Britain among the world's 50 main money laundering countries, says US

The US government has placed the UK alongside Afghanistan, Colombia and Russia on a list of countries that need to do more to crack down on money laundering, it emerged yesterday.

According to the US state department's international narcotics control strategy report, Britain is one of more than 50 "major money-laundering countries", thanks largely to its role as a leading global financial centre.

The report highlights figures from the UK's Serious Organised Crime Agency (Soca) which show that £15bn of dirty money is laundered in the UK each year. Although it praises the UK's high street banks for tightening their anti-laundering controls, the report warns that criminals are increasingly turning to card fraud, cash-smuggling and bureaux de change to process the proceeds of their activities.

"Because cash is the mainstay of the drugs trade, traffickers make extensive use of money transmission agents, cash smuggling, and informal value transfer systems (underground banking) to remove cash from the UK," it says. While heroin proceeds from the UK are often laundered through Dubai before reaching traffickers in Pakistan or Turkey, UK cocaine proceeds find their way back to South America through Jamaica or Panama.

"As money laundering laws become stricter, money laundering becomes more difficult. Because dealers in the UK generally collect sterling, most traffickers are left with excess small currency (usually £10 notes). This has created cash smuggling operations to move large sums of sterling out of the country. The Soca analysis suggests that more sterling has exited the UK in recent years than entered due to the relative ease of converting sterling in other countries."

While Britain's overall anti-money laundering strategy is judged to be sound, the report recommends the government brings in new rules to help it keep a closer eye on transactions made by "politically exposed persons" who may use banks to help fund foreign regimes.

The study notes: "The United Kingdom has a comprehensive anti-money laundering/counter-terrorist financing regime. However ... there are areas that should be further addressed by the authorities." It calls on the government to find out whether the Serious Organised Crime and Policing Act (Socap) 2005 exempts cases of money laundering from British legal controls if the transactions are not deemed illegal in the relevant foreign jurisdiction. The report also recommends changes to the Gambling Act 2005 to make it harder for criminals to launder money through gaming. Outlets ranging from solicitors and estate agents to jewellers or car dealers are subject to formal "suspicious activity reporting" requirements in the UK but some sectors of the betting and gaming industry are not, the report says.

"The 2005 Gambling Act should be amended to require the gaming industry to be covered in the same manner as the financial and designated non-financial businesses and professions," it urges.

" Authorities should track and examine the effects of the Socap change regarding acts and assets in or from foreign jurisdictions ... to determine whether it has been effective, or whether it has enabled exploitation." A spokesman for the government said yesterday: "The UK government takes the issue of money laundering and financial crime very seriously, and we are working both domestically and internationally to combat it."

In its first annual report on suspicious activity reporting last November, Soca said that progress had been made, adding: "Targeting the money is vital in the fight against criminal and terrorist activity. By following the movements of illegal finance we build a knowledge of criminal organisations and hit them where it hurts."

The international narcotics control strategy report is an annual briefing for the US Congress on the efforts key countries make to tackle the international drug trade. It also focuses on ancillary crimes such as money laundering and financial crimes.