Have dirty money, will launder in Asia
By CNN's Marianne Bray
in Hong Kong
HONG KONG, China -- For years Mexican drugs cartels and Colombian smugglers have funneled their ill-gotten gains into the steamy havens of Panama and the Bahamas.
But the tiny Pacific island of Nauru, home to 100,000 people, one main road and a reported 400 banks, has become one of the world's dirty money hot spots.
That's according to the Financial Action Task Force (FATF), which in a report last week said it would slap sanctions on "non-cooperative" Nauru along with the Philippines for failing to clamp down on money laundering.
But they're not the only Asian culprits landing on the hotseat.
Myanmar and Indonesia have become the latest Asian newcomers in shady banking -- joining the Cook Islands, the Marshall Islands and Niue -- according to the task force formed by the Group of Seven and represented by 29 nations.
The Asians have ousted Carribean old-timers, such as the Bahamas and the Cayman Islands, off the list.
Lax laws
The heat the FATF is placing on national governments comes as many Asian countries head towards democracy, creating a financial free for all.
Those making money in the murky realms of organized crime -- smugglers, drug traffickers, arms dealers, heads of prostitution rings and insider traders -- are attracted to these countries. They target weak spots, funneling their funds with no questions asked.
In developed countries, sophisticated banking systems raise red flags when huge bulges of cash move through accounts.
Many developing economies may also be turning a blind eye, accepting bribes or even cozying up to dictators and dubious financiers in a bid to boost their coffers.
The International Monetary Fund has said as much as $1.5 trillion dollars a year could be swirling in and out of tainted accounts around the world.
Estrada charges
The former president of the Philippines, Joseph Estrada, for one, has been setting the tone for loose standards.
Estrada was ousted by popular revolt amid charges of corruption and economic plunder, punishable by death.
During his aborted impeachment trial, Estrada was accused of stashing $200 million in several banks using fictitious names, and is now in jail.
Given this legacy, it is not difficult to see why some Philippine institutions may be finding themselves with dirty hands and why the country has done little in the past to curb the flows of illegally earned money through its financial system, analysts say.
Days are numbered
The Paris-based anti-money laundering agency has given the Philippines, Nauru along with Russia until September 30 to introduce laws to combat the shady dealings or face sanctions.
The group has also called on other countries to pay close attention to these "non-cooperative countries and territories."
But some Asian hot spots clearly do not want to slam the doors on the billions of dollars laundered by crime syndicates, and can't afford to be selective about the sources of money they attract.
Recently, Cook Islands Prime Minister Terepai Maoate urged the South Pacific community to present a united front against the developed nations' bid to close down the region's financial centers.
Maoate said his nation could not afford to lose the money pouring into the financial sector.
But the longer these countries leave it, the more entrenched the crime becomes, the FATF says, making them unpopular to legitimate forms of foreign investment.
Not all reluctant
Nauru has said it will introduce new laws to clamp down on money laundering before the FAFT deadline.
Little more than a giant phosphate mine, and sitting in the middle of the Pacific almost midway between Australia and Hawaii, Nauru has sought for many years to establish itself as an offshore financial hub.
It has encouraged the registration of offshore banks and corporations, with tens of billions of dollars channeling through accounts, according to the CIA.
But the chief secretary to the government of Nauru, Mathew Batsiua, told Reuters that once passed, the laws would be "among the strongest in the region."
For its part the Philippine Central Bank has asked Congress to pass an omnibus anti-money laundering bill.
But many analysts consider Estrada's impending trial will show the country's lack of effective laws to crack down on money laundering.
Reuters contributed to this report.
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