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Wednesday, 10 October, 2001, 12:16 GMT 13:16 UK
UK is 'money launderers' paradise'
Money laundering
Britain still offers a safe haven for terrorist money and the authorities are doing virtually nothing about it, according to a damning report by a French MP.


The City is an impenetrable fortress with a status, rights and custom of its own, a closed universe where every financier, banker or businessman chooses silence above all else

Arnaud Montebourg

The 400 page report says that the City of London's strict code of confidentiality allows money laundering to flourish.

Its findings square with those of investigations under way at BBC News Online, which suggest that the systems in place to deal with money laundering are woefully inadequate to the task.

The UK government called the report's findings "offensive". A Downing Street spokesman said the report "was inacurate before 11 September and even more inaccurate since then".

City culture 'helps money launderers'

The report's author, maverick socialist deputy Arnaud Montebourg, said that in Britain banking secrecy appeared to be more important than public order.


This report was out of date before 11 September, and it's even more out of date now

UK Treasury spokesman
And he accused the UK authorities of making it virtually impossible for investigators to pursue money launderers effectively.

"Tony Blair, and his government, preaches around the world against terrorism," he said.

"He would be well advised to preach to his own bankers and oblige them to go after dirty money.

"Even the Swiss co-operate more than the English," Mr Montebourg added.

The report also calls on Britain to dismantle offshore tax havens such as Jersey and Gibraltar and other places where criminals are suspected of hiding dirty money.

"Out of date"?

The UK authorities, though, insist Montebourg is wrong.

"This report was out of date before 11 September," said a Treasury spokesman, "and it's even more out of date now."

Over 63m in suspect funds has already been frozen - much of it before 11 September - and the hunt goes on, he said.

The UK's anti-money laundering operations have twice been commended by the main international body overseeing the fight against financial crime, the Financial Action Task Force (FATF), he said.

And the UK has taken concerted action to make sure its dependent territories fall into line.

Lack of manpower

Mr Montebourg's report, on the other hand, insists that British investigators lack the manpower they need to do the job.

It says Britain's National Criminal Intelligence Service (NCIS) employs just 30 people to deal with 15,000 reports of suspect transactions a year. The UK Treasury, though, points out that during the past 18 months this number has been increased to about 70 staff.

Between 1986 and 1996 just 100 money laundering cases went to trial in Britain, compared with more than 500 in Italy and 2,000 in the United States, over the same period, the report claims.

Phillip Thorpe, of City watchdog the Financial Services Authority, was quoted as telling the French parliamentary committee "each time we raise a flaw with a financial institution we are told it is somebody who took the decision on their own, who took it upon themselves to put profit before ethics."

Gathering data, not intelligence

According to serving and former UK officials who have spoken to BBC News Online, the focus in UK law enforcement has shifted to gathering data, rather than generating intelligence of practical use to investigators.

NCIS dealt with more than 18,000 "suspicious transaction reports" in 2000, and aimed to process them within 24 hours, an NCIS official said.

But sources with experience of fighting money laundering in the UK told BBC News Online that this policy is tied into performance targets, and does not represent an efficient way of tackling the problem.

NCIS, they said, is failing to build sufficient relationships with the financial community, to convince them to co-operate more effectively and help avoid scandals.

No police force except London's Metropolitan Police takes financial crime seriously enough, they claim.

"Closed universe"

Montebourg's report concludes that "the City is an impenetrable fortress with a status, rights and custom of its own, a closed universe where every financier, banker or businessman chooses silence above all else."


It is high time that Europe got worried about sheltering in its midst these veritable machines that launder criminal money

Monetbourg's report

It said it had taken the British an extraordinary amount of time to respond to Swiss tip-offs before ordering 19 banks to freeze funds linked to former Nigerian ruler Sani Abacha.

The former dictator has been accused of spiriting millions of dollars out of Nigeria.

On offshore tax havens, the report says: "It is high time that Europe got worried about sheltering in its midst these veritable machines that launder criminal money."

FSA response

A spokesman for the FSA said Mr Montebourg's report was out of date.


We are now very close to taking out tough new powers to tackle money laundering and things will change in a matter of weeks

FSA

"A lot of his comments are historical. Many of them must be close to a year old.

"We are now very close to taking out tough new powers to tackle money laundering and things will change in a matter of weeks."

He said the FSA has taken money laundering seriously for a "long time" and in January published a report into alleged money laundering by Abacha.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Rory Cellan Jones
"Security experts say existing rules are being enforced more thoroughly"
See also:

28 Sep 01 | Business
Net closes on terror cash
01 Oct 01 | UK
UK freezes terror funds
01 Aug 01 | Business
Laundering reports reach record high
19 Sep 01 | Business
Following the money trail
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