SAR's underground banks 'haven for money launderers'

PUBLISHED : Saturday, 12 February, 2000, 12:00am
UPDATED : Saturday, 12 February, 2000, 12:00am

Money laundering is on the rise and the world's criminals are increasingly opting for Hong Kong's underground banking system to clean dirty cash, the head of a regional crime watchdog has warned.

Millions made by China's burgeoning people-smuggling gangs coupled with drug trafficking has seen the SAR, India and Japan increasingly targeted by crime gangs.

Hong Kong has long been seen as a money laundering centre because of its liberal banking system and free-wheeling capitalist economy.

Rick McDonell, head of the Asia Pacific Group on Money Laundering Secretariat in Sydney, said: 'Asia's underground banking has been discovered by Western criminals.

'There are a number of indications of it being on the rise in Canada, Europe, the United States and Australia, emanating from Hong Kong, India and Japan.

'The reasons are it is convenient and efficient and it offers a cloak of secrecy based on trust.' The group is a monitoring agency affiliated to the Organisation for Economic Co-operation and Development (OECD) taskforce on money laundering.

Asia's money brokers were cited as among the world's major money launderers in the OECD's Financial Action Taskforce on Money Laundering's 1999-2000 report released earlier this month.

The OECD said the Chinese chit system was also attractive to money launderers because of a lack of transaction records, customer identification or background checks.

The chit system involves a remittance between Chinese businesses in two countries, often using only a facsimile machine from a businessman's home.

Mr McDonell said the growth in organised people-smuggling rackets in Asia had resulted in a rise in money laundering in the region in the past year. The OECD said Asia's money brokers were also used by terrorist groups and to buy gold.

Russian organised crime gangs were also using Hong Kong to launder money, he said.