The scandal surrounding the reported transfer of billions of dollars from Russia through the Bank of New York has turned a spotlight on international efforts to fight money laundering. RFE/RL correspondent Roland Eggleston reports on the proposals made at an international conference on organized crime held in Germany this week.
Grainau, Germany; 2 September 1999 (RFE/RL) An international conference in Germany has been told that organized crime is investing millions of dollars won in illegal operations into local business and industry. Much of the money is believed to come from racketeers in Russia and other parts of the former Soviet Union.
The warning was given by U.S., German and British experts at a conference in the town of Grainau. The conference was attended by more than 80 officials from the Soviet Union and Eastern Europe.
Klaus Kersten is the head of Germany's main crime-fighting organization, the Criminal Investigation Office. He said big international crime groups are investing heavily in industry and business in order to give a legitimate cover to money obtained from illegal operations. In extreme situations, Kersten said, the sudden withdrawal of these huge sums of money could have consequences for national economies.
Several speakers told the crime conference that organized crime now appears to be moving into the international telecommunications business, particularly in Eastern Europe. In some examples, criminal groups have bought financial control of a legal telecommunications company and then attached another company to it to carry out their illegal business.
Thomas Pickard is assistant director of the U.S. Federal Bureau of Investigation. He said it is difficult to check how much of the money circulating around the world each day comes from crime groups seeking to hide their illegal profits.
"Money laundering is probably one of the most difficult things to investigate. It's very difficult with the volume of financial transactions each day to track down which are legitimate transactions and which are illegitimate."
But at least one delegate to the conference had an idea about how to deal with international criminal gangs. Former Russian Interior Minister Anatolii Kulikov proposed an international forum to combat organized crime. He said he envisages an institution along the lines of the Davos Forum, which meets every year in Switzerland to discuss the world economy and related problems. He said other delegates support the idea and that he will visit Washington later this month to discuss the idea.
Kulikov said the recent scandal involving the alleged Russian misuse of aid from the International Monetary Fund could spur the Russian parliament to approve legislation that would ease investigations into money laundering.
Kulikov said law enforcement agencies have for years sought the right to obtain information about suspicious bank accounts, but parliament has failed to act.
"Our opponents say if banks have to provide information on the hard currency operations, this would be in violation of human rights, and so on and so forth. But we take the United States as an example. The United States is a democracy, but they do have laws for government to have the banks disclose information on illegal activities or activities that might seem illegal. They can take on such a powerful institution as the Bank of New York, for instance. And eventually they can even withdraw its license. And this is an example we can show to our legislators, to our lawmakers, saying that we really need such a provision in our legislation."
The U.S. began controlling money laundering in 1970 when Congress passed a law requiring financial institutions to file reports about any transaction exceeding $10,000 and to keep those records on file for five years. Later laws imposed even stricter regulations. Money laundering is now a criminal offense, and banks and financial institutions are required to report any transactions they consider suspicious.
Kulikov said he believed the U.S. laws should be an example for Russian lawmakers. He said corruption in Russia is so pervasive that it has serious consequences for the national economy.
"(Corruption) also influences the level of foreign investment in our economy. I know that firms and companies that are planning to take part in various economic projects earmark up to 50 percent of their investment to bribe government officials." Kulikov said he still favors the creation of an independent anti-corruption panel, which he first proposed in 1997 but which was never implemented despite initial support from President Boris Yeltsin and then-Prime Minister Viktor Chernomyrdin. Such a body would be subordinate to either the president or the prime minister and independent of all other law-enforcement agencies.
Another suggestion for combating money laundering came from the incoming director of the international police organization, Interpol. The new director, Ron Noble, suggested that investigators should identify companies known to be controlled or partly controlled by suspicious figures. The financial activities of those companies, he said, should then be monitored. But he acknowledged that this method is not foolproof.
The conference also discussed the issue of nuclear smuggling. A senior U.S. criminal investigator says most nuclear material smuggled from Russia to the West is worthless and incapable of being used in weapons. William Kinane, who is the FBI's representative in Moscow, said most nuclear material being offered for sale is what he called "radioactive junk."