ADB warns versus harmful effects of money laundering

The harmful effects of money laundering are not fully appreciated in the Asia and Pacific region, the Asian Development Bank (ADB) said in a report titled Technical Assistance for Countering Money Laundering in the Asia and Pacific Region.

"Money laundering must be seen as an economic and social issue that is steeped in crime and ultimately threatens the integrity of financial systems in the region and the legitimacy of state institutions," the ADB said.

The bank added that the link between combating money laundering and the integrity of the respective financial sectors, sustained economic growth, good governance, and anti-corruption is not clearly understood in the region.

Money laundering is a system whereby money illegally acquired is plowed into the established or legitimate system, resulting in the illegally-acquired money being "cleansed" or legitimized.

Laundering is a serious threat to the operation and stability of a nation’s financial system and has the potential to undermine the integrated global financial system as a whole, the bank said. It therefore makes countries vulnerable to other kinds of crimes such as drug trafficking, trafficking of people, fraud and corruption.

In 1989, the Group of Seven (67) industrialized countries organized the Financial Advisory Task Force (FATC) which has become the recognized "police force" looking into international money laundering.

The FATC released recently the names of 15 countries considered to be directly or indirectly involved in money laundering. The Philippines is among the countries listed as "uncooperative."

A regional technical assistance group under the supervision of the Organization for Economic Cooperation and Development (OECD) and the ADB will be zeroing in on nine developing member countries to help adopt and implement anti-money laundering measures. These are: Cook Islands, Fiji Islands, Indonesia, Marshall Islands, Nauru, Samoa, Thailand, Vanuatu, and the Philippines.

ADB country director for the Philippines Gunter Hecker said the Philippines has started taking steps to get de-listed from the FATC "uncooperative" list.

"Reforms are being pushed and the signals are that these reforms are being implemented. The RP has a headstart but we should not relax. We should start and pass the money laundering bill, and strengthen the supervisory possibility of the Bangko Sentral ng Pilipinas.

But the promulgation of the regulatory framework is only the starting point in combating money laundering, the ADB executive said.

"The real issue is how to effectively implement these laws," he added.

A critical external pressure exerted on the Philippines is that the United Nations may institute certain sanctions on countries that do not institute anti-laundering measures by 2003. This was embodied in its Political Declaration and Action Plan Against Money Laundering which was adopted in a special session of the General Assembly in June 1998.