No jurisdiction, large or small, is immune from the threat of corruption, according to Saul Froomkin, partner at Mello Jones and Martin.

Speaking at the Second Annual Bermuda Anti-Money Laundering Conference yesterday, the former Attorney General said that no country could afford to allow money to be laundered through its financial institutions, or it could face economic ruin.

While not mentioning Bermuda by name during his speech yesterday at Elbow Beach, he spoke of the need for vigilance for small nations such as Bermuda.

Froomkin also said that the pressure from the OECD (Organisation for Economic Co-operation and Development), the United States and the United Nations upon legitimate international financial countries to restrict or eliminate lawful tax avoidance measures, would in fact strengthen the role of the corrupt jurisdictions, which would ignore such pressures.

He said: "The fraudsters, money launderers, terrorists and narco-traffickers, will accordingly flock to those open 'wild-west mentality' locales where they will be allowed to loot, rape and pillage to their hearts' desire." He said that no country or jurisdiction could afford to allow its banks and other financial institutions for illegal activities.

"No nation large or small can afford to allow its financial institutions to be used or abused for nefarious activities. Failing to heed this warning will result in the destruction of the economic stability and international reputation of all involved."

And he added that new methods of money laundering were appearing all the time and regulators had to keep on top of it to keep criminals out to the system.

"It is equally patently obvious that those jurisdictions that maintain a laissez-faire attitude to the source of money coming into their institutions, or the bona fides of those who bring it, are at greatest risk," added Mr. Froomkin.

He said that in his view considerably more funding was moved through the Informal Money or Value Transfer Systems (the IMUT system).

Mr. Froomkin said this system consisted of the underground or parallel banking systems well known in India, the Middle East and Asia and included the well known money laundering operations of Hawala, Hundi, and Fei-Chien.

He told delegates: "Those systems have traditionally been used for legitimate purposes to move funds from one jurisdiction or another, particularly by itinerant workers to send funds to their families in places where in some instances banks don't exist.

"It is a system built on mutual trust and based upon family, ethnic or linguistic ties.

"They are an obvious route for the transfer of illicit funds and in particular to terrorist organisations, for they are almost impossible to penetrate."

But he said that because of the significant amounts involved many IMUT's must necessarily resort to using legitimate financial institutions.

"Those institutions suspecting such activity are required to file suspicious transaction reports, opening the door to investigation and detection."

He said that, if for example, a small Chinese grocery store, or a neighbourhood Indian travel agency were depositing into its bank account significantly more funds than it would reasonably be expected from such a business that ought to trigger a suspicious transaction report and set the train in motion for discovery of the underlying source of the funds.

He added that he had "no doubt that this method of moving and laundering illicit funds will continue to be employed and the vigilance of those under an obligation to report must be intensified in order to make more effective the fight against money-laundering generally and the funding of terrorism particularly."