6 March 2001

From: "johnwoodrow" <johnwoodrow@ziplip.com>
Subject: Money Laundering
To: jya@pipeline.com
Date: Sat, 3 Mar 2001 08:27:37 -0500 (EST)

New Zealand's tiny island neighbours are being squeezed by the world's economic superpowers, angry at dirty money deals washing through the South Pacific.

Documents linking the Nauru Government with banks allegedly used to launder fleeced Russian millions, were delivered to New Zealand Herald reporters in Auckland last week.

Inquiries reveal growing fears about the impact of possible sanctions on Pacific tax havens such as Niue.

Nauru, whose phosphate resources once made its people the wealthiest on Earth, and Niue have been threatened with economic sanctions by the Organisation for Economic Cooperation and Development if they do not improve monitoring of their financial centres to stop money laundering.

One United States Government official said Nauru was in particular danger if it carried on being a neighbourhood laundromat for criminals. "If they go absolutely rogue, then everybody is going to shut the country down."

Interpol documents obtained by the Herald show Russian authorities last year followed one stream of white-collar money from Moscow to a shell bank licensed by the President of Nauru, Bernard Dowiyogo. Another trail flowed to a bank licensed by a fellow cabinet minister.

International concerns about Nauru have not caused it to pull back. The Weekend Herald has learned that Nauru is issuing licences for internet casinos, described by the US State Department as a powerful vehicle for terrorists, drug traffickers and fraudsters to clean their money.

Documents show that a Government official was issued a licence last year to run an internet casino in which the Government would share 40 per cent of the profits.

A cabinet minister working with a Seattle-based businessman is understood to be applying for a second licence on the basis that the Government would pocket 15 per cent of the takings.

The activities of Nauru - last week confirmed as this year's host for the Pacific Forum due to be attended by Prime Minister Helen Clark - have caused unease.

The effect of sanctions on Niue is also worrying officials. New Zealand and Australia would be left to pick up the economic pieces if nations like Nauru, Niue and the Cook Islands were bankrupted through sanctions.

The Weekend Herald was told: "If you look at Nauru and Niue, the importance offshore banking has on their economies, and you remove them from their economies, how do you make up the shortfall?"

New Zealand has a constitutional obligation to Niue, a tiny coral-based island of 1800 people east of Tonga. Niueans are New Zealand citizens and it relies on New Zealand aid for about one-third of its budget.

One official said "If Niue went bankrupt, New Zealand would be forced to act. It couldn't stand by and watch."

Pressure from the OECD and other agencies intent on punishing nations that fail to beef up their anti-money-laundering procedures is causing a backlash.

Niue's Premier, Sani Lakatani, said his country was suffering from the effects of false accusations.

"We are a law-abiding people ... I don't understand," he said.

A senior New Zealand official said this week that the OECD's naming and shaming approach was not always helpful in the Pacific and that the Government preferred to help island Administrations.

Yesterday, Commonwealth Secretary-General Don McKinnon lashed out at the OECD's approach, saying it was turning into the world's financial policeman and wished to be "prosecutor, judge, jury and jailer."

His comments drew an angry reaction from OECD head Donald Johnston who said he could not understand Mr McKinnon's position.

"Frankly, I'm damned mad. [The Commonwealth] has told me repeatedly they share the same objectives as we do, which is essentially to eliminate tax evasion [and] illegal activity

However, an Asian diplomat in the region commented that, "It seems strange that the United States, with such a poor money laundering policy, drugs and mafia controlled gambling industry, should have "crusades" against small countries like Nauru and Nuie. The U.S. government ought to put its own house in order before pointing its finger at other countries." He commented that Nauru had not been co-operative with the US State Department who had requested Nauru to comply with US policy and vote accordingly in various International bodies, and this could explain the campaign that the US has started to foolishly try and isolate Nauru. Nauru would not be cut off but simply drift towards stronger ties with other Asian powers who do not tow the US policy line either.

The offshore banking and finance activities of Nauru are exactly like other tax free havens around the globe but western intelligence agencies do not have the same access to information that they enjoy in other offshore banking centers which also double as clearing houses for unexplained cash that MI6 and the CIA seem to be deeply involved in.