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U.N. Targeting Money Laundering

March 31, 2000

GEORGE TOWN, Cayman Islands (AP) _ The United Nations launched a drive Thursday to enlist secretive offshore havens in the struggle against money laundering _ appropriately, at a conference set on a tiny island that is the world’s fifth-largest banking center.

``The amounts involved in these financial scandals have gone beyond what the world community is prepared to tolerate,″ said Pino Arlacchi, a U.N. undersecretary general and executive director of the Vienna-based U.N. Office for Drug Control and Crime Prevention.

The two-day conference was aimed at getting offshore havens to adhere to a set of banking regulations laid out by the Paris-based Organization of Economic Cooperation and Development.

But some countries said stricter regulations could drive them out of business.

``It’s a fact that in the offshore sector there’s a greater scope for money-laundering because of the confidentiality and secrecy involved,″ the director of international financial services for the South American nation of Belize, Gian Gandhi, told the AP. ``But for fledgling new industries like ours it would be suicidal to enforce those laws at this time.″

To put the problem in perspective, Arlacchi cited last year’s case of at least $7 billion that Russian criminals moved through the Bank of New York _ and compared it to Jamaica’s gross domestic product of $9.5 billion.

However, the fact that it was a New York bank showed that ``the issues involved must also be relevant to ‘onshore’ jurisdictions,″ said George McCarthy, financial secretary of the Cayman Islands.

Thirty-seven of the world’s 55 offshore centers attended the conference, representing more than 50 percent of offshore business, organizers said. The only major player absent was Hong Kong.

The 26 developed nations in the Paris-based OECD are targeting countries with ``harmful tax practices″ to fight the loss of billions of dollars to tax-free havens. And the United States is targeting states that allow criminals to legitimize their illegal gains.

Ronald J. Ranochak, a former U.S. Federal Reserve official who is coordinating the U.N. forum, said the United Nations would offer technical assistance and training to countries ``seen to move forward″ in the anti-money laundering battle.

Many of the countries require only a few thousand dollars to register a company that can then be used to shelter tax money or criminal proceeds. Creating several such fictitious companies and shuffling money among them makes it even harder for regulators to detect its origin.

The task is made more difficult, speakers noted, by globalization and technology that moves money from country to country with the push of a button.

Arlacchi said the tainted money included not only hundreds of billions of dollars in drug proceeds but profits from trafficking in migrants.

``This traffic has become so profitable that even drug traffickers are beginning to switch,″ he said, noting an estimated 10 million people are smuggled illegally each year.

McCarthy said the Cayman Islands, a British Caribbean territory of 40,000 that holds more than $500 billion in deposits from foreign financial institutions, has tried to develop responses to money laundering, but noted that some jurisdictions cannot afford either the time or the resources.

Countries at the conference included a string of Caribbean islands, Panama, British territories in the Caribbean and several Pacific island nations, including the island of Niue.

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