1/3)J.WINER,DAS, CONG.TESTIMONY ON

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POSTED TUESDAY 14-MAR-2000: 6:00AM

Followings are excerpts from the testimony by Jonathan Winer, Deputy
Assistant Secretary of the Bureau for International Narcotics affairs,
before House Committee on Banking and Financial Services. The original
document can be found at URL:

http://www.state.gov/www/policy_remarks/1998/980611_winer_mlaundering.html

In this posting, Mr Winer's testimony was abridged and divided into
three parts. First part mainly concern with the definition of money
laundering and the extent of the problem. It can be learnt that the
problem of money laundering problem come together with other crimes such
as drug and arms trafficking, tax evasion and other financial frauds.
Globally, laundered fund is estimated as USD 300-500 billion a year
(Australian authorities estimate about 3-5 billion being laundered from
their country--and considered significant problem compared with the size
of Australia's economy).

Second part explain the US Government initiative with short summary of
recommendations, treaties and agreement to combat money laundering.
These treaties appears to be still developing from regional and
multilateral level. Part three is further elaboration of these treaties
and recommendations. Anyone who look for details should consult with
original testimony at above given URL.

There has to be question on the effectiveness of these recommendations
and multilateral treaties. To my observation, these treaties are still
at the development stage and, therefore, on their own term will be weak
to legally enforce. Thus, international political support, together with
pressure from the media may help enhance their effectiveness.

Regards, U Ne Oo.
---------------------------------------------
PART 1 OF 3: COMBATING MONEY LAUNDERING
TESTIMONY BEFORE US HOUSE COMMITTEE ON BANKING AND FINANCIAL SERVICES
JUNE 11, 1998. JONATHAN WINER, DEPUTY ASSISTANT SECRETARY
BUREAU FOR INTERNATIONAL NARCOTICS AND LAW ENFORCEMENT AFFAIRS

Mr. Chairman and members of the committee: 

Thank you for the opportunity this hearing provides to give you an
update on recent federal efforts to combat money laundering. Money
laundering has developed into a global problem and, to address this
problem, the Department of State has undertaken a variety of initiatives
to combat this evolving national security threat. I would like to
discuss global money laundering and address why it is important to fight
its growth on a global basis. I also would like to discuss several
initiatives the Department of State has developed to reduce the threat
of international money laundering. 

The Money Laundering Problem 

Criminals that commit crimes need to disguise their money so that they
can then use it freely by integrating it into global financial systems.
This is the basis for money laundering and involves ill-gotten gains
from a variety of crimes including drug trafficking, organized crime,
terrorism, arms trafficking, kidnaping, and various financial crimes. 

Money laundering generally involves a series of multiple transactions
used to disguise the source of financial assets so that those assets may
be used without compromising the criminals who are seeking to use the
funds. Through money laundering, the criminal tries to transform the
monetary proceeds derived from illicit activities into funds with an
apparently legal source. 

Due to the clandestine nature of money laundering, it is difficult to
estimate the total volume of laundered funds circulating
internationally. Analytic techniques are highly imprecise, involving
such measures as multiplying the volume of trade in an illicit
activity--such as drug trafficking, arms trafficking, or fraud--by the
value of that trade. Such rough estimates place the annual worldwide
value of laundered funds in the range of $300-500 billion. 

Weak financial regulatory systems, lax enforcement, and corruption are
key factors that make certain jurisdictions particularly attractive for
laundering illicit proceeds by international drug trafficking and other
criminal organizations, by terrorist groups financing their activities,
and by pariah states undertaking financial transactions to evade
international sanctions and to acquire technologies and components for
weapons of mass destruction. 

As the United States assesses a jurisdiction's vulnerability to money
laundering, it evaluates the role of the jurisdiction's financial
services sector in facilitating illicit financial transactions,
including: the laundering or otherwise improper transfer or distribution
of funds or maintenance of accounts; the nature and extent of
legislation and regulations to prevent illicit transactions; the
capabilities and  willingness of the government to enforce existing
legislation and regulations and the results of the government's actions
to enforce those laws; and, the volume of illicit transactions detected
by U.S. law enforcement agencies in the financial services sector of
that jurisdiction. 

There are three elements to the complete laundering of funds, beginning
with the placement of currency into a financial services institution
("placement"), continuing with the movement of funds from institution to
institution to hide the source and ownership of the funds ("layering"),
and concluding with the reinvestment of those funds in an ostensibly
legitimate business ("integration"). 

While countermeasures to all three components of money laundering are
important, laundered money is most vulnerable to detection at the
placement stage. As a consequence, international regulatory and law
enforcement efforts have concentrated especially on developing methods
to make it difficult to place illicit funds without detection by
developing measures such as suspicious transaction reporting
requirements, cross-border monetary declaration requirements, and "know
your customer" rules for those accepting cash deposits. 

International standards to discourage layering have also begun to
develop, through a focus on transparency and through pressure to
eliminate techniques such as the use of nominees and numbered accounts
to disguise the actual ownership of assets. Of additional importance has
been the growing international recognition that bank secrecy rules must
give way to permit law enforcement agencies to review financial records
in cases where there is an active criminal investigation pertaining to
the source of the funds. 

Finally, integration of illicit proceeds can be fought through the
strengthening of asset forfeiture laws, by which governments can seize
the proceeds of criminal activity even when those proceeds have been
reinvested in ostensibly legitimate enterprises. Currently, the United
States and its international partners are examining methods by which
asset forfeiture regimes and asset sharing among law enforcement
agencies of different countries can be strengthened to place more
pressure on money launderers and to make it more difficult for them to
assume that after "integration" they have successfully protected their
money from the law. 

Why It Is Important To Fight Money Laundering 

Money laundering has devastating social consequences and is a threat to
national security because it provides the fuel for drug dealers,
terrorists, arms dealers, and other criminals to operate and expand
their criminal enterprises. In doing so, criminals manipulate financial
systems in the United States and abroad. Unchecked, money laundering can
erode the integrity of a nation's financial institutions. Due to the
high integration of capital markets, money laundering can also
negatively affect national and global interest rates as launderers
reinvest funds where their schemes are less likely to be detected,
rather than where rates of return are higher because of sound economic
principles. Organized financial crime is assuming an increasingly
significant role that threatens the safety and security of people,
states, and democratic institutions. Moreover, our ability to conduct
foreign policy and to promote our economic security and prosperity is
hindered by these threats to our democratic and free-market partners. 

In recent years, crime has become increasingly international in scope
and the financial aspects of crime have become more complex due to the
rapid advances in technology and globalization of the financial services
industry. Money laundering can have devastating effects on financial
institutions and undermine the stability of democratic nations. Modern
financial systems permit criminals to transfer instantly millions of
dollars though personal computers and satellite dishes. Money has been
laundered through currency exchange houses, stock brokerage houses,
casinos, automobile dealerships, insurance companies, and trading
companies. The use of private banking facilities, offshore banking, wire
systems, shell corporations, and trade financing all have the ability to
mask illegal activities. The criminal's choice of money laundering
vehicles is only limited by his or her creativity. Ultimately, this
laundered money flows into global financial systems where it can
undermine national economies and currencies. Money laundering is not
only a law enforcement problem but a serious national and international
security threat as well. 

There is now worldwide recognition that we must deal firmly and
effectively with increasingly elusive, well-financed, and
technologically adept criminals who are determined to use every means
available to subvert the financial systems that are the cornerstone of
legitimate international commerce. Money launderers can
impact countries by reducing tax revenues through underground economies,
competing unfairly with legitimate businesses, damaging financial
systems, and disrupting economic development. Money laundering is now
being viewed as a central dilemma in dealing with all forms of
international organized crime because financial gain means power.
Fighting money launderers not only reduces financial crime, but it also
deprives criminals of the means to commit other serious crimes.

Many countries around the world already engage in a concerted effort to
combat money laundering and other financial crimes. Through the
enactment of counter-money laundering laws, bilateral and multilateral
agreements, and other cooperative efforts, nations have joined together
to foster an international awareness of the seriousness and threat of
this criminal activity. 

With a complex and sophisticated financial system that is often a target
for money laundering, the United States is working hard both at home and
abroad to fight this crime. An increasing number of countries have also
moved to deny criminals unfettered access to their financial systems.
While much progress has been made, there are still nations that are not
yet adequately addressing this problem. And the international criminal
is taking full advantage, moving vast sums of illicit money through the
world's financial systems. International criminals know no geographic
boundaries and still operate in "safe haven" jurisdictions
that permit, or even encourage, this criminal activity. 

If the United States, along with its international partners and allies,
is ultimately going to be successful in this fight, then we must make it
even more difficult for criminals. Efforts must focus on both those
areas where criminals are now operating and where they will try to
infiltrate in the future, and we must foster cooperation with those
nations that, heretofore, have allowed criminal enterprises to flourish
unchecked. 

Current Global Trends in Money Laundering
/END PART-1
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