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Financial Post Articles
G7 MINISTERS TACKLE ORGANIZED CRIME:
Money laundering a
Financial Post, Weekly edition,
Tuesday, May 12, 1998
At last weekend's meeting of Group of Seven finance ministers
in London, British Chancellor Gordon Brown rightly called finding
ways to combat the international spread of financial crime as "one
of the major challenges of our times."
As financial services have become increasingly globalized, so has
the nature of financial crime. The amount of money laundered around
the world as a result of drug trafficking is estimated at a
staggering US$400 billion annually.
Finance ministers of the G7 group of the world's largest economies
will launch a series of initiatives involving closer co-operation
between national and international financial regulators and law
enforcement agencies. The main thrust they agreed to in London will
be the creation of a worldwide network of anti-money laundering
The finance ministers' recommendations will get the go-ahead later
this week from heads of government meeting at the G8 Birmingham
summit. The leaders group includes Boris Yeltsin of Russia. It has a
huge organized crime problem, with tentacles that reach out globally
-- including into Canada.
The aim of the moves agreed to by the G7 finance ministers is quick
and more efficient exchange of information between regulators and
law enforcement authorities domestically and across national
borders. They involve government commitments -- including Canada's
-- to ensure financial institutions report suspicious cash
transactions that may be related to the proceeds of crime.
Our government will introduce legislation this year to toughen its
bank reporting rules. This is needed because, despite some progress,
Canada is still regarded as an easy target for drug-related and
other kinds of money laundering. "It will put Canada into a
position of real leadership on the issue," says Finance Minister
Paul Martin. "It's very much focused on the whole issue of money
laundering and international crime."
Martin doesn't think the problem in Canada is increasing any faster
than in other countries, although some law enforcement groups would
disagree with this. "But the fact is it's become a worldwide blight
and is increasingly sophisticated," he says. "This makes it a
growing concern in Canada because we're part of that world."
The key to success, however, will be action that also involves
jurisdictions outside the G8 grouping. Dozens of smaller countries
and territories continue to condone excessive banking secrecy. It's
easy in these areas for professional criminals and crooked business
people to set up "dummy" companies for illegal purposes. A lot of
money laundering is done through small offshore financial centres
that are often beyond the reach of investigators. The finance
ministers are looking at ways to counter this.
What's also needed are changes in laws to allow the freezing of
accounts when commercial crimes are suspected and to make it easier
to seize the proceeds of financial crimes such as the laundering of
dirty money. The G7 finance ministers also hope to strengthen
anti-money laundering systems by dealing more effectively with
tax-related crimes. Often the two activities are intertwined. More
leeway is needed for reporting of transactions related to suspected
tax offences and other financial crimes. Anti-money laundering
agencies will have to be allowed to pass information along to tax
authorities in support of investigations and also to give it to
agencies in other countries. The trouble is this gets into the
sensitive area of confidentiality on tax matters and also sticky
cross-border jurisdictional issues. Sorting these out will be
The G7 finance ministers have set an October deadline to identify
how systems to combat organized international financial crime can be
improved and how action can be implemented quickly. The initiatives
taken in London build on work started after last year's Denver
summit. They deserve high policy priority and support from the
legitimate financial and business community.
(Ed. note) Neville Nankivell is The Financial Post's
editor-at-large, based in Ottawa.
Source: This information is provided by the Financial Post.
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