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$1.5tn dirty money 'will float in the markets'

Manama, February 20, 2008

A total of $1.5 trillion will be laundered across the globe this year, a speaker at the GCC Regulators' Summit claimed.

Doha-based Al-khaliji bank head of compliance Niall Coburn said that banks should continue to be vigilant to clamp down on this but in fact most money laundering was now done by more direct methods.

'Money laundering remains a problem because all the holes have not been plugged,' said Coburn, who was once the head of the enforcement team at the Dubai International Financial Centre.

'But laundering is more direct now and has moved away from banks to investments in large real estate ventures, avoiding the need to go through banks by using trusts.

He was critical of the structure of banks across the region outlining a number of risks in the system.

'There is no bond market or real estate investment trusts, which means banks have to take all the risk and tie up capital in major projects for years,' he said.

'Banks want to expand internationally but not all of them have the experience. If GCC banks want to expand internationally they need to start operating to international standards and lot local regulatory standards.

'In corporate governance there may be a school bus mentality on the board of directors and the regulators whereby they are dominated by one or two individuals with the other directors like the children at the back of the bus with no say where it's going,' he noted.

'That's what happened in the US at Enron with the chairman steering while the ship went down. You need a strong chairman backed by vocal expert directors.'

Turning to Islamic finance, he said there was too much reliance on a few experienced and respected scholars and too much divergence in views as what did or did not meet Islamic principles.

He added that the industry had a problem in that there was no short term liquidity and no lender of last resort.-TradeArabia News Service




Tags: GCC | problem | Dirty money | laundering |

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