Addressing bankers in New York on Thursday, US Treasury Secretary Lawrence Summers delivered his second broadside in a week, this time targetting international money-laundering.
After Tuesday's attack on US tax shelters, this time Secretary Summers went for international financial centres that allow dubious banking transactions. The administration will propose new legislation allowing it to ban transactions between US financial institutions and offshore jurisdictions that it suspects of involvement in money-laundering.
The US administration has wanted greater powers to attack suspect jurisdictions, and the Bank of New York affair has given it the perfect opportunity to gain them.
"The issue of money laundering is so prominent and public that it can't be ignored anymore," a senior official said. "We need to be able to target the root problems without unnecessarily hindering legitimate economic activity."
In fact, legislation is already on its way through Congress that would place sanctions on US or foreign banks implicated in money-laundering, prompted mostly by perceptions that money given or lent to Russia has ended up buying prime beach-side villas on Caribbean atolls. But the Administration agrees with industry fears that simplistic punitive measures might achieve nothing more than disadvantaging US banks against their foreign rivals.
In his speech, Summers singled out certain countries as sources of money needing washing, including Russia, Colombia, and Nigeria, while he named the islands of Dominica, Nauru and Antigua are among the biggest destination spots, with laws that make it possible or actively encourage criminals to do business there. "Crime continues to flourish in Russia due to the lack of the rule of law," said the Treasury Secretary, "The Russian government has still not enacted meaningful reforms."
The measures proposed would allow the Treasury, in consultation with other US government departments, to determine that a foreign country, institution or even a certain type of transaction posed a "primary money laundering concern". Sanctions would then include new reporting requirements for financial institutions and prohibitions on correspondent banking relationships.
"The new measures are designed to be graduated, discretionary, and targetable," said Mr Summers, "graduated, so we can calibrate our action to be proportionate to the threat; discretionary, so we can integrate these tools into our more active bilateral and multilateral diplomatic efforts to persuade offending jurisdictions to change their laws; and targetable, so we can focus our response on the precise threat we confront in each specific jurisdiction."
Reaction in the House of Representatives was broadly supportive of the proposed measures. Banking Committee Chairman James Leach, an Iowa Republican, and the panel's ranking Democrat, John LaFalce of New York, are expected to introduce the legislation as early as next week
See related articles
in
The New York Times
http://www.nytimes.com/library/world/global/030200russia-launder.html
and the Financial Times
http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=
FT47470SC5C&live=true&tagid=ZZZOMSJK30C&subheading=US
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