By Peter Bate, Cartagena

"This subject, which is a worldwide problem, does not find Latin America and the Caribbean either unprepared or unconcerned," said IDB President Enrique V. Iglesias at the close of the seminar.

Possible IDB actions would include financing to train regulatory and financial officials, establish banking information networks, strengthen financial systems, and prepare diagnostic studies to determine the magnitude of the problem. Asset laundering--defined as legitimizing earnings from illicit activities, such as drug trafficking, bribery and arms smuggling--involves 2-5 percent of the world's gross domestic product, or $100-300 billion annually, according to some estimates. Left unchecked, it can undermine the credibility of a country's institutions and financial systems and compromise the integrity of judicial and law enforcement agencies, said Iglesias.

Other seminar participants described the serious impact asset laundering has on many Latin American and Caribbean countries. International Monetary Fund economist Alfredo Leone described how asset launderers evolve their operations, using innovative off-the-books financial operations as well as offshore institutions and trade in goods, real estate investments, and other sectors of the real economy.

"Money launderers continue to take advantage of the lack of solid legislation and regulations against laundering money in some countries," he said.

James Spinner, IDB deputy general counsel, noted that some countries have passed legislation to enable authorities to confiscate laundered funds, and moves have been taken to step up cross-border cooperation. He also pointed to a recent program financed by the IDB-administered Multilateral Investment Fund to train financial regulators in the detection and prevention of asset laundering.

But despite the progress, countries need to do more to expand regulatory provisions for preventing, controlling and identifying illegal financial transactions in such sectors as banking and trade, said Spinner. At the same time, he cautioned that financial and commercial regulations to address the problem of asset laundering must not obstruct the movement toward trade liberalization in the region.