Wednesday, April 18, 2007

Under their noses

Very few people know this but, on 2 April of this year, consultation closed on the draft regulations implementing the EU's third money laundering directive. For those who are at all interested, the result will be the Money Laundering Regulations 2007.

But, with the consultation document running to 110 pages of extremely complex detail, it is hardly surprising that it has not exactly soared up the best-seller lists.

This, though, is a classic "sledgehammer to miss a nut", imposing labyrinthine rules on virtually every enterprise where money is handled in any quantity, reaching right down to the treasurer of the local stamp club who, these days, finds it virtually impossible to open a bank account.

That, however, is the EU way – to bind millions of law-abiding people with a skein of rules of ever-increasing complexity, while criminals and terrorists completely ignore them, creating their own parallel economy, under the noses of the financial regulators.

But what is rarely understood is the huge scale of this economy, so it was useful to have yesterday an illustration of what we are dealing with when, in Bradford Crown Court, a local travel agent, Shahid Nazir Bhatti, was jailed for three years for his part in what was described as a £500 million scam.

This was the BBC’s description, but it went on to use the words "money laundering", for that is what it was.

Bhatti was the 11th to be convicted, his crime to use what is known as the "hawala" system of transferring cash abroad, an ancient form of money exchange, used in Asian countries, which bypass the ordinary financial regulatory system. Bhatti alone is believed to have laundered more than £42m of illegal money.

Much of the money stems from the drug trade, which is collected by couriers working for criminal gangs from all drug traffickers and dealers around the UK and delivered to other premises in Leeds for counting and sorting. It is said that literally hundreds of thousands of pounds in "dirty cash" is being ferried up the M1 – the main north-south motorway – every day.

The money is then deposited into business and personal accounts at various banking outlets, converted into foreign currencies, then transferred to accounts in the United States, the United Arab Emirates and across Europe. However, it is not only organised crime that taps into this network, but terrorist networks such as al Q’aeda, financing such outrages as the London bombing.

Almost certainly, the £500 million is the tip of the iceberg, but what is evident from this affair is that it was not EU directives that brought – so far – eleven criminals to book. It was the local police working within a framework of national law, targeting criminal activity. When it comes to having any impact on the problem, the EU is in this – like in so many other of its enterprises – a complete waste of space.

Now where have you heard that before?

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