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Russia: Expert Urges International Fight Against Money Laundering

Washington, 8 October 1999 (RFE/RL) -- An expert in international organized crime says the West has been just as unprepared for Russia's move from communism to capitalism as Russia was itself.

Louise Shelley, a professor of criminology at the American University in Washington, cites the Bank of New York, where billions of dollars in Russian currency is suspected to have been laundered.

Shelley told a briefing Thursday at the Washington office of Radio Free Europe/Radio Liberty that this questionable activity was able to persist for months without the knowledge of the bank's top executives.

"We're just as unprepared for what is now happening in the global financial markets as Russia was unprepared for this transition."

Shelley says the Russian money-laundering scandal is "long overdue," because it finally brings attention to money laundering. Until now, she said, law enforcement officials around the world focused their attention on drug trafficking.

The important thing, she says, is that investigators realize that Russian mobsters and corrupt officials cannot launder their money without "Western complicity." Shelley says there are plenty of lawyers and accountants who are willing to help launder the money, and bankers who ignore suspicious transactions at their banks.

And she predicts that such large-scale money laundering will grow unless governments learn to trust one another and work together. And this, Shelley says, means that organized crime will be one of the major problems of the 21st century.

The Russian money-laundering scandal broke in August with reports that billions of dollars in Russian funds -- perhaps as much as $15 billion -- may have been laundered through accounts at the Bank of New York. Some reports said IMF assistance to Russia may have been involved, and that senior Russian government officials may be involved. No evidence has surfaced to support this.

Money laundering is transferring illegally acquired income through a series of bank accounts to obscure the source of the funds and make it appear legal.

The corruption scandal has broadened to include Russian President Boris Yeltsin. Swiss prosecutors are investigating whether he and his daughters received about $1 million from a Swiss construction company that won a lucrative contract to renovate Russian government buildings, including the Kremlin.

Yeltsin's supporters say the president's political opponents are the source of the accusations. But one senior member of the U.S. Congress indicates that such denials are suspect. Congressman Benjamin Gilman (R-NY) says he believes corruption in the Yeltsin government goes to "the top," as he put it. He made the comments Thursday in his opening statement at a hearing of the International Relations Committee of the House of Representatives. Gilman is chairman of the committee.

In her briefing, Shelley said it is time for governments around to the world to recognize how central the issue of money laundering is to international development, and how it hurts everyone from corporate executives to ordinary citizens. She notes that an economist with the International Monetary Fund says money laundering involving drug profits, capital flight and tax evasion accounts for between 6 percent and 8 percent of the world economy.

She also says that when banks are caught laundering money, the penalties -- usually fines -- are so lenient that they leave the banks with little or no loss. Shelley calls this "the cost of business."

Shelley offers one option that she says would be among the most valuable tools in keeping banks from being attracted to the business money laundering can provide.

"Part of it is to get at banks through shaming them by having corporations feel uncomfortable using a tainted bank so that they get hit in the pocket not through a $25 or $100,000 fine or even a million-dollar fine, but that there are corporations that feel that it's not appropriate to deal with a tainted bank."