Feature Articles

July 3, 2000

Black Lists and Naming Names.

By John William Tuohy and Ed Becker


You can take this to the bank. The freewheeling days of global money laundering are ending. In fact, money laundering, as we know it now, probably won't make it very far into the new century.

The reason for that is, as a near broke Donald Trump once said, "Cash is King."

He's right of course. Cash is king. But the guys who own the cash--about 1% of the entire world's population--own almost 60% of all the available cash on the planet, and they are the emperors.

Right now the "sovereign specie," most of whom are North American or European, want to put an end to the rise of the shadowy new kid on the block, international money laundering.

Of course, one key weapon in the fight against money laundering, is for the financial leaders of the world to make the effort to stop the drug trafficking and child prostitution and pornography that create the money in the first place.

But this crack-down has nothing to do with the world's financial leaders being fed up with dope-addicted, inner city residents. The bankers of the world couldn't care less about the wave of crack babies that will be born in Harlem this month. Trust me on this, if they cared, even a little, not one ounce of cocaine would find its way to the streets of New York tomorrow.

Instead, what had caused this campaign to crush tax havens, is an effort by the world's financial centers to tighten up the whole international financial system in the wake of the Asian and Russian financial crises.

In other words, this recent global attempt to stop money laundering is a matter of self-preservation, plain and simple. I have no problem with that, after all, in this case anyway, what helps the world's elite, helps me. What I have a problem with, is that the current wave of financial McCarthyism appears to be selected persecution by the first world nations...the guys who created this problem in the first place...against the otherwise hapless third world Banana republics, accusing them of aiding and abetting the enemy.

Take Lebanon as an example.

In early June of this year, the Paris-based Financial Action Task Force, the anti-money laundering arm of the Group of Seven industrialized nations...the guys with the money...placed Lebanon on a black list of countries that are not doing enough to prevent money laundering. Lebanon is just one of 15 countries that has failed, and failed repeatedly to cooperate in the fight against dirty money entering the international banking system.

It's not that the government of Lebanon hasn't tried to cooperate with the world's bankers. They have. Nevertheless, the Organization for Economic Cooperation and Development, a group of almost 30 industrialized nations, is considering sanctions against Lebanon and the Financial Stability Forum, a separate Group of Seven, formed to prevent a repeat of the Asian and Russian financial crises, has put Lebanon in the worst offender's category of offshore financial centers. The Lebanese insist that they have no offshore financial activity.

Nor, for that matter, is Lebanon even a major player in the game. According to the US State Department, Lebanon doesn't have significant money laundering activity and virtually no drug trade.

Then why are they on the list?

Because, as insane as it might seem, they are on the list because of their potential to become a money laundering center. Lebanon has banking secrecy laws, laws that have been in place since 1956.

The reason those laws are in place, is that back before the Lebanese started on their campaign to reduce their once magnificent land into a rubble of stone-age anarchy, Lebanon was the jewel of the Middle East. It was a beautiful place full of beautiful people, who sunned themselves brown on pristine beaches by day and danced the cool nights away in exclusive hotel-casinos. American, European and Asian multimillionaires, desperate for a tax haven, flocked there and entrusted their fortunes to Lebanese bankers who were noted across the globe for their discretion.

Although the beaches are now stained in the aftermath of civil war, the chic casinos are now bomb craters and the international millionaires are gone, the banking secrecy laws remain. The result is, that Lebanon has made itself vulnerable to allegations that it is, or can be, a money laundering center.

Making the situation worse, is that while even the Swiss bankers have relaxed their secrecy laws in wake of this clean-up campaign, Lebanese secrecy remains among the strictest in the world.

Other countries on the "black list" although "Greenlist" would be a better fit, include Israel, Liechtenstein, Russia, Panama, the Bahamas, the Cayman Islands, the Cook Islands, Dominica, the Marshall Islands, Naura, Niue, Panama, the Philippines, St. Kitts and the Grenadines.

There is also a "gray list" which included 31 "suspect states," among them Cyprus, Gibraltar, Monaco, and Antigua.

The task force was unable to come up with a figure for the total amount of money illegally laundered in the 15 countries on the list, and the reason for that is that these countries are not necessarily laundering money, rather, they are guilty of "encouraging money laundering."

Many of these nations, like the otherwise law abiding state of Israel, are on the list because the don't have national legislation to counter money laundering, such as requiring a declaration of cash deposits. Some are on the list because of "controversial" figures given by commercial banks. Gee, imagine that.

The tiny countries of Naura, Niue, St. Kitts and Nevis, and St. Vincent and the Grenadines are on the list, not for actually laundering money, but for having insufficient laws regarding money laundering. Panama, which models its banking system after the US, made the list because it fails to recognize money laundering as a criminal offense.

But again, facts and reality have nothing to do with the issue at hand, rather, it's a matter of first world wishes versus third world needs and real world truths.

The almost-make-believe nation of Liechtenstein (population 29,800) is the only European country on the list. There are no North American countries on the list, nor are there any pirate nations on the list like Iran, Iraq, Libya or Cuba. Nations that might take offense at the inclusion and actually do something about it.

The fact is, the United States is still a major world center for money laundering. Just last year, the former Ukraine Prime Minister, Pavlo Lazarenko laundered $20 million in corruption and fraud money through US banks and brokerage houses. In fact the federal government is establishing the first four High Intensity Money Laundering and Related Financial Crime Areas, or HIFCAs, in Los Angeles, New York/New Jersey, San Juan, Puerto Rico, and the Southwest Border area.

The government admits that its "Suspicious Activity Report form" which banks and other depository institutions are required to use, is so complicated, it's virtually useless.

Worse yet, statistics show that money laundering cases referred by US enforcement agencies for prosecution, declined by 20% in the 30-year history of the US money laundering control effort. In fact, only six months after it released the government's 1999 plan to combat money laundering, the Treasury and Justice Departments announced a change for their Money Laundering Strategy for 2000. The plan had to be changed because the 1999 version didn't include means to look for dirty cash beyond banks, meaning that non-bank financial institutions and non-financial businesses like the insurance industry, travel agencies, pawnbrokers, and other "financial service providers " more or less get away without any government scrutiny or regulation, because they are not included under the Bank Secrecy Act.

Also excluded were other useful tools of money laundering, such as lawyers, auditors, accountants and cyber-payment service providers.

So why aren't we on the list?

We're not on the list because we have laws on the books that make it look as though we're tough on money laundering, unlike some third world nations that need to be included on black lists to get them to do anything about it.

The French, who have elected themselves leaders in this campaign, probably because it's a fight they might actually win for a change, have said that they are willing to go as far as to ban all financial transactions with Lebanon. However, the French, being the French, have turned a blind eye to the glaring fact that Monaco is the center for money laundering in Europe and the Middle East. Monaco is not on the list. In fact, it got off the list with a diplomatic "warning."

French Finance Minister Laurent Fabius said he would ask the French treasury to investigate. Will anything come out of the investigation? The answer is a resounding NO. Monaco is a cash cow for the southwestern French economy and a tax haven for the British, so don't expect any changes there in our life time.

Austria was quietly removed from the list after it "promised" concessions of bank-secrecy rules, and howls and threats from the Dutch Antilles and Switzerland over their inclusion, got them removed from the list.

Compare that to the astonishment of the people of Cayman Islands, which complained that the task force and US Treasury Department, had ignored repeated requests to come to the islands to do an on site evaluation.

Israel got on the list for its failure to "report suspicious transactions." When the Israeli government asked whom it was to report the suspicious transaction to, the task force had no answer.

Will the US Justice department and the state government law enforcement agencies leap on the cash-fascist bandwagon?

Of course they will. And you know why? Money. The power elite that controls the cash will send notice to the boys in Washington that they want action, and they want action now. The White House and the Congress will unleash a flood of cash to the Justice Department and the IRS, who will, in turn, create hundreds of anti-money laundering programs that will filter down to a state level.

Already, the White House has announced that it will issue advisories to American banks, that it expects them to give "enhanced scrutiny" to any transactions with the targeted countries. What that means is, that within the next three months, the government intends to make an example out of some mid-sized New York bank. Watch and see.

Mr. Tuohy can be reached at

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