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| Money
Laundering: The scale of the problem |
A wave
of money laundering is sending shock waves through banks, building
societies, lawyers and police. Fear of terrorist money, growing
evidence of black Russian money washing through London, mushrooming
credit card fraud have come together to terrify our law enforcement
agencies, intelligence services, and, finally, at the end of
the line, our banks.
This surge of black money undermines our belief in the financial
system and allows many evil traders in drugs, weapons and
stolen goods to profit by the City's good name and go free.
No less than £2 trillion of black money is believed
to circulate through London banks at any one time. London's
name is now too often linked with that of Switzerland as
an easy touch for money launderers. Who has forgotten the
way banks in both countries accepted the ill-gotten millions
of former Nigerian leader, President Abacha without blinking?
How could this country have hosted for so long the corrupt
banking empire of the collapsed Bank of Credit and Commerce
International?
Yet, in spite of the damage these failure wreak on our reputation,
there is a widespread belief that government lacks commitment
to the fight against financial crime. Government appears
oblivious to the need to spend heavily on training policemen
in fighting complex financial crime. No more than 500 trained
financial investigators investigate crime which runs into
billions of pounds. This undermanned service achieves pitiful
results. In the last year, there were just 129 prosecutions
and 50 convictions for money laundering.
The Government's own National Policing Guidelines -- the standard
set by the government for police priorities - give the game
away. Serving policemen trying hard to put a cap on the burgeoning
tide of black money are demoralized by the fact that financial
fraud barely receives a mention in this key document.
Rosalind Wright, the former director of the Serious Fraud Office and
a stalwart of the enforcement system, said recently that
Chief constables were reluctant to put money and men into
fraud investigation when government was encouraging them
to investigate muggings and burglaries. No-one can doubt
that these are the crimes that we fear most, but if this
country's banking system is to regain its global financial
credibility, the more esoteric money laundering and fraud
offenses must be seen to be tackled.
The government's failure goes deeper further than its neglect
of the police. The system it provides for transferring cases
to the police for investigation is falling apart at the seams.
A report published on Tuesday called for a complete overhaul
of the system which government relies on to spot terrorist
money, as well as fraudulent black money.
The system of tracking terrorist funds is supposed to snap into
action when a bank notices a suspicious name or movement
of cash. The bank follows the money to confirm its suspicion
before notifying the government agency, called the National
Criminal Intelligence Service. NCIS Despatches the Special
Activity Report to the relevant police department. In the
case of a terrorist suspicion, the SAR is sent to the Special
Branch. This liaises with the intelligence service.
The problem here is that NCIS is completely overwhelmed by SARs.
The number has jumped in the last three years from 18, 000
in 2000 to 63,000 last year (2004) and, although NCIS staff
has increased, its performance has stalled. NCIS is now like
a mailbox stuffed full of letters that no-one reads let alone
answers. All those engaged in acquisitive crime, and that
is no less than 70% of all criminals, must be laughing all
the way to the bank.
The banks too are up in arms. They have invested heavily in technology
to track the suspicious transactions, they have hired staff
to spot the fraudster and the terrorist financier, and they
have trained their cashiers to be suspicious, only to find
that their reports are languishing in a policeman's mailbox.
Carol Sergeant, a senior figure at the Financial Services
Authority, which regulates the banks, expressed all bankers'
frustration recently when she said that NCIS was 'swamped'
and the reports her banking colleagues produced disappeared
into a black hole. Draconian treatment of bankers who fail
to report suspicious transactions - including prison -- makes
the government's failure to produce a competent reporting
system all the more bitterly ironic.
Government and police are not alone responsible for this national failure.
Banks too have let the side down. When George Bush declared
a war on money laundering in the wake of the September 11
outrage, they went into overdrive in reporting the least
suspicion. They were so concerned about missing a terrorist
account on their books and later being found to have handled
dirty money that that they went well beyond examining the
black listed names and organizations produced by the US government.
Police say they reported Islamic organizations and people
without sufficient investigation. In the end , the British
authorities were not only unable to investigate every report,
but lost faith in the process.
This is to the detriment of the country's safety, as well as to
its financial well-being. Terrorist and dirty money needs
to be intercepted and seized, and banks are the first policemen
to spot it and alert law enforcement authorities. This is
a system that badly needs to be joined up. While banks must
be supported by a government that understands their role
in the system, police efforts need to be invigorated with
more training, closer links with the financial community
and more defined targets. Until this is achieved, those peddling
the fruits of financial crime will push at every weak point
in the system, and become rich at our expense. Worse still,
terrorists will have a route for moving money around the
world that leaves none of us secure.
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