Money laundering -- hiding the source of illegally acquired money -- is believed to be a major cause of the economic ills in Russia and Ukraine, as well as developing countries in Latin America and Africa. Now 12 banks have come up with what they say is an effective tool to combat the practice. But as RFE/RL correspondent Andrew F. Tully reports, some analysts believe this may be more of an effort to improve the banks' public images.
Washington, 24 October 2000 (RFE/RL) -- Twelve of the world's largest and most influential banks are preparing new guidelines designed to curb the practice of international money laundering. The question is whether these rules can work.
Details of the guidelines will not be known until a news conference in Zurich on October 30, but a group that helped the banks draw up the plan says they will subscribe to a practice known as "know your customer."
Money laundering is the practice of transferring illegally earned funds through many bank accounts until its source appears legitimate.
Under the "know-your-customer" rules, the source of the money would be more difficult to hide, according to Frank Vogl, a spokesman for Transparency International, or TI. TI is the Berlin-based advocacy group that helped create the guidelines.
The 12 banks are adopting the rules at a time when they are being accused of doing too little to fight financial crimes, particularly money laundering.
Swiss banks and Citigroup -- a U.S. financial institution -- have received the sharpest criticism. The Swiss banks control about one-third of the financial institutions that tend to attract money launderers. And Citigroup has been criticized for accepting large amounts of cash from Raul Salinas, the brother of Mexico's former president. Salinas is suspected of links to Mexico's illegal drug industry.
The guidelines are voluntary, but Vogl told RFE/RL that the very fact that the banks publicly embrace the guidelines will help them adhere to the rules.
"The fact that they publicly go out as a group and say, 'These are principles we adhere to' makes them extremely vulnerable, I think, in the event that subsequently, in later times, it transpires that they have nevertheless been taking deposits from major corrupt figures."
Vogl says too many people wrongly see money laundering as a victimless crime. But he argues that government officials and business leaders who steal from their nations' treasuries are guilty of directly robbing their own people. Vogl singled out Russia and Ukraine, some of whose political and business leaders are suspected of looting their nations' wealth.
"The economic system in Ukraine and Russia has been in a state of virtual collapse for the last few years whilst there has been tremendous corruption, tremendous looting of the system. Public services have not been able to work well, judges and civil servants have been paid poorly. There has been all manner of illegality in the system, clearly resulting in great hardship for the vast majority of the people."
But the very fact that the guidelines are voluntary leads some observers to suggest that the banks are more interested in improving their images than fighting money laundering.
One is Peter Pitorri, an assistant professor of criminology at George Washington University in Washington. He told RFE/RL that the kind of guidelines that the banks agreed to simply cannot work.
"They forget one very, very important element -- the 'worker bees,' the people at the teller cages. They don't get paid enough, they're not motivated enough, they simply don't care. And in some cases, they're in somebody's pocket. In some cases, bank officers themselves are in somebody's pocket."
Pitorri says that banks are by nature unlikely to refuse to accept lucrative transactions if they are not told the identity of the source of the money.
"What are they going to do, say, 'Well, either you give me his name or we're not going to accept the transfer.' Ahh, no, I don't think so. [Laughs] That just is not going to happen."
Pitorri says he does not even need to know the final details of the guidelines to know that the banks have no financial incentive to make them work.
The 12 banks who drew up the guidelines are ABN AMRO, Banco Santander, Barclays, Citigroup, Chase Manhattan Corp, Credit Suisse Group, Deutsche Bank, HSBC Holdings, J.P. Morgan, Societe Generale, UBS AG, and Bankers Trust, which is part of Deutsche Bank.
The guidelines were prompted by concerns over money laundering schemes that have contributed to the loss of millions upon millions of dollars.