IMF: Fight money laundering, terror financing

By Prinz Magtulis (The Philippine Star) | Updated January 7, 2013 - 12:00am

MANILA, Philippines - Inflows and outflows stemming from money laundering and terrorist financing activities could result in financial instability, the International Monetary Fund (IMF) said as it cited the need for country policies to address these challenges.

“Money laundering, terrorist financing and the related predicate crimes can undermine the stability of a country’s financial system or its broader economy in a number of ways and may have adverse spillover effects on global stability,” the IMF said in a policy paper dated Dec. 14.

In issuing the report, the IMF said it has made its policy to include in its annual Article IV consultations a “mandatory assessment” of country policies to fight money laundering and terrorist financing activities.

The Philippines is scheduled to undergo its Article IV examination this week.

The IMF has also ordered its review missions to look at the vulnerability of the financial system, estimate the possible amount of proceeds that can be laundered in the country and determine if those problems are “potential sources” of financial instability.

Officials of the Bangko Sentral ng Pilipinas (BSP) and the Anti-Money Laundering Council (AMLC) could not be reached for comment.

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The country has yet to pass a bill that would expand predicate crimes related to money laundering as required by the Financial Action Task Force (FATF).

FATF’s recommendations are “recognized” by the IMF, although it is not clear how the Philippines’ failure to comply with FATF’s requirement will impact on its recommendations.

Last week, Finance Assistant Secretary Ma. Teresa Habitan said the country is no longer required to adopt all IMF suggestions.

In the policy paper, the multilateral institution highlighted the pressure a country’s balance of payments (BOP) may experience as a result of money laundering (ML) and terrorist financing (TF) activities.

It said “illegal transactions” could be channeled through banks, affect banks’ status, and undermine the economy.

The BOP summarizes all inflows and outflows in an economy and the IMF said proceeds from these activities may be “significant in relation to the size” causing, among others, volatility in the financial markets – stock and foreign exchange markets.

“ML or TF activities may give rise to significant levels of criminal proceeds or ‘hot money’ flowing into and out of financial institutions in ways that are destabilizing for these institutions,” the IMF explained.

“As a result, policy-making could be put to test,” the IMF said as stolen money would most likely remain unaccounted for and affect government data. Foreign exchange and stock market transactions “may not fully reflect the underlying economic realities.”

As for predicate crimes, IMF cited corruption as an example that could adversely affect economic growth.

“Corruption, especially grand corruption at the national level and in the revenue administration, has a demonstrated negative effect on fiscal balances, foreign direct investment, and growth,” the agency explained.

Housing plan faces corruption threat, warns state media

Saturday, 05 January, 2013, 9:00pm Agence France-Presse in Beijing

A high-profile effort by the Chinese government to build affordable houses for the millions priced-out of the country’s property market is marred by official corruption, state run media said on Saturday.

China in 2010 launched a massive “affordable housing” drive as part of an effort to defuse widespread discontent about the country’s house prices, which have skyrocketed over the last decade.

The programme, which aims to build 36 million affordable units by 2015, was championed by Li Keqiang, who assumed the ruling Communist Party’s second most powerful post in November and is set to succeed Wen Jiabao as premier in March.

China invested more than 820 billion yuan in the programme last year, official media said.

But government officials have “easily amassed dozens” of newly-built affordable apartments, and “have taken away housing units specifically intended for disadvantaged groups”, according to state-run news agency Xinhua.

The outspoken editorial followed reports that a housing official has been placed under investigation after a local government confirmed online allegations that his family owned 29 apartments.

Of the apartments owned by the family of Zhai Zhengfeng, who previously worked as director of a housing bureau in the central Chinese city of Zhengzhou, “11 are said to fall into the affordable housing category”, Xinhua said.

The case, which provoked outrage on Chinese social networking websites, fanned “suspicion and murmurs about corruption in the distribution process” for affordable houses, Xinhua said.

Xinhua added that the need for measures to combat corruption in the programme was “increasingly urgent”, and called for greater transparency, including full disclosure of who is approved for affordable housing.

“Many Chinese have become extremely sensitive to skyrocketing housing prices and any mishandling of housing resources,” the editorial said.

China built more than five million affordable housing units this year, Xinhua reported previously, while the government has continued with restrictions on the market first announced in 2010 to slow house price rises.

China Ex-Housing Official Probed for Corruption, Xinhua Reports

From Bloomberg 05/01/2012

A former Chinese housing official is under investigation after allegations that his family owned 29 apartments were corroborated by the district government, the Xinhua News Agency reported late yesterday.

Prosecutors in Zhengzhou, capital of central Henan province, will investigate Zhai Zhenfeng, the former director of the housing administration bureau in the city’s Erqi district, Xinhua said. The allegations, from a whistle-blower, were first posted on a microblog last week, the agency said.

Similar online revelations in recent months have brought down government officials who maintained extramarital affairs, bought property and luxury items or abused their power. Xi Jinping, the new head of the ruling Communist Party, warned top leaders in November that corruption could kill the party and ruin the country, the official China Daily reported at the time.

Zhai was removed from his post in September 2011 for offenses including seeking profits for his family, Xinhua said yesterday. Among details of his family’s property dealings posted online last week were his daughter’s ownership of 11 apartments and two identity cards, revelations that “sparked outrage” online, Xinhua said.

In a separate report yesterday, state television said the daughter’s properties were purchased during Zhai’s tenure as head of the housing department between January 2002 and September 2010. Four members of Zhai’s family had a total of eight identity cards, with four registered in other provinces or cities, CCTV reported. Chinese citizens can legally have only one identity card.

Discipline Violations

Xi has intensified a crackdown on corruption and ordered officials to abandon extravagance, cut down on lavish ceremonies and live more frugally, as part of a broader push to win back people’s trust.

Li Chuncheng, a deputy party secretary of southwestern Sichuan province, became the first minister-level official to be investigated following a once-a-decade power transfer to new leadership in November. Li was put under investigation on suspicion of a “severe violation of discipline,” Xinhua reported on Dec. 6, citing the party’s Central Commission for Discipline Inspection.

The nation’s legislature last month passed rules requiring people to identify themselves when signing up for Internet and phone services, a move that may give the party greater control over microblogs and websites that have become platforms for people to air dissent, rumor and claims of corruption not tolerated in print media.

A district party secretary was fired in November after a sex tape of him circulated on the Internet, Xinhua said at the time. Cai Bin, an official in the southern city of Guangzhou was put under investigation for corruption after he was found to own 21 homes, the agency reported in October.

To contact Bloomberg News staff for this story: Tian Ying in Beijing at ytian@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net

India faces money laundering, terror financing risks: IMF

Press Trust Of India / Washington Jan 26, 2011, 01:26 IST

India, which has witnessed numerous terror attacks and still remains a potential target for such strikes, faces significant money laundering and terrorist financing risk, the International Monetary Fund (IMF) has warned.

IMF, in its report ‘India: Observance of Standards and Codes Financial Action Task Force Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism’, however, appreciated the steps taken by New Delhi to counter these threats.

The report, dated July 2010, was released on Monday.

“As a leader among the emerging economies in Asia, with a strongly growing economy and demography, India faces a range of money laundering and terror financing risks,” it said.

“The main sources of money laundering in India result from a range of illegal activities within and outside the country, mainly drug trafficking, fraud, counterfeiting of Indian currency, transnational organised crime, human trafficking, and corruption,” the report said.

“India continues to be a significant target for terrorist groups and has been the victim of numerous attacks. There are no published figures of terrorist cells operating in the country,” it said.

Based on a threat assessment, India has identified the following major sources for terror financing: Funds/resources from organisations outside India, including foreign NPOs; counterfeiting of currency; and criminal activities, including drug trafficking and extortion.

According to the report, since mid-2009, India has increased its focus on money laundering and the use of the money laundering provisions.

However, there are still some important and, in some instances, long-standing legal issues, such as the threshold condition for domestic predicate offences, which are yet to be resolved.

Effectiveness concerns were primarily raised by the absence of any money laundering convictions, it said.

Key recommendations include the need to address the technical shortcomings in the criminalisation of both money laundering and terror financing and in the domestic framework of confiscation and provisional measures; and broaden the due-diligance obligations, with clear and specific measures to enhance requirements regarding beneficial ownership.

It also recommended India improve the reliability of identification documents, the use of pooled accounts, PEPs, and non-face-to-face business; ensure India Post, which recently became subject to the Prevention of Money Laundering Act, effectively implemented the anti-money laundering/combating the financing of terrorism requirements; and enhance effectiveness of the suspicious transaction reporting regime.