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After US attacks, Europe urges black money crackdown

European governments pledged increased efforts to clamp down on criminals' money in the global financial system on Wednesday in the wake of last week's attacks on the United States.

Britain called for new global rules obliging financial institutions to report suspect transactions, and Switzerland said it would not let its tradition of banking secrecy stand in the way of co-operation with other countries on the issue.

European Union finance ministers will discuss what measures should be taken in areas such as banking supervision at a meeting in Liege, Belgium at the weekend, Belgian Finance Minister Didier Reynders said.

British Chancellor of the Exchequer Gordon Brown told BBC radio international action was needed because individual states could not fully tackle the problem with measures of their own.

"It's necessary to create that wider (reporting) obligation on international institutions, but equally it's necessary to have a system of reporting so that there's not only no safe haven (for terrorists) but no hiding place for terrorist money," Brown said.

"We have to persuade some countries that have been reluctant to do far more," he said.

British authorities had closed one London-based account at Barclays Plc, Brown said. A Barclays spokeswoman confirmed the closure of the one account, but would not comment on whether the bank planned to close any other possibly suspicious accounts.

Swiss Finance Minister Kaspar Villiger, whose country's banking industry manages around a third of the world's offshore wealth, said it "cannot become the location where terrorism can be built up financially and logistically".

"Bank secrecy will be waived within the framework of legal assistance cases where terrorism is concerned," he told the daily Tages-Anzeiger newspaper.

Earlier this week, French Finance Minister Laurent Fabius proposed the use of an anti-money laundering agency based in Paris to spearhead a drive against funding of extremists.

"Terrorism also relies on funding and we must do something to make sure the terrorists are more effectively hunted down," Fabius said. "I will take the proposal up very rapidly with my colleagues, not just at European level but at world level."

EFFORTS STEPPED UP IN RECENT YEARS

In recent years, international regulators have made efforts to curb the laundering of money from illegal sources, such as the drugs trade and organised crime, through the international financial system and especially through offshore centres.

The Group of Seven (G7) countries set up the Financial Action Task Force to combat illegal money movements and the Organisation for Economic Co-operation and Development has also been pressuring countries for reforms.

A study in June by the Task Force compiled a list of 'non-co-operative' countries in terms of cracking down on money laundering which included Hungary, Egypt, Guatemala, Indonesia, Ukraine and the Philippines.

PAPER TRAIL MAY YIELD LITTLE

The US Treasury's under secretary for enforcement, Jimmy Gurule said on Wednesday that the department would use every tool it has to track the sources of funding for the perpetrators of last week's attacks.

"We're going to be following the money trail wherever it leads," he told a Washington news conference.

However, Thomas Wania, a senior banker at Commerzbank in Frankfurt, said following a paper trail of suspected money would be quick and easy in the West but trickier in countries such as Bermuda, Pakistan or in the Arab world.

British Treasury sources said Brown will press his European colleagues for further action at the Liege meeting of EU finance ministers.

Brown is expected to call on the EU to implement the reform of its anti-money laundering directive, currently before the European Parliament, as a matter of urgency.

In the past few days, financial market regulators on both sides of the Atlantic have been looking into alleged insider trading in shares of airlines and insurance companies ahead of last week's attacks on New York and Washington.

Brown said Britain would also propose new measures to track money in wider forums. He is expected to push for reforms when he meets colleagues in the Group of Seven developed countries.

Bankers say tracking funds to specific suspects, such as Saudi-born millionaire Osama bin Laden who is suspected of involvement in the US attacks, will be tough.

"Obviously no known terrorist with an ounce of grey matter between his ears would open an account in his own name. And then difficulties start," said James Nason, spokesman for the Swiss Bankers' Association.

Ricco Koslowski, director of corporate investigations for the London-based Control Risks consulting firm, told the German weekly newspaper Die Zeit that it was doubtful the perpetrators of last week's attack used regular financial channels.

They were more likely to have used illegal 'underground banking', which bypasses official banking networks, he said.

"Technical surveillance doesn't make any sense in this case," Koslowski said. "Underground banking doesn't leave a paper trail."

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