By GREG ANSLEY Canberra bureau chief
The world has suddenly shrunk around New Zealand.
At the tap of a computer key, local criminals can tap into a rapidly expanding cyber-web that can take in black cash generated from drug deals, robberies and a dozen other major crimes, launder it, and deliver it back as clean, legitimate money.
For the moment at least, the United States Bureau of International Narcotics and Law Enforcement believes we are still small fry, and that dirty money from serious players can be cleansed far more easily elsewhere.
But as computers become ever more pervasive, new routes for illicit cash are expanding through the South Pacific and into Asia.
In Australia, the federal Government is preparing for a constitutional wrangle with the states over the granting of Internet casino licences, a mega-dollar source of revenue the states desperately want to tap.
Prime Minister John Howard's Government opposes the licences primarily on moral and social grounds.
It is concerned at the impact of a betting system potentially available to every home in a country already alarmed at the effects of gambling.
America's Narcotics and Law Enforcement Bureau sees much greater dangers.
"Internet gambling through credit card and offshore banks represents another powerful vehicle for criminals to launder funds from illicit sources and to evade taxes," it says in its latest international narcotics control report.
The appeal for Governments is obvious.
In Niue and the Cook Islands, the bureau estimates, fees from virtual casino licences are worth $3.16 million a month.
But the bureau believes the eventual cost to all nations will far outweigh the gains.
It says money-laundering and tax evasion, accelerated by the Internet, are reaching a scale that threatens the security and stability of entire countries.
Russia's precarious economy has already been rocked by the illicit export of vast sums of money at an average estimated rate of $US25 billion ($52.6 billion) a year between 1996 and 1998.
Rocked by the rise of the Mafia, over-regulation and economic turmoil, the flight of capital - and the resulting loss of tax revenue - has soared.
In 1998, at least $US78 billion was shunted through the international black market - $US70 million of it through banking facilities in Nauru.
In response, Moscow has introduced measures to scrutinise overseas financial transactions in a bid to block illicit flows involving Nauru, the Marshall Islands, Niue, Samoa and Vanuatu, all of which are also of concern to US agencies.
Unchecked, money-laundering can erode the integrity of a nation's financial institutions, the Narcotics and Law Enforcement Bureau's report says.
It can also flow through global capital markets to affect interest rates as launderers invest where they are least likely to be detected, rather than where rates of return are higher.
Money-laundering can also reduce tax revenue, damage financial systems and disrupt economic development. Moving vast sums is no longer a problem.
Millions of dollars can be transferred through personal computers and satellite links, vanishing through currency exchange dealers, stockbrokers, gold merchants, casinos, car dealers, insurance companies, private banks and shell corporations.
Money-launderers have been given golden new opportunities by the proliferation of overseas financial centres, increasingly set up by poor countries as a means of siphoning off some of the hundreds of billions of dollars flowing around the globe.
At least 4000 centres are operating in 60 countries, diverting a flow of $US4.8 trillion through them last year.
Most of these centres lack stringent regulation and supervision, and can be set up and operated on the Internet.
"Drug traffickers, terrorists, money-launderers, tax evaders and other criminals have found the centres a particularly inviting venue in which to conduct and conceal their nefarious activities," the bureau says.
Almost 20 per cent operate in the Asia-Pacific region, including the Cook Islands, Nauru, Samoa, Niue, Marshall Islands and Vanuatu.
The islands also allow international business companies to be set up. These, the bureau says, present impenetrable barriers to law enforcement.
Laws allowing the establishment of the companies usually do not require - and sometimes prevent - disclosure of the real owners, allow the issue of bearer shares and the marketing of shelf companies, and do not allow public access to registers of directors or managers.
Nauru has recently also become one of six countries to offer "economic citizenship" - in effect, the sale of citizenship with virtually no strings attached, providing such benefits as an instant change of name and the ability to travel to many countries without a visa on a new passport.
Of our close neighbours, the bureau notes:
* Cook Islands: The anonymity and confidentiality offered to financial transactions is particularly attractive to money-launderers and other criminals - possibly accounting for a surge in business from Russia. An added appeal is that it is nearly impossible to prove the criminal origins of money.
* Marshall Islands: International business companies have been linked to the laundering of criminals' money from Russia and other countries.
* Nauru: Asian and South American clients allegedly linked to organised crime have been involved in money-laundering. The island's loose rules and Internet marketing make Nauru-based businesses ideal for illicit financial trading.
* Niue: Russian and South American crime gangs are alleged to have used island facilities for money-laundering.
* Samoa: An alleged centre for Russian and other countries' money-laundering.
But the South Pacific is dwarfed by the scale of crime and corruption in Asia, greased by the flow of money through sophisticated cyber-trading and by traditional family-based underground economies that have moved into large-scale money-laundering.
Criminal cartels in China, Hong Kong, Macau, South Korea, Japan and Taiwan are using corruption and cronyism to help move huge amounts of cash from drugs, prostitution, people-smuggling and other major crime.
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