet to be revoked. He said the government should revoke the regulation and speed up the deliberation of a money-laundering bill submitted last week to allow for a gradual elimination of money laundering in the country's banking system.

"Indonesia needs capital and foreign investment for its economic recovery," he said. He said that despite the absence of money laundering legislation, Indonesia could enforce the criminal code and other laws on banking, corruption and drugs to fight domestic and international syndicates involved in illegal activities.

The FATF has decided to recommend the application of additional countermeasures, including the possibility of enhanced surveillance and reporting of financial transactions and other relevant actions, as of 30 September 2001 with respect to Nauru, the Philippines and Russia, unless their governments enact significant legislation which addresses identified money laundering concerns.

The FATF hopes that these countries will enact legal reforms to which they are committed so that they can avoid countermeasures.

The little nudge by the FATF was enough for the Philippine government to encourage steps to get the country on its good side.

Philippine authorities will ask Congress to pass the "minimum requirements" to get the country off the list, central bank governor Rafael Buenaventura said. He conceded that international criminal gangs could be exploiting the country's strict bank secrecy laws to use Philippines-based banks to launder money acquired through illegal activities.

He said the government's priorities are to get Congress to pass a law that would make money laundering a crime and an amendment to the Central Bank Act that would empower monetary authorities to inspect suspicious bank transactions exceeding 50 million pesos or $1 million.

He said there is strong opposition to the second measure due to concerns that the government could abuse this power.

"We're being practical here. We'll just try to meet the minimum requirements of FATF, which is making money laundering a crime, number one, and number two, allowing some degree of relaxation on deposits of over 50 million pesos," he said over DZMM radio.

The FATF will review the situation of each country on the list as a matter of priority at each plenary meeting.

Click here to view the FATF report.