http://www.jpost.com/Editions/2000/09/25/News/News.12784.html
G-7 threatens to punish Israel for money laundering
By Tal Muscal, Jerusalem Post, 09/25/2000
JERUSALEM (September 25) - Finance ministers and
central bankers from the seven major industrial countries
yesterday threatened penalties against "uncooperative"
countries or territories - including Israel - that refuse to
comply with an international set of rules aimed at rooting
out money laundering.
Penalties "would include the possibility to condition or
restrict financial transactions" and the withdrawal of aid
given by international organizations, such as the
International Monetary Fund, officials from the Group of
Seven countries said in a statement after their meeting in
Prague.
The countries or territories targeted are the 15 identified in
a blacklist released June 22 by the Financial Action Task
Force (FATF) on money laundering, a group made up
mostly of members of the Organization for Economic
Cooperation and Development. Countries other than Israel
on the blacklist include Russia, Panama, and the Cayman
Islands.
The inclusion of Israel on the blacklist sparked the passage
of legislation combating money laundering before the
Knesset's summer recess. However, implementation of
specific articles of the law has not yet been carried out. "It
will take more time until technical aspects are worked out,"
MK Tzipi Livni (Likud), former chairwoman of the Knesset
subcommittee on money laundering, told The Jerusalem
Post.
As part of the new law, there will be mandatory
registration of large deposits in a database. In addition,
financial institutions will be required to report suspicious
transactions. "It's now up to the Justice Ministry and the
banks to enforce the regulations," Livni said.
Justice Ministry officials attached great importance to the
legislation. "The law went into effect on August 17," said
one official, adding: "We are making an effort to comply
with [it]."
According to the ministry, work has already commenced
to institute the law's various regulations. "While we are
committed to having the laws in place within 18 months,
the ministry is doing its best to reach compliance sooner,"
the official said.
The threat of sanctions is the latest step by the G-7 to
combat practices intended to disguise the flow of money
involved in criminal activity. The G-7 has championed
tighter rules and regulations of the international financial
system in light of the turmoil caused in Asia, Latin
America, and Russia in late 1998. It is a project that started
in 1989, with the creation of FATF.
"We have already issued advisories to our banks and other
financial institutions to demonstrate our commitment in this
field," the G7 - the US, Japan, Germany, Italy, Canada,
France, and the UK - said in its statement.
Some of the countries or territories identified for their
"harmful" tax regimes are already cooperating. In June, six
territories and countries pledged to eliminate "harmful" tax
practices by the end of 2005. They are Bermuda, the
Cayman Islands, Cyprus, Malta, Mauritius, and San
Marino.
The G-7 officials recognized that for some countries,
notably Russia, the issue is more fundamental. They
signaled they would be prepared to send technical advisers
to assist countries "that commit to making improvements to
their regimes."
FATF based its blacklist on countries or territories that
failed to comply with 25 guidelines for standards of
financial regulation, disclosure, enforcement, and
cooperation to combat crime.
Meanwhile, as the IMF and World Bank open their annual
meetings in Prague tomorrow, the sinking euro and rising
oil are expected to top the agenda, and all eyes will be on
financial markets today to see if Friday's efforts to prop up
the euro and push oil lower will work.
Europeans tried to paint a picture of unified, enthusiastic
support for their flagging currency yesterday, amid fears
the US is only halfheartedly behind Friday's surprise
intervention.
A synchronized move by the US, Japan, the European
Central Bank, and other allies to buy the euro on foreign
exchange markets immediately boosted the currency.
The euro surged from about 86 US cents to 90 US cents -
but halved those gains by the end of Friday's trading - after
US Treasury Secretary Lawrence Summers said America
has a vital interest in a strong dollar.
The statement cast doubt on US commitment to the
intervention and perhaps future interventions, which
essentially weaken the dollar to give a boost to the euro.
Also on Friday, US President Bill Clinton said he would tap
into an emergency oil stockpile to push prices lower.
IMF officials introduced a new plan yesterday to stabilize
the global oil market by bringing producers and consumers
together, hailing it as a major breakthrough in the current
crisis, which has seen oil prices surge to a 10-year high
above $30 per barrel, triple the price of early 1999.
In the past, it has been difficult to get producers and
consumers to agree on plans for the oil market, however,
and the latest effort was still short on details.
It was contained as a major point in the final communique
of the IMF's top policy-setting panel, the International
Monetary and Financial Committee, and represents a
compromise with finance ministers from big oil consuming
countries and top producers, including Saudi Arabia.
"This is the IMF at its best working to bring oil producers
and consumers together," said Gordon Brown, Britain's
chancellor of the exchequer and the chairman of the IMF
policy panel. "There is a common understanding of the
need for more stability and also a reasonable price."
(News agencies contributed to this report.)
