Jun.26, 2010

The rich world has been busy tightening its belt in recent weeks, with Britain, Germany and Spain all announcing the severest economic cuts in generations and prompting acres of press coverage.

The holes in the budgets of the world's poorest countries seldom garner such attention. But the decisions of a meeting currently taking place in Amsterdam could offer these nations a historic opportunity to replenish public coffers, by cracking down on the corruption and state-looting that is too often enabled by the world's most respected banks.

The Financial Action Task Force (FATF) is an intergovernmental body that sets international anti-money laundering standards and assesses laws designed to keep dirty money out of the financial system. It meets largely under the radar, but the processes it recommends have major implications for how the world's financial system works. Items on the agenda this week include how to deal with terrorists, drug lords, tax havens and corrupt politicians.

So far, the task force has been effective in getting banks to implement better controls against the financing of terrorism. This includes checking that their customers are not terrorists. But efforts to ensure that banks do not accept the proceeds of corruption have been far less impressive.

This may be changing, thanks to a steer from the G20, which at its summit in Pittsburgh last year, told FATF to get serious about stamping out corruption and plugging the gaps in the regulatory system that allow corrupt politicians to hide behind a veil of corporate secrecy. This must happen if we are to have any hope of stopping billions of dollars from flowing out of the world's poorest countries.

In 2008, Africa received $44bn (£29.5bn) in international aid. In the same year, the continent exported oil and minerals worth $393bn. Many of the poorest countries could lift their populations out of poverty with their natural resource revenues. One of the biggest things stopping them is the willingness of the international financial system to accept looted funds. The flow of corrupt funds into the banks of the developed world is a disaster for the world's poor. Some estimates put this transfer of wealth as high as $40bn a year.

Earlier this month, in a small London court, the sister and the mistress of James Ibori, a Nigerian state governor, were both sentenced to five years in jail for helping him to launder millions of dollars of stolen national funds. Ibori is just one of a number of Nigerian governors accused of using the UK's financial system to hide stolen assets: Diepreye Alamieyeseigha and Joshua Dariye have both had their assets frozen and returned to Nigeria. The former pleaded guilty to money laundering in July 2007, while the latter faces trial in Nigeria.

The UK is not the only destination of choice for those looking to hide and launder looted funds. The US continues to play host to Teodorin Obiang, playboy son of the president of Equatorial Guinea, another African country whose oil should make it comfortably off, but whose population languish in poverty because of corrupt rulers. Major US bank Riggs – once used by Abraham Lincoln — collapsed in 2005 following a Senate investigation into its banking for the Obiangs. Yet the American government has still not taken action against Teodorin, who, despite his official salary of only four or five thousand dollars a month, owns a $35 million mansion and is building a 200ft luxury yacht complete with a shark tank.

Since Pittsburgh, FATF has restarted its process of naming and shaming countries that aren't making the grade in stopping flows of dirty money. But much more needs to be done. With G20 support, FATF should push for every country to have a register of the ultimate "beneficial ownership" of all registered companies. This would mean knowing who was ultimately behind a chain or group of companies – and would make it easier to track where the money is coming from and who it belongs to. Effectively, it would become much harder for terrorists, proliferators and corrupt politicians, to hide their dirty money behind a veil of corporate secrecy.

The message from the meeting this week must be clear and strong: that FATF is ready and willing to act to stop banks from facilitating corruption that is keeping millions of people poor. If it does not act soon the world's poorest people will continue to be robbed blind by their political leaders with the full complicity of the western financial system.