For the first time since its inception, the Financial Action Task Force (FATF), theworld’s leader in promoting anti-money laundering controls, has made an in-depthanalysis of the possibilities of laundering in the gold market as well as money launderinginvolving non-financial professions such as lawyers, accountants, casinos and real estateagents.
FATF, a 26-nation organization created by the G-7 to address the global problem ofmoney laundering, developed the report as part of its 1997-98 typologies exercise. It wasissued in Paris during FATF’s Plenary meeting. This is the third year that FATF hasissued a public report (1997-1998 Report on Money LaunderingTypologies) on existing money laundering trends around the globe.
The meeting of experts on money laundering typologies has been an annual feature on thecalendar since the beginning of FATF in 1989. The purpose of this meeting is to bringtogether ideas and experiences regarding the phenomenon of money laundering and then todevelop and articulate a worldwide view of the actual state of this activity.
"This exercise plays a critical role in the overall FATF effort. In no other forumcan we focus not only on the size and nature of the problem but also on how well we aredoing -- throughout the world -- at confronting it," said Stanley E. Morris, Directorof the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). Mr. Morris, whoheads the U.S. delegation to FATF, acknowledged the importance of the report at a newconference today in Paris.
In discussing the gold market’s vulnerability to money launderers, the reportnotes that gold is the only raw material comparable to money, is a universally acceptedmedium of exchange, is traded on the world markets and provides its owner with anonymity.These are only a few of the traits that make this precious metal attractive to potentialmisuse. The report indicates that countries in South Asia and the Middle East are havingdifficulties piercing the widespread alternative banking system called "hawala,"which facilitates both currency exchange and the purchase and sale of gold. In addition,Australia and Italy have specific legislation in place to combat gold money laundering.
The report also cites the experiences of countries around the world in its first-everin-depth analysis of laundering in the non-financial sector, including professions such aslawyers, accountants, real estate agents and sellers of high-value objects such asjewelers. In addition, the report focuses on businesses such as casinos and shellcorporations, examining the magnitude of the money laundering problem involving theseindustries as well as countermeasures in place to combat this activity around the world.
Other highlights addressed in the report relate to the following issues:
* Drug trafficking remains the largest single generator of illegal proceeds; however, non-drug related crime (various types of fraud, smuggling and organized crime offenses) is increasingly significant.
* A continuing shift from banking institutions to non-bank financial institutions (bureaux de change or money remitter businesses) to launder money reflects the increased level of compliance by banks with anti-money laundering measures.
* Last year’s report discussed for the first time the money laundering implications of emerging payment systems, such as electronic money (e-money) and Internet transactions. This year’s report generally found that these new technology systems were in a phase of steady development or even rapid expansion, although it was stressed that there had been little innovation relative to laundering.
* Traditional money laundering through the use of financial system services such as wire transfers and bank drafts continue as prominent laundering methods due to effective counter-money laundering measures enforced in banks and other financial institutions. The technique of "smurfing" - where financial transactions are broken down into amounts below reporting requirements - remains prevalent as well. There was also hard evidence of the continued growth and sophistication of cross border currency smuggling.
Copies of the report are available from FinCEN by calling: (703) 905-3770. Additionalinformation is also available from the FATF Secretariat in Paris by calling: 331 45 24 7945.