“Stop Money Laundering!” Conference - 26th February 2002, LondonGood morning ladies and gentlemen. I would like to thank the organisers for inviting me to speak at this conference. The previous speakers have already highlighted the many steps that the UK has taken to combat money laundering and it is only right that the Foreign and Commonwealth Office should focus on the international aspects of this global crime.
Money laundering transactions are estimated to account for 2 to 5 percent of global GDP or around US$1.5 trillion per year. The majority of these amounts are the proceeds of drug trafficking. To put matters in context, the UN Drugs Control Programme estimates the annual world-wide proceeds from the drug trade to be in the region of US$500 billion. These figures are at best guesses. Thus money laundering has the effect of corrupting markets and even destabilising the economies of certain countries. The potential macroeconomic effects can cause inexplicable changes in currency demand and cross-border capital flows. Money launderers also negatively impact jurisdictions by reducing tax revenues through underground economies, competing unfairly with legitimate businesses, damaging financial systems, and disrupting economic development.
In 1989 the G7 group of countries recognised that money laundering had become a global problem, not least due to the increase in drug trafficking. The United Kingdom, with the City of London as the foremost financial centre in the world, was one of the first countries to suggest an international approach to tackling money laundering. As a result, the Financial Action Task Force, now universally known as the FATF, was set up. Eight other nations were invited to join and the group membership gradually expanded to 29 countries. The experts within the group came up with a list of 40 Recommendations, built on the firm foundations of the 1988 UN Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances and the Statement of Principles of the Basle Committee on Banking Regulations. The 40 Recommendations have now become the global blueprint in anti-money laundering best practice. The IMF regards the anti-money laundering actions advocated by the FATF as crucial for the smooth functioning of financial markets. Other UN initiatives, such as the 2000 UN Convention against Transnational Organised Crime, have assisted in complementing the work undertaken by the FATF. However, it was the FATF’s exercise on Non-Co-operating Countries and Territories which brought about a sea-change in thinking at the highest political levels. The exercise, which identifies and evaluates the legal, judicial and regulatory framework of countries whose regulatory systems do not appear to meet international standards has been a success, despite its unpopularity in many quarters. The United Kingdom fully supports the work carried out by the FATF.
Other international instruments such as the Council of Europe’s 1990 Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime, which is open for signature by non-Council of Europe members, has been another useful method by which countries have attracted the expertise of the international community to join in and help countries to identify and rectify the imbalances within their systems. The European Union has also recently issued its Second Anti-money Laundering Directive to ensure a similar understanding of the regulatory framework across the community.
There is however, now a consensus amongst experts and practitioners of the need to get away from drug-related definitions of money laundering and address the issue from an all crimes perspective, irrespective of whether or not the predicate offence was drug-related. Only then can the criminal fraternity have any fear of being deprived of the proceeds of their ill-gotten gains. This needs to be a first step coupled with a strong system of exchanging information between law enforcement agencies. Which brings us to the need for effective, well-staffed financial intelligence units or FIUs as they are popularly known as. The Egmont Secretariat, currently hosted by the UK, is the ideal vehicle for FIUs from various countries to talk to one another once they reach the required standard.
Having addressed the need to exchange information, the most common problems faced by both the United Kingdom and others is the exchange of evidential information. The Foreign Office regularly receives requests from other nations for evidential information. Our domestic laws, which have recently been considerably tightened, require these requests to be made to our Judicial Co-operation Unit in the form of proper letters rogatory based on precise information. Quite often this has not been the case and whilst the UK has always been keen to assist fellow nations, we are also required to respect our domestic laws on human rights and data protection. Hence, we do not encourage ‘fishing expeditions’. The establishment of bilateral and multilateral Mutual Legal Assistance Treaties is therefore an essential component in ultimately nailing the criminals and confiscating the proceeds of their crimes.
My speech would be incomplete without a mention of September 11 and the tragedy in New York. This act highlighted to all civilised nations the need to look at the finances of terrorists and the methods used to transfer funds around the world. The FATF, at its Washington meeting in October 2001, came up with 8 Special Recommendations to tackle this threat. Terrorists use similar systems to money launderers and the 8 Special Recommendations complement the 40 existing Recommendations. The United Kingdom was one of the first countries in the world to have signed and ratified the UN International Convention on the Suppression of the Financing of Terrorists through the Terrorism Act 2000. In fact the UK was unique in meeting the requirements of all 8 FATF Special Recommendations immediately. We would therefore urge all countries who have not already done so, to sign and, more importantly, ratify the UN Convention and join us in the battle against terrorism.
It has to be recognised that the best help is self-help and the UK fully supports the creation of regional anti-money laundering bodies that can perform FATF like functions through mutual evaluation by their peers. There are currently a number of such groups in existence. The Council of Europe’s PC-R-EV, the Caribbean Financial Action task Force, the Asia Pacific Group against Money Laundering, the South American Financial Action Task Force and the Eastern and Southern Africa Anti-Money Laundering Group. In Western Africa we would welcome further progress by the ECOWAS led GIABA initiative. Such groups, especially the ones in Europe and the Caribbean, have matured and fully support the FATF’s Recommendations. Some of the members of these groups are also FATF members and have found themselves to be leaders in their own regions.