- The Washington Times - Monday, August 12, 2002

HONG KONG Efforts to stem the flow of money to terrorist organizations since September 11 have drawn more international support than originally hoped, according to the former president of the world's leading anti-money-laundering organization.
Clarie Lo, commissioner for narcotics in Hong Kong and the immediate past president of the Financial Action Task Force, or FATF, said in an interview that the past year has brought more attention to the issue of money laundering than anything done by the FATF in its 12 years of existence.
For the organization, the move to fight terrorism meant rethinking its mandate. "The events of September 11 had opened up a whole new avenue for the FATF," Mrs. Lo said.
Mrs. Lo stepped down as FATF president July 1. During her term of office, the organization shifted its primary emphasis from tracking drug money, corruption and extortion to disrupting the financial lifelines of international terrorist groups.
The task force, a 29-member international body headquartered in Paris, includes the major industrialized nations plus leading Middle East Arab nations and the European Union. Its 40 recommendations form the basis for money-laundering legislation around the world.
At a special plenary meeting held in Washington last October to discuss terrorism, the organization issued an additional eight guidelines to help countries identify and stop money destined for terrorist groups.
The original purpose of the group was to track down dirty money before it became clean.
Following the eight recommendations from the Washington meeting, Mrs. Lo said, governments must now also look for clean money tied to suspicious financial networks and stop it before it can be used to finance a crime.
Basically, said Mrs. Lo, the guidelines require the financial sector to observe standards and procedures in record-keeping, customer identification and reporting of suspicious transactions.
She added that the guidelines should be updated regularly either by legislation or executive action as conditions change.
Ratification of U.N. resolutions on terrorism was the first point pressed by the FATF during its October meeting.
The recommendations coming out of the Washington meeting included:
Making it a crime to finance terrorism through money laundering.
Reporting suspicious transactions related to terrorism.
Establishing international cooperation through sharing of data about possible financial violations.
Tightening regulations on nonbanking financial institutions such as money changers and remittance agents.
Paying closer attention to nonprofit organizations and their ties to terrorist organizations.
Mrs. Lo said many members objected to the vagueness of the provision on nonprofit groups, so the FATF secretariat has asked for clarifications from the member states.
Following the October meeting, Mrs. Lo said the financial task force asked its members to report on how well they have complied with the anti-terrorism recommendations made in Washington.
In March, the FATF secretariat sent similar requests to another 170 countries and jurisdictions asking for the same information.
By the end of June, all 29 FATF members, as well as 55 nonmembers, had responded. "We only gave them a few months to answer, and we received a good response," she said.
The FATF has extended its deadline to Sept. 1 so more countries can respond before the next plenary meeting, which will be held in early October in Paris.
One of the nonmember countries that did respond was China.
Mrs. Lo praised the Chinese government for taking steps to prevent money from reaching terrorist organizations.
"In all our meetings we have been told China, even though it is not a member, is adhering to the FATF 40 recommendations or is trying to adhere," she said.
"They also assist in terms of checking the list of terrorists circulated" by the United States and the United Nations.
According to Chinese government figures, last year about $25 billion passed through banks and other financial institutions that was identified as criminal in nature.
The Beijing-based Financial and Economic News reported in July that the Chinese Security Bureau and central bank have set up separate committees to investigate money laundering.
Besides following the guidance of the United Nations, China's entrance to the World Trade Organization committed it to assist in the fight against money laundering. Mrs. Lo said in that regard Hong Kong has played an important role in helping China live up to its agreements.
She said Hong Kong officials have regular consultations with Beijing officials to help them better understand the latest trends in international banking and financing regimes.
At the same time she is invited to speak to groups of students, lawyers and bankers in China to explain how international agreements will affect them.
Copies of Hong Kong's money-laundering legislation are sent to Beijing not for approval, she said, but so the leaders in China can see what type of laws are needed to comply with international standards.
"We send all this information up north so they have some reference when they want to draft or revise their thinking process in this sector," Mrs. Lo said.
The task force will review the findings from the reports submitted to it at its October meeting in Paris. At that time, said Mrs. Lo, the group will issue a revised set of recommendations for countries to control money laundering and terrorist financing.
Prior to the Paris meeting, FATF will be sponsoring several public forums for nonmember countries and the public.
"This is the first time FATF has published a consultation document and has given the public time to comment and to organize a forum to discuss the results," she said.
The invitation to nonmembers and the public to participate in the formation of the new guidelines, Mrs. Lo said, will encourage the nonmember states to be part of the process and make it easier for them to join in the future.
"It's good for the FATF and it's good for the nonmembers as well," she said. "I want to create a win-win situation for all."


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