Financial Watchdog Clamps Down on Dirty Money
June 22, 2003
Members of the 31-nation Financial Action Task Force (FATF), responsible for leading the battle against financial crime, adopted far-reaching new regulations intended to strengthen their hand at a meeting in Berlin on Friday.
The new rules will expand the FATF’s jurisdiction and allow it to investigate dubious accounts and money transfers of non-traditional financial institutions such as lawyers, accountants, auction houses, casinos and jewelry dealers.
Limited only to banks so far, officials hope the move will strengthen the FATF’s crackdown on international money laundering and the financing of terrorist organizations. International estimates suggest that as much as $1.5 trillion, or 5 percent of global gross domestic product, is laundered every year.
A quantum leap
The new rules also call for the banning of shell banks, boosting the surveillance of casinos and tightening regulation of illicit money transfers via so-called "underground banks" operating through front companies like Internet cafes, travel agencies and import-export firms.
The meeting also for the first time identified a list of crimes, include smuggling, organized crime and trafficking in humans and drugs that legal systems should regard as sources for money laundering.
FATF President Jochen Sanio called it a historic day for the FATF. "This is a quantum leap forward," Sanio told a news conference after the four-day meeting. "We have reached some agreements I would regard as historic," he said.
The FATF also announced it had revised its so-called "40 Recommendations," a road map for financial regulators, which is a barometer of new dangers posed by money laundering by criminal and terror groups. The 40 Recommendations were initially drafted in 1990 and last reworked in 1996. Once the rules are approved by FATF member countries, they are expected to incorporate the rules in their national laws.
Russia and South Africa enter the league
The Berlin meeting also saw Russia and South Africa joining the FATF, a move that is likely to boost the two nations’ international standing and financial markets.
In particular Russia, which had a notorious record for money laundering and is seen as an easy conduit between Europe and northern Asia, is expected to pressurize its blacklisted neighbors, including the Ukraine, to take measures against financial crime.
Sanio said the efforts made by Russia, which was taken off the FATF’s blacklist of noncooperating states last October, were a "great success story." Russian government spokesman Alexei Gorshkov told Interfax: "The government views this decision as recognition of the work carried out by the Cabinet in fighting financial abuses and money laundering."
Battle intensifies
Founded in 1989 as a means of intensifying the fight against drugs by helping nations trace the money trail back to traffickers, the FATF is an independent body of officials and experts from 31 countries, the European Union’s Executive Commission and the Gulf Cooperation Council. Germany currently holds the presidency.
The FATF’s fight against terrorism financing took on a new urgency after the Sept. 11 2001 terrorist attacks on New York and Washington when choking off the flow of funds to terror groups took top priority. The group added eight new "Special Recommendations" designed to combat terror funding.