Natural Resources and Violent Conflict - WaterWiki.net

162 winer and rouleimportant self-regulatory organizations, such as the Basel Group ofBank Supervisors, in connection with its revised standards for assessingrisk to bank capital, the International Organization of SecuritiesCommissions, 2 and the Offshore Group of Bank Supervisors, amongothers. Finally, a coalition of private sector financial institutions, denominatedthe Wolfsberg Group, has established its own set of transparencystandards, initially created in 2000 to prevent the use of theirbanks and brokerage firms to hide the proceeds of corruption andextended in late 2001 to prevent terrorist finance. 3The increasing integration of national financial payments and clearingsystems into a global financial infrastructure has made it possiblefor changes in financial regulatory systems to be contemplated, mandated,and enforced at a global level, as the twin name-and-shameexercises initiated in 1999 by FATF and OECD have already demonstrated.In these exercises, countries with lax financial regulatory systemswere warned that they could face loss of market access to majorfinancial centers if they did not harmonize their standards for financialtransparency with the requirements levied by the members of thoseorganizations. Both FATF and OECD developed lists of jurisdictionsdeemed not to be in compliance with those standards. In each case,many of the targeted jurisdictions complained bitterly that the approachdid not respect their sovereignty. However, in each case, jurisdictionsthreatened with being blacklisted adopted comprehensivedomestic legislation, which on paper complied with the required normsalmost immediately. 4The initiatives share many common elements. These include the needto know one’s customers to ensure that they are not engaged in illicitactivity; the need for financial institutions to share information pertainingto illicit activity with regulators, with law enforcement, and, whenneeded, with one another; the need to trace such funds; and the need ofeach country to assist all others in enforcing violations of their domesticlaws. Principles initially used to combat drug trafficking and laterextended to include all serious crimes and, recently, terrorist financeand corruption have now been extended to include many fiscal offenses,as countries have come to recognize that a beggar-thy-neighbor approachto tax violations threatens to beggar all jurisdictions.To date, cross-border exploitation of illicit extraction represents anaspect of the illicit use of the global financial services sector that hasreceived comparatively little attention. Existing financial transparencyinitiatives have not addressed the need to combat the flow of funds fromabuses of natural resources in cases of conflict. Although such activitycould often fall within the parameters of standards and regulations designedto address money laundering, terrorist finance, or corruption, the