US to lead money laundering fight

A senior US government official told the Observer it was considering using, if necessary, its ‘considerable powers’ to close certain offshore centres down and is putting pressure on Britain to aid it in this initiative.

It is likely to have the support of chancellor Gordon Brown who last week called for the EU and the G7 to create a wider obligation on financial institutions so that there would be ‘no safe haven for terrorists’.

The moves mark a dramatic shift in US policy towards offshore financial centres. In May this year, US Treasury secretary Paul O’Neill said America had ‘little to gain’ from supporting the OECD’s initiative to reform tax havens. The US would not support punitive measures the OECD proposed for tax havens that did not meet certain criteria, primarily to do with transparency in their financial systems.

But in the wake of the deaths of an estimated 6,000 people in the World Trade Centre and Pentagon attacks, the US has been tracking down the assets of suspected terrorists in an efforts to end global terrorism, but has hit problems when the ‘money trail’ leads to a tax haven.

Prime suspect Osama Bin Laden is believed to finance his operations through anonymous offshore bank accounts. His and other account-holders identities are protected in these financial jurisdictions.

Now the US is reconsidering action against tax havens, along the lines of steps proposed by the OECD, which include sanctions. In addition, Washington may introduce new tax laws forcing individuals and businesses to declare their revenues earned in offshore centres and may ban on ‘outlaw’ companies from trading in the US.

A spokesman for the OECD told ‘We are delighted that the US should want to work with us.’

But, he added: ‘There has been no dramatic change in policy. This is an ongoing battle going against money laundering and tax evasion, highlighted by what has happened in the US in the last two weeks, which has strengthening the need for implementation of measures to prevent illegal tax evasion.’

At the weekend meeting of EU finance ministers, the chancellor called for the European Parliament to back new rules on money laundering. A UK Treasury spokeswoman told the Observer: ‘We need to look at banking secrecy, and its place in the modern world economy. Every government has its part to play.’


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