AUCKLAND, New Zealand (Dec. 21, 1999 � Agence France-Presse)---In an unprecedented action international banks have placed a ban on U.S. dollar denominated payments involving three tiny Pacific nations, Nauru, Palau and Vanuatu, two of which have been accused of laundering Russian Mafia and South American drug cartel money, a document obtained by AFP Tuesday reveals.

The ban has been in effect since 12:01 a.m. New York time on November 17, but appears to have been retrospectively introduced and not publicly announced.

The statement represents a stunning humiliation of the three countries, all small Pacific republics, which as members of the 16-nation South Pacific Forum have signed two declarations opposing tax haven based crime and money laundering.

On December 9 AFP, quoting diplomatic and law enforcement, said the Group of Seven were preparing to launch tough economic sanctions against Nauru and Niue.

Niue, which operates an offshore banking and company registration scheme through Panama, has escaped action so far.

Nauru, the world's smallest republic with 10,605 people, saw 70 billion U.S. dollars moved through its banks last year and it may be the key player in the seven billion dollars of Russian Mafia money moved through the BNY.

A U.S. Bureau for International Narcotics and Law Enforcement Affairs report earlier this year said Vanuatu, population 190,000, was an "extremely active financial center, with offshore companies, trusts and banks." It said its attractiveness was due to "its strict bank secrecy."

It is less clear why Palau, 20,000, has been banned. The U.S. report did not have it on a watch list but warned a then proposed Corporate Registration Act would allow for the creation of shell offshore holding companies. Hong Kong financial experts drafted the law.

"Palau offshore banking licenses -- the legitimacy of which is unknown -- are being advertised on the Internet by a Latvian bank."

Bankers move money through the "SWIFT" system internationally and in a message to its over 300 correspondent banks Deutsche Bank Global Institutional Services noted that in recent months fund transfers to Nauru, Palau and Vanuatu had become the focus of law enforcement and regulatory agency attention.

"Government authorities are currently investigating funds from Russian and other Confederation of Independent States nations that may have been improperly transferred to these jurisdictions," the bank notice sent out on SWIFT said.

"These transfers appear to have involved not only banks located in these countries but also financial institutions spread throughout the world."

Deutsche Bank and Bankers Trust said the developments "necessitated appropriate measures.

"To prevent both banks from being abused by unlawful elements, it was decided that the processing of any payments denominated in United States Dollars involving the countries of Nauru, Palau and Vanuatu would be prohibited."

They had therefore "cancelled all payments involving these countries and returned them to the remitter.

"It was the first time either institution undertook such a proactive approach. The policy will remain in effect until further notice. Please note that this action does not constitute a blocking or seizing of funds."

The notice said Republic and the Bank of New York had adopted similar policies and "other US-based financial institutions are seriously considering adopting a similar policy."

The bank notice also quotes from the US Bureau report as well as a comment quoted in the Washington Post from Nauru Chief Secretary Mathew Batsiua who told the newspaper Nauru was currently incapable of "undertaking a credible and comprehensive screening process" to ease a conceded vulnerability to money laundering.