26 April 2006
Cooperation Key To Stopping Money Laundering, U.S. Official Says
U.S. consul general praises Macau's new anti-laundering legislation
With the expansion of Macau's gaming industry, law enforcement personnel and bankers need to cooperate to ensure money launderers do not take advantage of potential vulnerabilities, says U.S. Consul General to Hong Kong and Macau James B. Cunningham.
A bill recently passed by the Macau Legislative Assembly is an important step toward creating an effective regime against money laundering, Cunningham said April 26 in a speech to the Financial Investigation Seminar at Macau.
The United States sponsored the weeklong seminar to raise awareness of illicit financial transactions and how they can be used to launder the proceeds of crime.
Macau's Legislative Assembly passed a bill in March to combat money laundering that aims to make money laundering by casinos more difficult, improve oversight, and tighten reporting requirements.
Money laundering facilitates all types of criminal activity, including terrorism, narcotics and proliferation of weapons of mass destruction, Cunningham said.
"This is why the international standards also include legal provisions for the freezing and confiscation of the laundered proceeds of illegal activity," he said, "Prudent use of seizure and confiscation laws is an important and necessary part of a robust money-laundering regime."
Financial institutions are the "front line" of defense against these types of criminal activity, he said, adding that cooperation with law enforcement is needed to follow money involved in illegal activity.
Due to increased vigilance, criminals must resort to other methods to move money, which includes the physical transportation of cash into countries where reporting requirements are weak, he said.
Macau should take the necessary course of action regarding the bulk movement of currency across the border and install a robust declaration system to monitor incoming and outgoing cash flows, Cunningham said.
Abuse of charitable organizations for laundering purposes is another area where oversight is needed for Macau, he said.
Money laundering also negatively impacts a financial institution's integrity that can lead to a loss of new investment opportunities, Cunningham added.
"Confidence in a healthy, financial sector effectively protected from abuse brings with it increased investment and attractiveness to international capitol markets," he said.
For additional information, see The United States and China and Money Laundering.
Following is the text of the prepared remarks:
(begin text)
"Financial Security: Front Line of Defense"
Remarks by U.S. Consul General James B. Cunningham
Financial Investigation Seminar
Macau Monetary Authority Auditorium
April 26, 2006
(As prepared for delivery)
Good afternoon. I'd like to welcome the participants from the law enforcement, regulatory, and financial community to this special afternoon session. This is part of a weeklong seminar sponsored by the U.S. Government on money laundering, terrorist financing, and financial investigative techniques. This seminar is a joint effort by the U.S. Department of the Treasury's Office of Technical Assistance and the Internal Revenue Service's Criminal Investigation Division.
The seminar this week is part of a continuing series of efforts by the U.S. Government, in collaboration with the Government of Macau-and the Macau Monetary Authority in particular-to raise awareness of illicit financial transactions, and how they can be used to launder the proceeds of crime. With Macau's gaming industry expanding rapidly and financial flows increasing, regulators, law enforcement personnel, and bankers will need to work closely with each other to ensure that money launderers do not take advantage of potential vulnerabilities.
Macau is not alone. Law enforcement, regulators, and finance ministries around the world face the same problems in trying to identify and disrupt financial crimes. They have the same need for international cooperation to fight transnational criminal groups, including terrorists. The U.S. Government therefore wants our respective finance authorities to work together using our respective governments' financial investigative resources to identify, investigate, and prosecute those trying to exploit the global financial system for illicit gain. Intergovernmental organizations that can help in this effort are the Financial Action Task Force, or FATF, and the Asia Pacific Group on Money Laundering, or APG, both of which promote the internationally accepted international standards on money laundering and terrorist financing. These organizations also call on all countries to work cooperatively in constructing regimes within their jurisdictions and implementing the FATF 40 Recommendations on Money Laundering and the FATF 9 Special Recommendations on Terrorist Financing.
We are pleased to see that Macau is making progress. The legislation that your Legislative Assembly recently passed is an important step toward creating an effective anti-money laundering regime that will meet global standards in working to identify, disrupt, and prosecute people intent on exploiting the vulnerabilities of Macau's financial sector.
In particular, I note that Macau's new money laundering law covers all financial institutions, including currency exchangers, money transmitters, casinos, pawnshops, and property agents. In addition, the new legislation creates suspicious transaction reporting requirements for solicitors, accountants, and dealers in precious metals, gems, luxury vehicles, and other sellers of high value goods. International experience has shown that such professions have been effectively used as intermediaries in money laundering schemes. Ensuring that Macau's legislative framework is as comprehensive as possible is important. Even more important, however, is the need to effectively implement and enforce this legislation, which is ultimately the true test of compliance with the international standards and the true test for combating illicit finance in Macau.
We are glad to work with Macau toward that end. Some may say that money laundering and terrorist financing are not big concerns here. Money laundering facilitates all types of criminal activity-including terrorism, narcotics, weapons of mass destruction proliferation and organized crime-by providing a conduit to promote, expand, and carry on a criminal enterprise or activity. Money laundering also allows criminals the opportunity to enjoy the proceeds of their illegal activities by living a lavish lifestyle.
This is why the international standards also include legal provisions for the freezing and confiscation of the laundered proceeds of illegal activity. Prudent use of seizure and confiscation laws is an important and necessary part of a robust money-laundering regime. Prosecution alone may stop certain members of a criminal conspiracy, but confiscation of the proceeds of illicit activity disrupts the criminal enterprise. These types of money laundering-related forfeitures are also consistent with the FATF recommendations, including United Nations Security Council Resolutions 1267 and 1373.
As U.S. Deputy Representative to the United Nations immediately after 9/11, I played a role in passing these resolutions. We realized that only through a coordinated international effort could we disrupt transnational terrorist networks. UN sanctions have yielded quantifiable results. Since 2001, the UN estimates that about 60 countries have submitted names to the UN sanctions list, and more than 300 individuals and entities have been subjected to sanctions. U.S. Treasury reports indicate that over 1,600 terrorist-related accounts and transactions have been blocked around the world, and more than 170 countries and jurisdictions have issued orders, consistent with applicable UN Security Council Resolutions, freezing US$150 million in assets. What is important is not the amount of money that has been frozen worldwide, but rather that these actions, when fully implemented, financially and commercially isolate key nodes that facilitate international terrorist groups and terrorist operations.
We have learned that it takes a surprisingly small amount of money to finance a highly effective terrorist act. No jurisdiction-including Macau-is immune from the activities of extremist groups. We must all work together as international partners to identify, disrupt, and prosecute the sponsors of terrorism.
To carry out the attacks of September 11, 2001, the terrorists spent between 400,000 to 500,000 U.S. dollars. The bulk of this amount was deposited into the hijackers' U.S. bank accounts via wire transfers, bulk currency smuggling, debit and credit cards, and related cash deposits. All of these methods could have been disrupted by U.S. law enforcement with the use of suspicious transaction reporting. The 9/11 terrorist attacks provide an excellent example of why money laundering laws alone are not sufficient to prevent the financing of terrorism or other financial crimes. Finance ministries, regulators, law enforcement, and the financial services community must all work together to raise awareness of the constantly changing methods, trends, and techniques used by money launderers and the financiers of terror. Acting cooperatively and using the agreed international tools available, we must fully implement international best practices, train personnel, and share intelligence. In this way, the international community will be better able to prevent attacks before they happen by depriving terrorists of funds.
Financial institutions are the "front line" of defense against these types of criminal activity. It is only through collaboration with law enforcement agencies and regulators that we can work together to follow the money involved in illegal activity. An important tool in maintaining the appropriate vigilance toward suspicious financial transactions is the international collection and sharing of information on illicit activities through the work of the FATF and the Asia Pacific Group on Money Laundering.
We welcome that Macau is becoming a stronger partner in this international effort. Macau's new money laundering legislation includes the establishment of a financial intelligence unit. To become a member of the Egmont Group -- a global network of 101 financial intelligence units cooperating to share information and expertise -- Macau's financial intelligence unit must meet the Group's international standards. The financial intelligence unit should also assist in the tracing of illicit activity designed to hide assets, as well as in identifying the source and ownership of funds. An appropriately functioning financial intelligence unit assists in the investigation and prosecution of the host of criminals that use the financial systems to facilitate their illicit activities, including drug kingpins, triad leaders, corrupt corporate executives or politicians, tax evaders, as well as extremist groups intent on carrying out a terrorist act. International exchange of suspicious financial transactions under the Egmont guidelines for information sharing is an essential element of the global effort to disrupt illegal activity through collaboration and cooperation.
Illicit flows of money are now more difficult to channel through financial institutions. Adherence to international standards on anti-money laundering and the establishment of effective financial intelligence units have enabled financial institutions throughout the world to stem the influx of criminal cash, even into jurisdictions where money once flowed without restriction.
Consequently, criminals must resort to other methods to move money. This includes the physical transportation of cash into neighboring countries where currency reporting requirements are weak. Criminals search the international financial system for the weakest link and tend to follow the path of least resistance. If a country is perceived as having weak anti-money laundering measures, criminal proceeds can find their way into the country's financial system, thereby putting the global financial system at risk. This is why in late 2004, the FATF formally adopted Special Recommendation Number IX, which states that jurisdictions should require either a cash declaration or disclosure at the border.
As Macau continues to make progress in implementing the international standards on anti-money laundering measures, it will become increasingly important for the Government of Macau to address FATF Special Recommendation Number IX. Macau should take the recommended course of action regarding the bulk movement of currency across the border, and put in place a robust declaration system to monitor incoming and outgoing cash flows and provide for freezing/confiscation abilities in the case that cash is suspect of being involved in criminal activity.
Another area of vulnerability that is being addressed by the international community is the abuse of charities as a fund raising and facilitation mechanism for terrorists. This is why FATF adopted Special Recommendation Number VIII, which states that jurisdictions should review the adequacy of laws and regulatory oversight in the non-profit sector to ensure that terrorist organizations cannot exploit charities to finance terrorism. Consequently, it is also important that Macau take reasonable action to ensure that public disclosure and accounting transparency are an integral part of the government's regulatory oversight of charitable organizations.
All of you in the financial community know that the integrity of the banking and financial services marketplace depends heavily on the perception that it functions within a framework of high legal, professional, and ethical standards. A reputation for integrity is one of the most valuable assets that a financial institution maintains. Money laundering erodes that integrity, and customers are reluctant to maintain banking relationships at institutions that tolerate or facilitate illicit activity by account holders. Erosion of a financial institution's credibility also affects the stability of financial markets within a jurisdiction. Such erosion can limit the ability of a jurisdiction to maintain and attract new investment.
A case in point is Banco Delta Asia in Macau. The U.S. Department of the Treasury last September designated Banco Delta Asia as a "primary money laundering concern" under Section 311 of the USA PATRIOT Act. The U.S. took this action as a protective measure against a bank that was facilitating a range of illicit activity by agencies and front companies of the government of North Korea.
The success of the protective action against Banco Delta Asia is demonstrated by the fact that financial institutions around the world have increased their vigilance. They have become more aware of the risk associated with providing financial services to North Korean account holders engaged in illicit activity.
BDA provided financial services for over 20 years to North Korean government agencies and front companies, some of which engaged in illicit activities, including currency counterfeiting, narcotics trafficking, production and distribution of counterfeit cigarettes and pharmaceuticals, and the laundering of the associated proceeds. BDA tailored its services to the needs and demands of North Korean entities with little oversight or control. BDA helped North Korean agents conduct surreptitious, multimillion dollar cash deposits and withdrawals without questioning the basis of those transactions.
The Macau authorities have taken action to freeze North Korean accounts at BDA and have assumed managerial control of the bank. We are working closely with the Macanese authorities to resolve our concerns about BDA, and the cooperation has been excellent.
As I stated earlier - and as the Banco Delta Asia case proves -- financial institutions are the front line of defense against financial crime. Effective reporting of suspicious transactions provides the foundation for a financial intelligence unit to assist law enforcement with the investigation and prosecution of money laundering, terrorist financing, and other financial crimes.
It has been suggested that there is a trade-off between developing and implementing strong anti-money laundering and anti-terrorist financing controls, on the one hand, and maintaining a healthy financial sector, on the other. The reality is that a healthy financial sector cannot exist without the implementation of controls to protect it from abuse. Confidence in a healthy financial sector, effectively protected from abuse, brings with it increased investment and attractiveness to international capital markets.
In closing, I congratulate Macau on the recent enactment of new laws to counter money laundering and terrorist financing. My country looks forward to the creation and effective operation of your financial intelligence unit. It is my hope that this week's training seminar will be useful in implementing these new authorities in a robust way, and that Macau can continue to make progress against those that intend to engage in illicit financial activity.
Thank you.
(end text)
(Distributed by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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