Smallest States Accused Of Mafia Drug Cartels
Two of the smallest states in the world, Nauru and Niue, are facing an assault by the economic super-powers over mounting evidence that they are key players for the Russian mafia and South American drug cartels. John Howard reports.
The Group of Seven (G7) is preparing sanctions on the tiny South Pacific states because they are seen as a serious threat to the world banking system.
Nauru, the world's smallest republic saw US$70 billion moved through its banks last year and may be the key player in the US$7 billion of Russian mafia money moved through the Bank of New York.
Much of the money does not make it to Nauru and is instead moved through Internet-based Nauru sites but in May there was so much cash in Nauru that government officials were seen flying to neighbouring Kiribati to deposit money in Australian banks.
Niue is a centre for offshore company formation which, sources say, is a cover for Panamanian drug related operations.
Senior diplomatic and international law enforcement sources, who won't be identified, confrimed that measures designed to isolate Nauru and Niue are being drawn-up by the OECD.
Australia and New Zealand may bare some of the consequences of any sanctions as Australian currency is used in Nauru and New Zealand currency in Niue.
Nauru had apparently been warned directly by the OECD's Financial Action Task Force (FATF) to clean up its act but was told that it was none of their business.
Nauru is also snubbing its neighbours in the 16 nation Pacific Forum wo in their 1992 Honiara Declaration noted " Adverse law enforcement environment threaten the sovereignty, security and economic integrity of Forum members and jeopardise economic and social development."
Law enforcement officials say Naura has become the "number one bad guy" in the world of tax haven operations.
Niues problem was different with the development of prime bank instrument fraud centred on its tax haven banking. The Panamanian drug link is being monitored closely with New Zealand offering the only direct access to the country.
Regional criminal intelligence operations were also monitoring large numbers of Russians moving into the region.
In March, FATF named Nauru, the Cook Islands, Samoa and Vanuatu for their "heavy concentration of financial activity related to Russian organised crime."
In October, Victor Melnikov, deputy chairman of the Russian Central Bank told the Washington Post that last year 70 billion dollars was transferred from Russian banks to accounts of banks chartered in Nauru, primarily to evade taxes.