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Monday, 2 September, 2002, 09:59 GMT 10:59 UK
IMF blocks terror fund blacklist
The International Monetary Fund's move to share the spotlight with the existing international experts on money laundering and terrorist finance, the Paris-based Financial Action Task Force (FATF), is triggering tensions which threaten to overturn some of the key techniques developed over the past decade.
Sources close to both organisations have told BBC News Online of fundamental differences between the two groups' practices and philosophies - and some fear the result will be to delay at best and handicap at worst further progress in making sure countries around the world keep their defences up.
The report, due out on Thursday 5 September, suggests that al-Qaeda continues to have no trouble raising money, with private donations of perhaps $16m a year "continuing unabated" and investigators finding it "exceedingly difficult" to stop the flow of funds.
The US Treasury has denied the thrust of the report, with Deputy Assistant Secretary Rob Nichols telling BBC News Online that the UN had missed a great deal of relevant information.
Nevertheless, the report reinforces the fear that the IMF's involvement could spell the end of the FATF's annual blacklist of countries not doing enough to stop money laundering and terror finance.
But several IMF board members - particularly from developing countries - are strongly opposed to it, accusing the FATF of punishing poor states while letting its richer members off the hook.
The price of their acceptance of the IMF-FATF joint venture has been a one-year moratorium on the NCCT blacklist, and some fear the postponement will become permanent.
"The NCCT process has saved at least 10 years of work," one law enforcement expert said.
"It's a bit tough when you've been at something for 10 years and then people who've only been at it a few months start taking over."
The FATF made no official comment on the tensions.
"As far as we're concerned, we have been working with (the IMF) to try to develop a common methodology that can be used worldwide," said Patrick Moulette, the FATF's executive secretary.
But other people close to the Paris-based group made their concerns clear to BBC News Online.
"It's hard to see how this is going to work" without some kind of threat in the background, one said.
The IMF's decision to stay away from examining the criminal law and police system - despite existing anti-corruption work which does precisely that - is rapidly becoming a major worry.
"It's an obsession I don't understand," the source said.
All together now?
The culture clash is also causing problems, not least because officials at the IMF say that labelling anyone as "non-cooperative" runs counter to the way the Fund works.
"Everything we do is uniform, it's voluntary, and its co-operative," one senior IMF adviser on money laundering and terrorist finance told BBC News Online.
"Current policy doesn't allow that," the IMF adviser said.
On top of that, the IMF refuses to get involved with examining legal systems or law enforcement practices, preferring to concentrate on financial regulation - a factor that worries experts like Steven Philippsohn, among others.
"I do not think that sidelining the FATF and incorporating much of its work into the IMF/World Bank would be desirable or effective," he said.
The upshot is likely to be that while FATF members - predominantly richer countries - assess one another, non-members get their rules and practices assessed by the IMF and World Bank.
"This could turn into a classic case of too many cooks spoiling the broth," one expert in international money laundering told BBC News Online.
David vs Goliath
Part of the problem is that the two organisations are wildly divergent in size, structure and background.
Instead, it has focused on long-term changes to "codes and standards" of financial and corporate regulation - which will take years to implement.
Since 1990 the FATF, a tiny outfit with fewer than 10 staff and a budget of less than 1m euros, has set the international standards.
Its "Forty Recommendations" - supplemented by eight Special Recommendations on terrorism published late last year - are the acknowledged rulebook on fighting money laundering and terrorist finance.
By mid-2001 co-operation between the IMF and the FATF had begun, in an attempt to draw up a single set of yardsticks based on the so-called "40 plus 8".
But after 11 September leaders of the G8 group of rich countries wanted the anti-money laundering profile raised, and the IMF and World Bank meetings in November the same year concurred.
The immense budgets, plush offices and well-paid staff at the Bank and Fund are in sharp contrast to the FATF's establishment.
The international financial institutions' stature and clout, it was hoped, would enhance the reputation of the push against terrorist finance and money laundering.
But ironically, it is the smaller organisation that has so far proved more effective.
This is the first piece in a series of four investigative reports into global efforts to choke the flow of money to terror groups.
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