G7 gets tough on money laundering

G7 gets tough on money laundering
Timot Szent-Ivanyi

JULY 8: The G7 industrialised nations said on Saturday they would take tough new measures against international money laundering and may cut off some bank dealings with countries that do not halt hot money flows.

"We've named, we've shamed and we're taking measures to fight it," said French Finance Minister Laurent Fabius at the end of a one-day meeting of finance ministers from the Group of Seven. "I think it's a necessary trilogy if we want to rid ourselves gradually of this gangrene."

The G7 said it was endorsing a "hit list" of nations compiled by the Financial Action Task Force (FATF), which was established by the G7 to investigate the international flow of money obtained through illegal activities, often drug running.

The measures were a "landmark step" in showing a renewed commitment to curb money laundering around the world, said the statement issued by the finance ministers from the United States, Japan, Germany, France, Britain, Italy and Canada. Ironically, the day's talks had included one of the potential target nations -- Russia -- for at least part of the discussions.

The FATF last month named 15 havens that it said were not doing enough to prevent the recycling of hundreds of billions of dollars in hot money. Some $600 billion from drug cartels, mafia barons or other criminal outfits is believed to pass through banks each year -- a sum close to the value of the entire Canadian economy, which is the world's seventh biggest.

The rich world's finance ministers had on Saturday reviewed 29 nations and pared their list of offenders down to 15.

RESTRICTIONS VS HOT MONEY FLOWS: The G7 would announce "the issuance of advisories to their domestic financial institutions informing them of the FATF action and calling on these financial institutions to apply enhanced scrutiny with regard to transactions involving the identified jurisdictions", their statement said.

Potentially more ominous for these countries was a warning in the statement from the Group of Seven finance ministers at the end of a one-day meeting that those who do not clean up their act could find their international finance activities restricted.

"With regard to jurisdictions that fail to fully join the international fight against money laundering, the ministers will also begin to consider additional counter-measures, including the possibility to condition or restrict financial transactions with those jurisdictions and to condition or restrict support from international financial institutions to them," it said.

Russian Finance Minister Alexei Kudrin attended part of the session but it is not known if he was present for the talks on money laundering.

RUSSIA PLEDGES ACTION: Speaking to reporters about the money laundering issue later, Kudrin said: "We are now working on a new law to be adopted by the end of this year."

In June, the G7's anti-money laundering agency set Liechtenstein, Russia, Israel and several offshore banking Meccas on a blacklist of financial centres deemed "uncooperative" in the fight against hot money.

It named the Bahamas, Cayman Islands, Cook Islands,Dominica, Israel, Lebanon, Liechtenstein, the Marshall Islands, Nauru, Niue, Panama, the Philippines, Russia, St Kitts and Nevis and Saint Vincent and the Grenadines.

Switzerland was listed too -- albeit in the lowest rank of the three-tier league table -- along with other major Financial centres such as Luxembourg, Hong Kong, Singapore, Dublin and the British-controlled Isle of Man, Guernsey and Jersey islands. The top of that offender list comprised mainly exotic places such as Belize, the Virgin Islands and the Seychelles, along with Liechtenstein.