Global Policy Forum

By Joe Ortiz

Chancellor Gordon Brown has urged international regulators and banks to clamp down on "terrorist money" in the global financial system in the wake of last week's attacks on the United States. Brown called for international rules obliging financial institutions to report movements of suspect cash, saying action by individual countries would not be enough to tackle the problem.

The attacks on New York and Washington highlighted the problem of money circulating through banks to finance such deadly actions. "It's necessary to create that wider (reporting) obligation on international institutions, but equally it's necessary to have a system of reporting so that there's not only no safe haven (for terrorists) but no hiding place for terrorist money," Brown said in a BBC radio interview.

In recent years, international regulators have made efforts to curb the laundering of money from illegal sources, such as the drugs trade and organised crime, through the international financial system and especially through offshore centres.

The Group of Seven (G7) countries set up the Financial Action Task Force to combat illegal money movements and the Organisation for Economic Co-operation and Development (OECD) has also been pressuring countries for reforms.

A study in June by the Task Force compiled a list of "non-cooperative" countries in terms of cracking down on money laundering which included Hungary, Egypt, Guatemala, Indonesia, Ukraine and the Philippines.

The U.S. government and the European Union are also considering tightening their anti-money laundering regulations. The U.S. Treasury's under secretary for enforcement, Jimmy Gurule said on Wednesday that the department would use every tool it has to track the sources of funding for the perpetrators of last week's attacks. "We're going to be following the money trail wherever it leads," he told a Washington news conference.

PAPER TRAIL MAY YIELD LITTLE

Thomas Wania, a senior banker at Commerzbank in Frankfurt, said following a paper trail of suspected "terrorist money" would be quick and easy in the West but once investigators had to cross into countries such as Bermuda, Pakistan or an Arab country, co-ordination with regulators could be trickier.

Brown stressed any effort had to be truly international. "We have to persuade some countries that have been reluctant to do far more," he said. He added that countries also have to be persuaded to look at money which has not come from illegal sources but whose destination means it could be used to fund illegal activity.

Switzerland, often criticised for its banking secrecy laws, on Wednesday pledged to co-operate in any international moves. "If there is an improvement of international standards, we will help, and consider what we can do," said Urs Zulauf, head of legal affairs and enforcement for the Swiss Federal Banking Commission, the country's top banking regulator. Switzerland passed a law against money laundering in 1998, which requires banks and other firms to report suspect money.

The Swiss banking watchdog also took the unusual step last year of publicly shaming some banks for taking deposits tied to the family of deceased Nigerian strongman Sani Abacha. "We clearly gave the signal, we are not going to tolerate that. If it needs more, we will give more signals of that kind. For us, this is a wider issue," Zulauf said.

UK TO PUSH FOR QUICK ACTION

Treasury sources said Brown will press his European colleagues for further action at a meeting of EU finance ministers in Liege, Belgium at the weekend. Brown is expected to call on the EU to implement the reform of its anti-money laundering directive, currently before the European Parliament, as a matter of urgency.

In the past few days, financial market regulators on both sides of the Atlantic have been looking into alleged insider trading in shares of airlines and insurance companies ahead of last week's attacks on New York and Washington. Brown said Britain would also propose new measures to track money in wider forums. He is expected to push for reforms when he meets colleagues in the Group of Seven developed countries. He said Britain would tighten its own legislation to make movements of such money more difficult and noted that the authorities had already closed one bank account and circulated the names of suspicious potential clients to banks on Tuesday.

But bankers are well aware that tracking funds to specific suspects, such as Saudi-born millionaire Osama bin Laden who is suspected of involvement in the U.S. attacks, will be tough. "Obviously no known terrorist with an ounce of grey matter between his ears would open an account in his own name. And then difficulties start," James Nason, spokesman for the Swiss Bankers' Association.

Ricco Koslowski, director of corporate investigations for the London-based Control Risks consulting firm, told the German weekly newspaper Die Zeit that it was doubtful the perpetrators of last week's attack used regular financial channels. They were more likely to have used illegal "underground banking", which bypasses official banking networks, he said. "Technical surveillance doesn't make any sense in this case," Koslowski said. "Underground banking doesn't leave a paper trail."

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