An international anti-laundering task force has recommended mandatory reporting of suspicious transactions by all financial institutions, including nonbanks such as brokerage firms and securities dealers.
The task force, a 26-nation organization created by the Group of Seven to counter international money laundering, issued 40 recommendations in all, aimed at revising standards to adjust to global money laundering trends as well technological innovations in the financial services industry.
"The recommendations perform a dual role: They make it more expensive for money launderers as well as set an international standard," said Ronald K. Noble, president of the Financial Action Task Force and a former Treasury under secretary for enforcement.
Because American banks already comply with expensive U.S. money laundering rules, such as filing Suspicious Activity Reports, they will be at a disadvantage internationally if the recommendations are not adopted in other major financial centers, he added.
Because American banks already comply with expensive U.S. laws to prevent money laundering, they will be at a disadvantage internationally if the recommendations are not adopted in other major financial centers, he added.
Money laundering involves disguising the source of funds so that revenues generated through illegal activity can be used without detection by law enforcement agencies.
The group has also encouraged private sector and governments to stay abreast of developments of emerging electronic banking technology, said Mr. Noble.
It will be costly for other countries to adopt the new standards, but Fernando Carpentieri, director general of Italy's Treasury Ministry, said the "hidden cost of money from illegal activities entering a country's economy and financial industry is far greater." Mr. Carpentieri is the incoming president of the task force.
Mandatory reporting of suspicious activities by financial institutions is crucial in assisting investigators uncover laundering, Mr. Carpentieri said. "Without the support and the active participation of the financial services industry, we have no other possibility of helping investigators," he said.
Mr. Carpentieri said the black market fee for laundering money has quadrupled to 20% since the task force was formed in 1989.
Mr. Carpentieri said the task force would investigate the potential impact electronic banking would have on monitoring money laundering.
"It's difficult to say whether the electronic transfer of funds is really a threat yet," Mr. Carpentieri said.
The task force was created by the Group of Seven to develop controls to prevent money laundering and foster cooperation in investigations among its members and internationally.
Although the group has not been able to reach an accurate assessment of the amount of money being laundered, "it is generally agreed that it amounts to hundreds of billions of dollars annually," according to the group's report.
Because the sale of narcotics alone is believed to generate in the region of $100 billion annually, earlier estimates have used this figure as a yardstick.
U.S. Treasury Secretary Robert Rubin said in a statement that in order for all countries to enjoy the benefits of a global economy, "strong alliances must be built to combat money laundering."
