Lawyer pinpoints money laundering failures identified in EU ‘White List’ countries
A specialist lawyer in the field of money laundering and financial service regulation has questioned the validity of the European Union’s ’White List’ of countries whose money laundering controls are considered to be equal to the EU Member States.
Stephen Platt, English barrister and chairman of BakerPlatt, questions why countries such as Russia, Argentina and Mexico can justifiably make the list. He further highlights that Australia and Canada are on the list, despite being regarded as less than 25% compliant by the standards set by the Financial Action TaskForce (FATF), the inter-governmental body which assesses measures to combat money laundering.
The ’White List’ countries are seen as having a higher level of control compared to leading offshore finance jurisdictions, including the British Crown Dependencies, a conclusion Stephen Platt describes as bewildering.
’Having researched the background to some of the countries included, we question why countries that fall behind recognised international standards are on the list, whilst finance centres such as Jersey, the Bahamas and the Cayman are not,’ said Stephen Platt, who advises Governments and regulators on the implementation of effective regulatory and anti money laundering rules. In conjunction with its alliance partner in London, Seven Bedford Row, BakerPlatt has produced an analysis of the countries included on the White List. It highlights the following:
Russia – the first mutual evaluation report on Russia in 2001 by the European Committee on Crime Problems, noted as a ’critical deficiency’ Russia’s lack of comprehensive laws and regulations giving effect to international standards on money laundering. Although a second round evaluation in 2004 noted significant improvements, the numbers of investigations, prosecutions and convictions for money laundering were reducing and Know Your Customer procedures remained deficient.
Argentina, a GAFISUD (need explanation of body) report noted inherent weaknesses in legislation which had the effect of impeding successful prosecution of money laundering and no offence of terrorist financing existed. Argentina was criticised for its failure to provide statistics in anti money laundering areas meaning an assessment of the implementation of core requirements could not be carried out.
Mexico – in FATF’s September 2004 report, the application of anti money laundering measures was seen as somewhat haphazard and the lack of mutual legal assistance legislation not only inhibited Mexico’s ability to co-operate internationally, it also undermined national prosecutions. Bank and trust secrecy was also criticised as impeding investigations.
South Africa – while there was praise from FATF for developing a legislative structure to combat money laundering, the absence of a framework to combat the financing of terrorism was noted, whilst the framework in place was so new it needed time to be assessed for its effectiveness
As a further illustration, BakerPlatt, a Jersey based law firm, conducted some comparisons between Jersey, which was not included on the White List and yet was 76% compliant at the time of the last IMF assessment of the Island in 2003 and five of the other countries include on the White List. In their more recent assessments by the IMF, neither Australia (24%), Canada (14%), Singapore (23%), Switzerland (22%) nor the USA (31%) were near the compliance standards reached by Jersey.
’Australia and Canada’s staggering level of non-compliance with FATF recommendations makes it difficult for the EU to justify their inclusion on the White List on the grounds of "equivalence"’, he added.
He concluded :
’Given that the EU recently announced that it is to pursue infringement measures against 15 of its Member States for failing to implement the Third Money Laundering Directive into national law, the EU would perhaps be better placed to give a jurisdiction such as Jersey the recognition it deserves, and the role model some of its Member States appear to need, as the leader in the field of anti money laundering.’