Niue denies links to drug cartels

NIUE’S Premier Sani Lakatani has denied his small South Pacific state’s tax haven operation is linked to South American drug cartels, following reports the country faced economic sanctions.

The Group of Seven (G 7) superpowers was reported by AFP (Agence France- Presse) to be considering sanctions against Niue and another South Pacific island nation, Nauru - two of the world’s smallest states - amidst fears they are key players with drug cartels and the Russian mafia.

The head of the Paris based Financial Action Task Force (FATF), Patrick Moulette, confirmed a list was being drawn up of countries judged “non-cooperative” with international money laundering efforts.

Russian government officials claim US$7O billion moved through Nauru’s offshore banks last year, while investigators in Washington say Nauru had a role in Russian mafia attempts to launder seven billion dollars through the Bank of New York last year.

Senior diplomatic and law enforcement sources said Niue’s offshore Internet based banking system had been linked to Panama and drug cartels.

But Lakatani said he had never heard of any drug-related links to the island’s offshore business scheme, the New Zealand Herald reported.

He said an internationally respected Panamanian law firm, Mossack Fonseca, had organised clients. “We checked them out and they are great.”

Lakatani said more than 50,000 clients had registered, each paying around 200 dollars to the Niuean government.

Asked whether the companies received tax incentives, he said he did not know the details.

He said he was bemused by reports that the G 7 and the Organization for Economic Cooperation and Development (OECD) would take an interest in his country.

“We are only a small nation. Why would they bother with us?”

New Zealand’s Foreign Minister Phil Goff said he would be making urgent inquiries on the proposed actions.

“Niue has close associations with New Zealand and we have certain responsibilities for it,” Goff said.

FATF is based in the OECD offices but is not officially an OECD organ.

Moulette said FATF had compiled a list of 25 criteria to identify countries and

administrations judged “non-cooperative” with international money laundering efforts, including such things as “excessive bank secrecy,” which are “serious obstacles to the fight against money laundering.”

A list of countries that fell into the non cooperative category was being compiled and would be put to the G 7.

Offending countries will be asked to comment on FATF’s judgment and given a chance to correct any errors made by FATF or to mend their ways.

FATF members have finalised a list of proposed sanctions against places judged to be non-cooperative, Moulette said.

They did not go as far as a French proposal for outright banning of transactions with any administration found to violate the criteria, but they do include

the possibility of limiting or “setting

conditions on” financial transactions with such areas.

This could include a requirement for financial operators to report to regulatory authorities any financial transaction involving such a non-cooperative center.

But the chief initial sanction would be to publish the list of non-cooperating areas, Moulette said, because of the likely effect of such adverse publicity. ■