Search for missing Parmalat funds puts spotlight on tax havens

PARIS (AFP) – The collapse of the Italian dairy conglomerate Parmalat and the search for an estimated 10 billion euros ($12.6 billion) missing from its accounts illustrate the limited scope of international efforts to shine light into the murky world of money laundering and tax havens.

Despite initiatives by the United Nations, an OECD-based watchdog and individual countries to combat money laundering and, particularly after the Sept. 11 terror attacks, terrorist financing, both clean and dirty money continues to flood into tax havens.

According to the Rome newspaper Corriere della Sera, millions of euros belonging to Parmalat were transferred from a bank account in the Cayman Islands to an account in Luxembourg held by the company’s founder, Calisto Tanzi, before his arrest on Dec. 27.

A self-governing British territory in the Caribbean, 600 kilometers (370 miles) miles off the US Florida coast, the Caymans are among the best known of the world’s estimated 60 tax havens, where as much as $500 billion (390 billion euros) are estimated to be stashed.

The territory was allegedly used as a transit for billions of dollars by the failed US energy giant Enron, whose finance chief Andrew Fastow was indicted on 78 counts of fraud, money laundering and other charges in Oct. 2002.

"It has become a common practice for most multinational companies to hold accounts in tax havens such as the Cayman Islands," the French examining magistrate Renaud Van Ruymbeke told the Paris daily Le Monde.

Van Ruymbeke, who was commenting on the Parmalat affair, had tackled the corruption scandal surrounding the French oil giant Elf, which saw former chief executive Loik Le Floch-Prigent and his deputy Alfred Sirven jailed for five years in November for embezzling 305 million euros through illicit slush funds.

"The proportion of international capital that goes through a tax haven before it is invested on the stock exchange has risen in the space of a few years from about 10 percent to 50 percent," Van Ruymbeke said.

"There is every reason to be pessimistic" about the chances of success of initiatives such as the so-called Geneva Appeal, which he helped set up in 1996 to improve cooperation between European countries in the fight against financial crime, he added.

"The chief attraction in using a tax haven is to keep one’s financial operations dark," Van Ruymbeke said.

"There may be various motives for doing so: to cheat the tax authorities, to switch funds away from their original purpose, or to finance corrupt activities," he said.

A French parliamentary report in April 2002 said that 11 of the country’s leading banks, including BNP-Paribas, Credit Agricole Indosuez and Societe Generale, discreetly channelled funds through the Cayman Islands.

The offshore operations of the banks and their affiliates and subsidiaries "create the most reprehensible conditions both in terms of financial evasion and evading the fight against financial malfeasance," said Arnaud Montebourg, the parliamentary committee’s Socialist rapporteur.

Van Ruymbeke said he saw "scant international willingess to clamp down on tax havens", noting that some governments used them for their own dark purposes.

A former banker in a tax haven noted that despite intense efforts to track shady finances at Parmalat, the international web of tax havens was unlikely to change.

"Once again, in the Parmalat affair, fingers are being pointed at several men, but the system itself remains untouched," he said under condition of anonymity.

"Perhaps when governments understand that they are the first victims of these practices, they will start to take notice," he added.

The United Nations has taken steps designed to curb money-laundering, but with limited success so far.

One year ago, the chairman of the UN panel set up to monitor sanctions against the al-Qaeda terrorist network said only 79 of of the 191 UN member states had responded to a request to report on steps taken to crack down on the financing of the group.

He said governments were thought to have frozen $130-140 million worth of al-Qaeda assets, but few were willing to identify the owners of the bank accounts. And he noted that none of the 104 suspected terrorists on a list compiled by the Security Council had yet been stopped while trying to cross a border.

Another international initiative, the Financial Action Task Force on Money Laundering, was set up in 1989 to combat money laundering and since the 2001 attacks in the United States has widened its sights on terrorist financing.

The 33-member FATF, an independent body based at the Paris headquarters of the Organization for Economic Cooperation and Development, maintains a list of countries deemed non-cooperative in the fight against money laundering.

Countries on the list are subject to tighter controls on international financial transactions.

The Cayman Islands, once on the list, was removed after meeting FATF criteria.

The eight countries on the uncooperative list are Ukraine, the Cook Islands, Egypt, Guatemala, Indonesia, Myanmar, Nigeria and the Philippines.