Special report on the International Money Laundering Conference

By Margaret Craig-Bourdin

Conference highlights
When it comes to dealing with dirty money, are CAs and lawyers potentially just as guilty as the criminals themselves? Worse still, is our entire economic system actually abetting the cause of money laundering and terrorist financing? These are just a couple of the questions raised at an international conference on money laundering held recently by the Royal Canadian Mounted Police in Montreal. Entitled "Together to fight organized crime," it brought together an unusual cross-section of participants, including police, lawyers, bankers, forensic accountants, judges, brokers, criminologists, brokers and the media. At least 43 countries were represented, including the US, France, Italy, Switzerland, South Africa, Colombia, Aruba, Ireland and the Ukraine.

For CAs - especially those now required to adhere to new federal regulations on reporting of suspicious transactions (see The new rules) - the gathering couldn't have come at a better time. It offered a chance to view the rules from beyond the confines of their own office, and to understand how they fit within a growing arsenal of anti-money-laundering and anti-terrorist legislation worldwide. Topics ranged from the globalization of organized crime and new technological trends to terrorist financing, cryptology and cybervandalism. A number of recommendations were also issued. Here are some of the themes that emerged. (For a full list of conference topics and speakers, see the conference website www.ciba-imlc-rcmp-grc.org/index_e.html.)

Close links, big bucks
If anyone had any doubt that money laundering and terrorism are linked, this was dashed in the first plenary session. RCMP Commissioner Giuliano Zaccardelli noted that "Some people say money laundering is just an accounting exercise - a nonviolent exercise that has no impact on our lives. I say it's time to wake up. The link between terrorism, organized crime and money laundering is very clear. Terrorist organizations are criminal organizations in that they are financially supported by dealing in illegal commodities. They arm themselves through illicit connections and live and move in the shadows and as part of the criminal element."

The sums involved are stupendous: current estimates suggest that the international drug trade alone is a multi-trillion-dollar industry. One speaker noted that one-fifth of all electronic transfers are thought to be related to money laundering. And Jeffrey Robinson, a well-known American author of books such as The Laundreymen and The Merger, said that if money laundering were to be eliminated, a number of countries around the world would have to go into bankruptcy.

Crime goes global
Giuliano Zaccardelli

Several speakers emphasized that criminal enterprises often work together far more effectively than legitimate organizations do. They are forging new alliances, based on market opportunities. For example, Xavier Raufer, a criminologist from France, said an alliance was formed this summer in Belgium between the Hells Angels and the Albanian mafia. And Fanny Kertzman, Colombian ambassador to Canada, said there are links between smugglers in Colombia and terrorists in the Middle East; between the IRA and Colombian guerrillas. "Sometimes I'm actually envious of how [criminal organizations] collaborate and work," said Zaccardelli.

Meanwhile, Jeffrey Robinson complained that "Something has bothered me since September 11. There is a difference in politicians' minds between terrorist money and drug money. [But] Bin Laden's money and the Cali cartel's money and the money from the Russian mafia and the money that's moving through Cypress - it's all the same. Bin Laden is tied into the Taliban, the biggest heroin dealers in Europe, and they're tied into a direct relationship with Albanian terrorist groups."

A patchwork of laws
Given that crime has gone global, many speakers stressed the importance of breaking down barriers between professional disciplines and national laws. "The global nature of organized crime means we must look beyond our state, our province, and our own borders - we must reach out to other countries and other organizations to develop common approaches and tools to combat money laundering and its devastating effects," said Zaccardelli. "September 11 blew the lid on everything. We're naked. We're exposed. We are one community around the world and that's why different points of view are important."

At the moment, though, a lack of harmony between international and national laws makes the pursuit of criminals a highly elusive venture. "I wish somebody could explain to me why we have 13 international conventions on terrorism and why we don't have a single convention on terrorism," said Cherif Bassiouni, a professor at De Paul University in the US.

Tax havens
Nowhere is the lack of coordination so blatant as in the offshore world. In a hard-hitting session entitled "Do financial havens pose a real threat?" Jack Blum, a Washington-based lawyer and expert in money laundering, asked: "Can there be a world where we're trying to operate globally, where businesses move from country to country, and then there's a little area where you can go where there's no law? It is not acceptable for some regions of the world to hold themselves out as a base in which people can operate in other places without obeying the rules."


Co-speaker Robinson said 50 of the 200 nations in the UN have secret banking. He also noted that Canadian banks have extensive operations in the Caribbean, which is "all about secret banking." (Robinson is currently working on a major exposé of offshore banking, which will document the role Canadian banks have played in money laundering throughout the Caribbean.) Robinson showed how laughably easy it is to open a secret bank account in Lugano, Switzerland - or to form an international business corporation in the Caribbean. "An IBC isn't about anything except money laundering," he said. "If you are a law enforcement agency and you see an offshore trading company with a name like Acme Trading, it's bent." To drive his point home, Robinson recounted a "case study" of his own. "When I was writing The Laundreymen, I contacted a company formation agent who had an office in the Bahamas, and I gave him absolutely every excuse conceivable to turn down my business," he said. "I hit every key word that should have raised red flags. I said I'd like to form a company called 'First Manhattan Fiduciary Trust.' He didn't laugh; he said, ' That's no problem.' " When Robinson told the agent he would also need to meet some "friendly bankers," he said, 'Well, I'll introduce you around the island.' " Robinson replied, 'No, you don't understand, I want to meet some friendly bankers. And the agent said, 'I heard you the first time, I'll introduce you to the right people.'" Apparently, that same week, the Bahamian government said it had solved the money laundering problems in the Bahamas. Co-speaker Blum delved into the reasons why he thinks Caribbean countries have become a haven for secret banking. "They have very little prospect of making a living in normal ways," he said. "Tourism doesn't give them long-term economic possibilities - these folks turn to the offshore business as a form of salvation. Not a dime of the money stays where it nominally is. The corporation remits the fees and that's it. And when the crooks and thieves and gangsters disappear, they're the people left to take the heat."			Facts on dirty money The International Monetary Fund estimates that between $9 billion and $2.25 trillion is laundered annually throughout the world. In Canada, the figure is between $5 billion and $17 billion. In Nieu, a tiny island 2,500 miles from New Zealand, about 300 Russian banks are registered. You can buy a Nieuian company, an IBC, for US$1,000; you can buy a Nieuian bank for $10,000. On the island of Cypress, 24,000 International Business Corporations (IBCs) are registered. And 23,000 of them have no physical presence on the island. Between Pakistan, Dubai and India, up to £3 billion flow through the Hawallah system. This is about five times greater than the amount going through normal banking channels. From 1990-'98, the Russian national product dropped by 50%. 20%-25% of all imports to Colombia are contraband. 80% of all the cocaine in the world is produced in Colombia. In 2000 alone, 3,700 people were kidnapped in Colombia and 26,000 people died violently (through drug-related incidents, street violence, transit accidents, illegal self-defence groups, etc.). In Nigeria, since independence, $125 billion have been ripped out of the country by a succession of leaders. Now, in a country with a population of about 130 million, 70 million are living on less than $1 a day.

Blum cited several examples of countries that have been robbed by their leaders - including Indonesia and Pakistan. In Indonesia, he said, more than $40 billion were taken from the country between the time Suharto became president and the time he left the presidency. And offshore banking was used as the vehicle.

"After reading 50 years of economic literature on development in the developing world, I had to ask why does development never happen? The answer is, the rest of the world has provided a vehicle for the theft of those resources, and that vehicle has to be brought under some kind of control."

In Russia, he said, development was stalled because Russian natural resources were sold to a few select people far below market price. Those people then sold the resources through shell companies in the West. The money in the shell companies was used to fund all kinds of enterprises, legitimate and illegitimate.

Who's to blame?
Some speakers expressed serious doubts about current efforts to rid the world of dirty money. "I am extremely skeptical about the will of governments to do much about money laundering," said Bassiouni. He pointed out that governments want secrecy for a number of transactions that take place through the international financial system. "It's hard to conceive that we will suddenly have such a transparent system that the CIA or the KGB will simply go to the local bank and say, 'Here's a transfer from CIA, Langley, Virginia, to its agent so-and-so in such-and-such a city."

In a post-session interview, Blum also spoke about the "stupidity" of the US financial system, where, he said, "It's possible to get a credit card for a dog." Noting that some estimates show the September 11 attacks cost less than $1 million, he said it wouldn't take too much to charge them to MasterCard or Visa.

Accountants as accomplices
As for the role played by accountants in handling dirty money, some speakers didn't mince their words. "If you look at money laundering coming through the offshore world, the money's got to get someplace," said Robinson. "Who's handling it? Bankers, accountants, company formation agents, wire transmitters, they're here."

Robinson added that If he were prime minister for a day, he would require all lawyers, accountants, stockbrokers and other intermediaries to be "criminally liable" for the activities of the funds' ultimate or "beneficial" owner. "No good saying my client is a Swiss lawyer,'" said Robinson. "No, no, we say, 'Mr. lawyer, Mr. accountant, you in Canada, we can grab you, we can grab your assets, we can throw [you] in jail.'"

For Bassiouni, one solution lies in strengthening professional standards. "Globalization has brought about this enormous array of opportunities [for crime] and this array of opportunities is, in a sense, supported by lawyers, by accountants, by bankers, by commercial experts, all of whom, remaining within the very strict letter of the ethical boundaries of their professions, are able to insulate themselves from what I would call the moral responsibility of asking the right questions... Why can't we ask the professions to [police themselves] more?"

Recommendations
At the end of the conference, a press conference was held, in which Insp. Mair and other panel members set out a number of recommendations that emerged from the sessions. (The final list was to be posted on the IMLC website www.ciba-imlc-rcmp-grc.org/index_e.html in mid- December.) The recommendations included:

Creating an international tribunal to deal with international criminal cases.
Establishing a central international criminal intelligence centre through which law enforcement agencies can exchange information about the flow of dirty money.
Harmonizing the justice systems of all countries so that criminals face what conference president John Mair called "similar justice for similar crimes."
Issuing a "white list" of countries that are actively complying with money-laundering conventions (right now, there are only "black lists" of those that do not comply).
Ensuring better standards by lawyers, bankers and accountants.
Creating an instrument for tracking the flow of currency and mapping suspicious transactions worldwide

Of course, it remains to be seen whether any of these measures can ever stem the flow of dirty money. "Realistically speaking, I don't think we'll ever stop it," said Insp. Mair. "The criminals always seem to be a step ahead of the organizations working to combat the problem but we can't give up."

Robinson ended on a more upbeat note. "In the end, terrorist money, drug money, the whole offshore world is about business. It's time the politicians started thinking about business. All businesses need cash flow and reinvestment. If you can cut off the cash flow, if you can prevent the reinvestment of the money in the product, you can bankrupt the bastards. And that will make a real difference."

Canada's arsenal
Canada has long been considered one of best places in the world to launder money. In an assessment made several months ago by the Paris-based Financial Action Task Force on Money Laundering, it ranked 27th out of 29 countries in terms of its compliance with 40 recommendations issued by the task force in 1989. "Canada did not come out with a good mark," Insp. Mair told the Globe and Mail.

Still, progress is being made. The Proceeds of Crime (Money Laundering) Act received Royal Assent in June 2000, and some of the related regulations are now in effect. [See The new rules.] The September 11 attacks also prompted a flurry of activity in Canada and elsewhere; among other initiatives, the federal government tabled Bill C-36, the so-called antiterror bill, on October 15. (That bill is now being scaled back under pressure from the public.)

For now, here are some of the tools that are in place to combat money laundering and terrorism: