Five Arrests in Bank Bali Scandal
Jakarta
Indonesian police last month arrested five suspects in the US$65 million Bank Bali corruption scandal, though Setya Novanto, the ruling party official whose company received the money, remains free. In addition to Rudy Ramli, the bank's former president director, police arrested his colleagues Hendry Kurniawan, Rusli Suryadi and Firman Soetjahja, as well as businessman Djoko Tjandra, for violating banking laws, said police spokesman Col. Saleh Saaf.

The case, which has led international donors to freeze much- needed aid, centres on a 546Md rupiah (US$65m) "fee" paid by PT Bank Bali to a company controlled by Novanto - the ruling Golkar party's vice treasurer - to help recover money from banks shut by the state. Since the bank money was guaranteed by the government, no fees should have been paid, it is alleged. Some of the money was allegedly intended to bribe delegates to vote for Habibie in the presidential elections set for November.

Swiss Freeze Bank Account of Former East German Judge, NZZ Says
Zurich
Swiss prosecutors have frozen the bank account of former East German judge and lawyer for the Stasi secret police Juergen Wetzenstein-Ollenschlaeger. Wetzenstein-Ollenschlaeger is accused of stealing 1.8 million Swiss francs (US$1.2 million) and depositing them in an account of Credit Suisse Group subsidiary Bank Hofmann. The account was frozen after the bank earlier this year alerted the Swiss authorities to a possible case of money laundering. A new Swiss law to combat money laundering came into effect in April 1998, in a bid to shore up the battered image of Switzerland's banking industry.

Swiss freeze Abacha accounts in Lagos search
GENEVA
Switzerland has said it has frozen bank accounts held by the late Nigerian dictator Sani Abacha, close family members and associates, accused by Lagos of having "systematically plundered" the central bank. The Federal Office for Police Matters said the frozen accounts were at four banks in Geneva and one in Zurich. The financial institutions, which were not identified, had not yet informed the federal police authorities in Berne of the value of the frozen assets, the statement said.
Enrico Monfrini, a Geneva lawyer representing the elected government of President Olusegun Obasanjo, said Lagos could prove Abacha and his entourage had diverted $2.2 billion from the central bank alone.

He said the Nigerian police's special fraud unit had identified suspect transfers during Abacha's nearly five-year rule to countries including Austria, Britain, Brazil, Germany, Switzerland and the US. Abacha, who seized power in 1993 after the turmoil that followed a presidential election annulled by the military, ruled the oil-producing country with an iron fist. He died in June 1998.

Drug Busts in Colombia, Caribbean
BOGOTA, Colombia -
Although encouraged by their apparent crippling of a major international drug ring, US law enforcement officials remain worried about the remarkable resiliency of Colombia's cocaine entrepreneurs. More than 30 people were arrested this month in what authorities called the biggest blow to Colombian drug trafficking since 1995. The smashed ring was the heir apparent to the Medellin and Cali cartels, Colombia's main drug mafias from the 1980s through the mid-90s, and shipped between 20 and 30 tons of cocaine a month into Mexico for distribution in the United States, officials said.

Officials said 40-year-old Alejandro Bernal Madrigal of Bogota set up the ring, using remnants of the Medellin cartel and other drug gangs and employing advanced technology, including encrypted and cloned cellular phones and Internet voice communication. Bernal's chief link in Mexico, Armando Valencia, was among 43 co-conspirators named in an indictment in Miami that specified drug trafficking, racketeering and money laundering charges. One suspect was arrested in Mexico, but Valencia remained at large, officials said.

Those arrested in Colombia will be the first Colombians extradited to the US under a December 1997 law that overturned a six-year ban on the practice. DEA agents in South Florida found Internet phone software on one alleged trafficker's computer that had Bernal listed No. 1 on the speed dial, US officials said. Officials said key busts that led to the ring's demise included seizures in August of 13.7 tons of cocaine - found inside chlorine gas cylinders in Quito, Ecuador; hidden in bags of frozen fruit pulp seized in Galveston, Texas; and secreted in a Mexican-registered fishing boat seized off that country's Pacific coast.

Italian police make huge money laundering raid
MILAN –
Italian police have cracked a major money laundering operation and arrested enigmatic Sardinian financier Flavio Carboni and 67 other people. Carboni and others are accused of laundering funds from an international drug ring by investing the recycled cash in real estate developments in Italy, mostly in Sardinia. "We have confiscated some 130 Md lire (US$72m) in real estate assets - the biggest seizure ever carried out in Italy," said Angiolo Pellegrini, a top official in Italy's anti-mafia DIA special police. "The extensive documents in our possession indicate there could be further developments.'' Italy's anti-mafia police unit said it had also confiscated about 4 tonnes of cocaine. Carboni, charged by Italian magistrates in 1997 with the murder of Italian banker Roberto Calvi in a case that has yet to come to trial, was arrested with three family members.

The money laundering investigation was triggered by the arrest earlier this year of drug boss Pasquale Centore, who gave police important information about a network of companies linked to Carboni. The money from Centore's Milan-based drug trafficking operation was transported to banks in Lugano, Switzerland "by hand, in suitcases, in cash," Pellegrini said - and changed into US dollars. 

It was then transferred in cash to companies controlled by Carboni and by a firm called Bucalossi, based in the Tuscan town of Grossetto, and invested in real estate in either in Sardinia or in Rome, he said. Centore's operation imported some 50Kg of cocaine monthly from Peru, Venezuela and Colombia, much of it hidden in containers of frozen food or machine tools, police said.
Centore paid for the drugs through banks in New York and Miami, police said. They declined to provide names of either the Swiss or American banks. Police said Carboni's companies invested the laundered money in Sardinia Village, a 177-apartment luxury resort in Porto Rotondo in Sardinia worth about US$55 million. Other funds were invested in a luxury villa in Rome called Villa Casaletto, they said.

Bulgarian banks intact after laundering arrests
SOFIA
Bulgaria's Interior Ministry said this month that 19 people were arrested during the break up of a money laundering scheme, which had laundered US$30m through nine Bulgarian banks in the first half of 1999 in order to avoid taxes.

Emil Harsev, managing director of Harsev & Co brokerage house, said the case showed that Bulgaria had an effective supervision system over money transfers which had been able to detect “such a small sum”, he said.

Stability of the banking system is an extremely sensitive issue in the Balkan state where a severe financial crisis caused by the uncontrollable syphoning of funds abroad closed one third of Bulgaria's banks two years ago. Bulgaria, which has 34 banks including foreign bank branches, passed a law against money laundering in 1998 and set up a Financial Investigation Bureau at the Finance Ministry, which was mainly involved in the crackdown. Police said the money-laundering scheme operated through ghost firms that were set up in Bulgaria without proper registration. They exported capital against fake import contracts. The Interior Ministry did not name the banks but said the scheme involved an offshore company set up by the ring with a bank account in an eastern European country through which Bulgarian companies syphoned funds to avoiding paying Bulgarian taxes, excise and customs duties.

Experts urge UAE to fight money laundering
ABU DHABI -
The United Arab Emirates has been urged to step up efforts to combat money laundering. At an official seminar on drugs and related crimes, experts recommended that the oil-rich Gulf Arab state put in place "practical mechanisms to implement international agreements and protocols".

The UAE, which experts say is vulnerable to money laundering because of its open economy and proximity to international drugs routes, has signed UN and other accords to introduce laws against money laundering, but it has no specific law against money laundering. During the meeting in the UAE capital, Abdulrahim Sinkais al-Awadi, a central bank manager for supervision, outlined the central bank's initiatives to tackle money laundering. al-Awadi said the UAE central bank had already issued guidelines asking banks to monitor suspicious activities, report transactions not compatible with an owner's income, verify customer identities and keep client records for five years.

He said the central bank urged the international community to help stop money laundering by making drug smuggling and distribution punishable by death, as is the case in the UAE, other Gulf Arab states and some Asian countries. He said the country had become an attraction point to dealers in international drug trafficking "for a number of reasons" - these included high incomes, liberal capital flow rules and an active financial system depending heavily on foreign trade. About 50 local and foreign banks have branches in the UAE, located across the Gulf from Iran, which is a major transit route for drugs heading to Western states from Afghanistan and Pakistan.

Thailand agency remains incomplete
BANGKOK –
The nine-member Anti-Money Laundering Committee remains incomplete after opposition members of the appointment committee abruptly left the in camera appointments meeting during which the Senate was expected to consider the nine nominees for the committee. Parliament is closed for six weeks, due to reopen on Nov 23. The walkout was apparently over the resignation of one member and the failure of the committee to approve his chosen successor. Following the walkout there were only 182 MPs left in the assembly hall. At least 191 MPs are needed to make a quorum.

Eastern Europe
TATRANSKA JAVORINA, Slovakia –
The prime ministers of Slovakia, Hungary, Poland and the Czech Republic held an informal meeting in Slovakia and pledged closer co-operation, especially to combat organised crime, which is blamed for a dramatic increase in money laundering, drug trafficking and prostitution. The leaders are concerned to improve the image of their respective countries as they edge towards application to join the EU.

Japan
TOKYO –
Police have raided the first foreign-affiliated financial institution to be investigated on suspicion of violating the Banking Law. The Tokyo branch of Credit Suisse Financial Products (CSFP), a unit of Credit Suisse Group AG, was entered with police alleging suspicion CSFP obstructed an earlier inspection by the Financial Supervisory Agency (FSA). The Tokyo unit of CSFP is alleged to have told staff to destroy quantities of transaction documents and delete e-mail transaction records when the FSA inspected the branch's derivatives products in January. Investigators also obtained records from the FSA following its inspection of CSFP.

The Banking Law provides for disciplinary measures if financial institutions are found to have obstructed banking inspectors' efforts to uncover misconduct by regulated institutions. It is rumoured that the Credit Suisse Group developed loss-deferring commodities products that relied on complex derivatives transactions. These were then sold these to more than 100 Japanese firms that incurred losses on security investments.

The group is also suspected of helping its customers modify their accounts to postpone disposing of losses on share-holdings or avoid making disclosures on bad loans.

The Credit Suisse Group called the raid "regrettable," saying it has co-operated fully in all investigations and will continue to do so.

“Colombia's national sovereignty is increasingly threatened by well-armed and ruthless guerrillas, paramilitaries, and the narcotrafficking interests which are inextricably linked. Although the government is not directly at risk, these threats are slowly eroding the authority of the central government and depriving it of the ability to govern in outlying areas. It is in these lawless areas -- where the guerrilla groups, paramilitaries, and narcotics traffickers flourish -- that the narcotics industry is finding refuge. As a result, large swathes of Colombia are in danger of being narco-districts for the production, transportation, processing, and marketing of these substances.”

Testimony of Ambassador Thomas R. Pickering, US Under Secretary of State for Political Affairs before the Senate Committee on Foreign Relations; October 6, 1999

Ireland: The three year investigation into cross border laundering between Northern Ireland (UK) and the Republic of Ireland looks like moving into a critical phase as arrests by Republic authorities are said to be imminent. Details are sketchy but it seems that predicate crimes are tax evasion and smuggling more than the expected terrorist related offences, perhaps an indication of the problems of defining terrorism between the UK and Ireland. Estimates of the amount alleged to have been laundered range up to IR£125m, passed between Bureaux de Change. The investigation has been bogged down as different organisations struggled to come to grips with its complexity and the number of people involved. The near parity of the Irish Pound and Sterling is a factor as is the ease with which both currencies can be spent in the other country, so making currency almost a like for like swap.

UK: The divergence of opinion at the governing body for solicitors (attorneys) came to a head with the publication of the Office for the Supervision of Solicitors’ guidance for solicitors. The OSS, both under its present name and its previous name of The Solicitors Complaints Bureau (and, yes, they left the punctuation out when they invented the name) has always taken the view that solicitors who take part in any activity covered by the Financial Services Act 1986 are required to comply with the 1993 Money Laundering Regulations which more or less enacted the provisions of The Money Laundering Directive 1991.

However, the OSS is the supervisory part of the Law Society which also has a sort of trade union function. That part of The Law Society has kept up a rearguard action claiming that solicitors are not covered, declaring even within the past few weeks that the proposed Second Money Laundering Directive will “bring solicitors within the net” of money laundering prevention laws. Even when presented with the evidence, that part of The Law Society seems to be in denial, seemingly oblivious to the role of lawyers in a typical money laundering scheme, even though the OSS has published details of actual cases involving solicitors.

Fascinatingly, not many people seem to have noticed that there are two parts of the same organisation putting out entirely conflicting messages, and both doing so in the same weekly newsletter, The Law Society’s Gazette.

One of the USA Government’s most frequent travellers to Europe, or anywhere else for that matter, has touched down in France. Stan Morris, the former director of FinCEN who was lampooned in the American press for his tendency to be somewhere other than Washington has arrived at Interpol. One question: if he is already in Europe, will he now fly to the USA?

Talking of Interpol, the UK spell check in WMLR’s copy of Netscape Communicator (which does not recognise “recognise”) thinks “Interpol” should be “interlope”.

The British Government is anticipating a scandal. Over the past couple of years, every time a Government Minister has made a pronouncement about organised crime in general and money laundering in particular, it has been a diversionary tactic. So, on the day Peter Mandelson, until then a disgraced former minister and now a formerly disgraced minister, arrived in Northern Ireland to take over from the experienced and, in most quarters, highly regarded, Mo Mowlem, the Home Secretary announced, to a conference few people knew about, a series of initiatives to stem international crime. And announced that his great chum Tony (the artist occupying the office formerly known as The Prime Minister) is to address a European Summit in Tampere, Finland the same week as this issue of WMLR hits the wires. Of course, Straw's comments made clear the same message as every previous message: let's talk about it, let's state objectives, but let's shuffle around existing money and not commit any more money to enforcement agencies.

Yet, WMLR is nothing but fair. Straw, famous for having a son found in possession of a controlled drug but not charged with any offence, wants stronger action on international criminals and did mention two good ideas which would dissolve law enforcement borders within Europe and make it less attractive to criminals to operate trans-nationally within the EU. First he suggests that police in each state should enforce warrants granted in any other state so removing the need for extradition between member states and secondly that court-granted freezing orders in one state should be applied to assets, including bank accounts in any other state.

Of course, this will not happen in the lifetime of most of the criminals he wants to attack: bankers in Luxembourg will not be willing to easily give up their USP of secrecy and the concept of getting an Italian policeman to execute a warrant for a wife-beater (given the recent attitude of Italian Judges to domestic violence) seems less than likely to succeed. Again, the British Government has made a policy statement that grabs headlines but has, apparently, little substance. In this case, however, some of the initiatives are co-operative with other EU states so maybe they will try to make something happen. We await the full text of the Boy Blair’s speech - and details of the initiatives.