Task force leans on IMF terrorist intelligence


Indonesian troops have been battling seperatists in Aceh, but leaning on the IMF for intelligence may be controversial

By Alex Frew McMillan

HONG KONG, China (CNN) -- A group combating the flow of funds to terrorists hopes to get intelligence in the Philippines and Indonesia this year from some of the world's top lending bodies.

Both countries are on a 19-nation blacklist of nations that aren't cooperating in the fight against terrorist-related money laundering, according to the Financial Action Task Force on Money Laundering (FATF).

But, with limited resources, the task force hopes to gather information on terrorism funding from the International Monetary Fund (IMF) and the World Bank.

"We really need the cooperation of the IMF and the World Bank," FATF Executive Director Patrick Moulette told CNN, after the group wrapped up a meeting in Hong Kong.

"This is something that is new," he said of the intelligence that the task force hopes to gather.

FATF used to be seen as 'rich boy's club'

The FATF started talks with both the IMF and the World Bank in April last year.


The task force, which met here last week, was viewed as a rich boy's club before September 11, its executive director says

The task force aims to push for better legislation to combat money laundering in all forms, but particularly in terrorism.

Still, its ability to gather information on the ground is limited. The task force also struggled to get cooperation from those groups.

The IMF and World Bank "used to think of the FATF as a rich boy's club," Moulette told CNN. "But since September 11, they have been much more amenable."

While the FATF consists mainly of bankers from the world's largest countries, the IMF and the World Bank control much of the world's aid loans to impoverished nations.

The IMF has offices in both the Philippines and Indonesia. A high-level mission is now in Indonesia, for a two-week trip to check on the progress of reforms there. Talks with the government started Monday.

The FATF rapidly switched its focus to curbing the flow of money to terrorists after September 11. It was originally set up by the then Group of 7 industrialized nations to combat money laundering related to drugs, white-collar fraud and other crimes.

The switch in focus has produced a sea change in the amount of help they are getting, Moulette said. It is now attempting to convince the Philippines and Indonesia to tighten their laws on money laundering.

High tolerance for 'suspicious loans'

For instance, FATF officials note that banks in the Philippines have a very high threshold for reporting "suspicious loans." They only report loans above $80,000 to authorities. The FATF would rather see that changed to include any "suspicious" loan -- however small.

If the Philippines and Indonesia do not change their laws, they face sanctions from FATF member countries. So far, only the Pacific island nation of Nauru has suffered that fate.


Arroyo says terrorists are operating throughout the region, and welcomes the War on Terror for uniting allies

Besides sanctions, FATF makes life difficult for banks looking to do business in such countries.

Financial institutions are warned to keep records in writing of all dealings with people or companies in those countries and to make them available to law enforcement agencies.

The Philippines narrowly averted that hardship in December. But the FATF merely said it was not imposing sanctions "for the time being."

Philippine President Gloria Macapagal Arroyo signed a money-laundering bill into law in September.

But the FATF has written to her administration requesting numerous amendments. It is still threatening sanctions, and barred lobbyists from the country from its three-day meeting in Hong Kong last week.

Arroyo said she welcomes the War on Terror for creating a united a front against terrorists. The United States has dispatched troops to the Philippines.

Arroyo noted in an interview aired on CNN this weekend that terrorists are active throughout the country.

"We do know that there are terrorist cells all over the region," she said. Now, she added, "a lonely fight has become a fight with allies."

She said that authorities have evidence showing the brother-in-law of Osama bin Laden was living in the Philippines in 1995.

IMF visit to Indonesia already controversial

But with that aid comes greater scrutiny. The constitutionality of the American troop visit is also under question.

Seeking information from the IMF and World Bank would likely be even more controversial in Indonesia.


Lo (r), toasting FATF delegates with Hong Kong's chief executive, admits there is scant proof of terrorist money laundering

Ministers in President Megawati Sukarnoputri's cabinet have sought to downplay the IMF's role in the country.

They say the IMF mission that landed in Jakarta on January 31 will play a "consulting" role, rather than actively dictating bank privatization.

In reviewing a $5 billion loan package at the end of January, the IMF demanded progress on bank sales and set up a reform schedule with the Indonesian government.

One of the key reforms is the much-delayed sale of a majority stake in Bank Central Asia, the largest commercial bank in the country. The IMF is expected to examine general progress at the main reform body, the Indonesian Bank Restructuring Agency (IBRA).

The Indonesian government took over BCA and many of its banks after the Asian crisis. It is now trying to privatize many and is mulling bids for BCA, including from the American venture capitalists Farallon Capital and the Anglo-Chinese bank Standard Chartered.

The FATF suspects that banks in both the Philippines and Indonesia are the starting point for terrorist money. The 29-nation FATF concentrates on trying to shape policy in countries around the world.

But it has limited capacity to send inspectors to its blacklist countries.

"We are not a law-enforcement agency," Moulette noted. "We can't hold statistics."

Little evidence of money laundering

Clarie Lo, current FATF president and Hong Kong's commissioner for narcotics, admitted on Friday there is scant evidence of terrorism-related money laundering around the world.

"I am weak on figures," she said. Hong Kong is host of the FATF meetings this year, which has given Lo the presidency of the group.

A number of countries like the Philippines have admitted terrorists are operating there, raising money through kidnapping, drugs and other means. But it is difficult to disprove lawmaker's claims that the law now in operation is insufficient.

On the other side of the coin, the definition of "terrorism" is open to interpretation.

That has skeptics worrying that countries may define it to suit their own purposes. Both China and Russia, for instance, are contending with Muslim separatist rebels within their own borders.

So it's looking for reports on the ground, that fill out its view of how terrorist funding works. That's where Moulette hopes the IMF and World Bank come in.

The FATF is housed in the Paris-based Organization for Economic Cooperation and Development, though it is technically independent.

Its members include many of the biggest countries in the world, including the United States, United Kingdom, which led the recent war in Afghanistan.

It is also pushing all countries around the world to perform a self-assessment of their money-laundering legislation.