TRACKING THE KLEPTOCRATS

The trial of Slobodan Milosevic is a rather noble effort to hold
rulers accountable for genocide.

At great pain and cost, the man has been extradited and is on trial
for crimes against humanity; on the theory that his having to face an
international tribunal will give future genocidal dictators some
pause.

But what if the crime of a dictator is not slaughter but massive
theft? Various ex-presidents of Mexico; Fujimori of Peru; Idi Amin of
Uganda; Mobutu Sese Seku, the late kleptocrat head of Zaire; Suharto
of Indonesia; the late Shah of Iran-all have skimmed millions, if not
billions of dollars out of their countries' economies, and most of
them then headed off for la dolce vita in foreign parts.

The Bush Administration is now backing away from international
efforts to reduce money laundering, a banking procedure used by drug
cartels, arms traffickers and terrorist groups, as well as crooked
dictators. In the current issue of Foreign Affairs, William Wechsler,
who worked on these problems as special adviser to the secretary of
the treasury from 1999 to 2001, has a fascinating account of the
progress that has been made over the years in building international
cooperation against rogue banking.

I am indebted to him for all the following information unless
otherwise indicated.

Until this administration, the United States has been the leader in
trying to stop money laundering. Several organizations work to stop
this and other banking abuses-the G-7's Financial Stability Forum,
the Financial Action Task Force, and the Organization for Economic
Cooperation and Development (OECD), along with the IMF.

Wechsler reports, "According to the Russian Central Bank, $74 billion
was transferred from Russian banks to off-shore accounts in 1998, the
year of the ruble devaluation and the Russian financial meltdown."

The most popular new havens, in addition to the usual suspects, are
small islands in the South Pacific-Nauru, Niue and Vanuatu. Some $70
billion of the Russian money went into accounts of banks chartered in
Nauru. In the old days-1O years ago-money launderers needed to be
near the banks that kept their secrets: Europeans could easily get to
Switzerland with a suitcase full of cash, Americans to the Cayman
Islands. But with the advent of banking by Internet, many small, poor
countries around the world realized that all they need do was
establish strict bank secrecy, criminalize the release of customer
information and ban international law-enforcement cooperation-and the
money would roll in. The international community gradually figured
out a strategy to combat this new plague-"name and shame." The FSF
(11 nations with advanced financial systems) and FATF (29 nations)
slowly developed criteria for international banking, focusing on bank
regulation, customer identification, the reporting of suspicious
activity, international cooperation and the criminalization of money
laundering. The FATF developed a list of 15 non-cooperating nations
and another 14 with serious banking deficiencies. The only way these
efforts can succeed is with multilateral countermeasures, with
penalties ranging from stronger warnings up to economic sanctions,
including the wholesale restriction of financial transactions.

Unfortunately, Bush's chief economic adviser, Lawrence Lindsey, is
opposed to legislation to deter international money laundering,
apparently because he is generally opposed to banking regulation. As
Wechsler notes, there are legitimate privacy concerns that do need to
be addressed, but this is not a choice between privacy and law
enforcement, but a question of how to balance them both.

Treasury Secretary Paul O'Neill told The Washington Times he shares
"many of the serious concerns that have been expressed recently about
the direction of the OECD initiative" and "the project is too broad,
and it is not in line with this administration's tax and economic
priorities." That mind-boggling gobbledy-gook is an indication that
the United States will not go along with the OECD on multilateral
sanctions.

So far, all O'Neill had done is the classic bureaucratic dodge of
instituting a thorough study of the situation.

Unfortunately, the study is headed by Dina Ellis, formerly senior
lawyer at the Senate banking committee under Phil Gramm, no friend to
banking regulation he. According to The Financial Times of London,
political pressure is being put on the administration by a coalition
of small bankers (especially from Texas), privacy advocates and
libertarians.

Here we move off the radar and into the wiggy conspiracy theories of
the U.N.-black-helicopter set. I am as ready as anyone to oppose
faceless, international regulatory agencies-I'm against trade
agreements without labor and environmental provisions, always happy
to fault NAFTA and the WTO, and generally opposed to secret and
unaccountable organizations. But we are talking here about an
international anti-crime effort that involves more transparency, not
less; more accountability; not less. How this one ever got to be a
bogeyman of the far right is beyond me. Why should we make life
easier for kleptocratic dictators, drug traffickers, arms dealers and
terrorists? Give us a break.