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Russian prosecutors have opened the first criminal investigation into a Moscow bank since the Government was rocked by accusations of money laundering through the Bank of New York.

The director of the prosecutor’s investigative unit, Vladimir Minayev, said Russian authorities had uncovered evidence of suspicious deals carried out by the Flamingo Bank, a small bank based in Moscow.

Mr. Minayev declined to say whether Russian officials had uncovered information that Flamingo had channeled money through suspicious accounts at the Bank of New York. He said the investigation was continuing.

Russian executives say Flamingo was one of several Russian banks suspected of funneling under-the table payments from Russian importers through foreign banks.

The practice is a widespread means of avoiding taxes and tariffs. And some Russian businessman have said it may account for some of the money that passed through accounts at the Bank of New York that the Federal Bureau of Investigation is examining. Some $7.5 billion passed through their accounts over the last three years.

Executives at Flamingo Bank did not respond to repeated requests for comment. The bank received a license in October 1994, according to the Central Bank. It has a license to deal in foreign currency, as well as rubles. But its official assets are so small that it has escaped attention by some Western bank-rating agencies.

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Financial officials from Arab countries worked behind closed doors here on Thursday to create the first regional organization in the Middle East and North Africa to fight money laundering, delegates to a meeting on terrorist and criminal finance said.

The organization could be a vital tool to pursue terrorist money that flows outside traditional banking channels through an ancient system known as hawala, which is also important in sending money from workers scattered around the globe to relatives in Muslim countries.

Five regional organizations already work under the aegis of the Financial Action Task Force, which was created in 1989 to investigate money laundering by drug cartels and organized crime and, since the Sept. 11, 2001, attacks, has also tracked terrorist finance.

The task force sets standards, like urging countries to adopt laws that make money laundering a crime and that authorize the extradition of suspects. It also publishes lists of countries whose financial regulatory systems it deems helpful to money laundering. The current list has 7 countries on it, down from a peak of 21.

Creating the new organization has been the focus of talks here this week by delegates from the 31 countries and two organizations that make up the task force, said Patrick Moulette, the task force’s executive secretary.

An announcement is expected Friday. The new organization could become part of task force operations as early as October, delegates said.

Officials declined to say which nations were involved. Calls to the Washington and Paris embassies of Saudi Arabia, Jordan and Egypt were not returned. Iran was not represented here, officials confirmed.

The new regional organization could be crucial to identifying terrorist plots financed with money transferred across borders without any written record. In a hawala transaction, a client deposits funds with a hawala agent in one country and is given a code, usually a number. When the code is delivered to another hawala agent in another country, the money is turned over, minus a commission.

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LEAD: In moving against a large money-laundering operation Wednesday, the Justice Department began using a new Federal law meant to help the Government seize the proceeds of illegal drug sales.

In moving against a large money-laundering operation Wednesday, the Justice Department began using a new Federal law meant to help the Government seize the proceeds of illegal drug sales.

The law, enacted last year, permits the Government to claim ownership of all cash funneled through operations intended to disguise the source of ill-gotten money. Investigators previously relied on a 1986 law that allowed them to seize only the profits of the laundering operation, typically amounting to just 6 or 7 percent of the money being ”washed.”

The significance of the new law was dramatically illustrated Wednesday when the Justice Department filed a civil suit in Federal District Court in Manhattan, seeking $433.5 million in laundered money that moved through the accounts of nine American banks and foreign banks with American branches.

Among the nine banks are the Bank of New York, Republic National Bank, Citibank, American Express Bank Ltd. and BankAmerica International. In some cases, the lawsuit claims, the laundered money was transferred to offshore branches of major American banks, Justice Department officials said today.

It also includes the Bank of Credit and Commerce, a New York agency of Bank of Credit and Commerce International. The international bank is a Luxembourg-based institution indicted last year in Florida in the breakup of a major international drug-money laundering scheme. Extension of Authority

”This is the first time that the courts have extended our authority to reach into foreign countries to tell someone to return assets” from a money-laundering operation, the head of the Justice Department’s narcotics section, Charles Saphos, said today. ”This suit tells them to freeze the money, to bring it back to the U.S., and to let us adjudicate to determine who owns it.”

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LEAD: A Panamanian bank has agreed to plead guilty to laundering drug money, in a case that discloses the complicated new electronic technology now used to transfer illegal profits from cocaine sales in the United States.

A Panamanian bank has agreed to plead guilty to laundering drug money, in a case that discloses the complicated new electronic technology now used to transfer illegal profits from cocaine sales in the United States.

The plea is to be entered on Monday in Federal court in Atlanta by lawyers for the Panamanian subsidiary of Banco de Occidente, court documents say. It will be the largest money-laundering conviction ever obtained by the Federal Government against any bank.

It will also be the first time a foreign bank with no operations in the United States has been convicted on charges of disguising illegally earned cash.

Details of the plea agreement are to be announced on Monday by the Justice Department. The bank’s cooperation with the Federal authorities provides a rich source of information about the role played by American banks in money laundering.

Justice Department officials in Washington said the complex laundering operation began with drug dealers in New York, Miami, Houston and Los Angeles who took in hundreds of millions of dollars in cash from cocaine sales and then carted them off to bogus jewelry businesses that acted as fronts. Hundreds of Briefcases

The cash, often in hundreds of briefcases and cartons, each containing from $100,000 to nearly $2 million, would then be sent by armored truck to other phony jewelry operations in Los Angeles, where they were counted in high-speed machines.

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Donald Regan unfairly implies that banks are not taking an active role in combating money laundering (”The Color of Money Can Stop Drugs,” Op-Ed, Sept. 18). Experts familiar with recent developments know that banks are playing a major role in this battle, both in the United States and abroad.

Mr. Regan says that ”if our Government is going all out to fight a war over drugs, bankers should be the first to join in.” The American Bankers Association agrees; it started addressing these issues more than four years ago.

Mr. Regan proposes a White House meeting of enforcement officials, financial industry regulators and bankers ”to establish ground rules on how to proceed.” Last March, in an open letter to the Office of National Drug Control Policy, A.B.A.’s Money Laundering Task Force called for the creation of just such a group. Last month Senator John Kerry introduced legislation that would establish an Anti-Money-Laundering Advisory Commission, and President Bush recently incorporated this recommendation in his national drug program.

A special United Nations task force met for the first time this week in Paris to assess the problem of money laundering and to discuss means of enhancing international cooperation in providing access to bank records and seizing drug assets. The A.B.A. is also meeting with representatives of several European banking organizations to discuss the issue.

America’s commercial banks have a strong record of support for compliance with Federal statutes like the Bank Secrecy Act and the Money Laundering Control Act. They also make every effort to know their customers. In 1988 financial institutions filed approximately six million cash reports and reported hundreds of suspicious transactions, despite the difficulty in distinguishing these transactions from legitimate ones.

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Creditors are likely to forgive $80 billion to $90 billion of Iraq’s $120 billion debt owed to donor nations, World Bank President James Wolfensohn said on Wednesday.

Wolfensohn, speaking to business students at Stanford University, said $80 billion to $90 billion “has a fair chance for debt relief” but he did not offer any details or timing.

The World Bank head has said he believes most of Iraq’s major government creditors are willing to forgive two-thirds of Iraq’s debt. France, Germany, Japan and Russia have all promised big reductions.

Wolfensohn was in California for talks and meetings in the San Francisco Bay Area on Wednesday and Los Angeles on Thursday to press for action to reduce global poverty.

“Madness is running over our planet,” he said, ticking off statistics on development assistance and defense budgets.

World development help is running at about $56 billion a year, while military expenditures are almost 20 times higher at more than $900 billion, Wolfensohn said.

Subsidies and tariff protections for world agriculture, including large commercial interests, reach about $350 billion a year.

“This is a huge frustration. We have to find a way to focus on poverty and development … but the big issue is indifference. People don’t care. Money is not flowing to where it is needed,” Wolfensohn told the students.

The World Bank is working to meet U.N. goals to halve by 2015 the proportion of people who earn less than $1 a day and go hungry, he said.

Another principal goal, Wolfensohn said, is to ensure that by 2015 children worldwide will be able to complete primary schooling.

“We must give people a better life and peace. If we don’t do that we have troubles that can’t be sorted out by military expenditures,” he said.

The World Bank head also said a donor meeting to begin a “needs assessment” for troubled Haiti will be held in three weeks.

It will include the World Bank, International Monetary Fund, U.S. Agency for International Development, and assistance agencies from France, Britain and other countries, a world Bank spokesman said.

The meeting would focus on urgent social and economic support for the impoverished Caribbean nation and gauge donor feelings since the fall of President Jean-Bertrand Aristide last weekend.

A more formal pledging meeting, which would include a new Haitian administration, would be held later.

Financial officials from Arab countries worked behind closed doors here on Thursday to create the first regional organization in the Middle East and North Africa to fight money laundering, delegates to a meeting on terrorist and criminal finance said.

The organization could be a vital tool to pursue terrorist money that flows outside traditional banking channels through an ancient system known as hawala, which is also important in sending money from workers scattered around the globe to relatives in Muslim countries.

Five regional organizations already work under the aegis of the Financial Action Task Force, which was created in 1989 to investigate money laundering by drug cartels and organized crime and, since the Sept. 11, 2001, attacks, has also tracked terrorist finance.

The task force sets standards, like urging countries to adopt laws that make money laundering a crime and that authorize the extradition of suspects. It also publishes lists of countries whose financial regulatory systems it deems helpful to money laundering. The current list has 7 countries on it, down from a peak of 21.

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The major industrial nations warned Russia and two other countries today that they would face restrictions on their dealings with international banks if they did not make quick progress in clamping down on money laundering.

A committee that includes the United States and 28 other countries said Russia, the Philippines and Nauru, the Pacific island nation, has done little in the last year to halt flows of illegally earned money through their financial systems. If the three countries do not enact legislation on the problem by Sept. 30, the panel said, they would be subject to sanctions, including tighter monitoring of international banking transactions or denial of permission for their banks to operate in other nations.

The Financial Action Task Force in Paris, which operates as an arm of the Organization for Economic Cooperation and Development, also added six countries to a list of those that have not cooperated in cracking down on laundering. They are Burma, Egypt, Guatemala, Hungary, Indonesia and Nigeria. The countries on the list could ultimately face the same sanctions that are being threatened against Nauru, the Philippines and Russia.

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In another unusual twist to an unusual case, two San Francisco decorators convicted of laundering money for a Colombian drug lord received reduced sentences yesterday from a United States District Court judge in Brooklyn who said he granted leniency in part because he thought that as homosexuals the two would be vulnerable in prison.

Judge Jack B. Weinstein sentenced Antony Alexander Blarek 2d to five years and eight months in prison and Frank V. Pellecchia to four years. Under Federal sentencing guidelines, Mr. Blarek, 56, faced 10 to 12 years while Mr. Pellecchia, 49, faced roughly 8 years.

The judge said he also based his leniency on the fact that Mr. Pellecchia is H.I.V.-positive and on his belief that the two men had acted more out of artistic egotism than greed or ingrained criminal behavior.

Despite Judge Weinstein’s leniency, Federal prosecutors lauded the sentences. ”We think it is a very severe sentence,” said an assistant United States attorney, Mark W. Lerner. He said the sentences sent ”a loud shot across the bow” to deter anyone from using a legitimate business to knowingly work with drug traffickers or other criminals.

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Promising a fight on the floor of the Senate, Senator Charles E. Schumer, Democrat of New York, said today that he planned to ”toughen up” legislation proposed by the Clinton administration to combat money laundering.

Senator Schumer’s main criticism of a White House proposal announced on Wednesday was that penalties against offshore banks or countries would be left to the discretion of the United States authorities rather than being set off automatically when money-laundering abuses were uncovered.

Speaking at a hearing on money laundering convened by Representative Jim Leach, the Iowa Republican who is chairman of the House Banking Committee, Senator Schumer said that an effective policy against money laundering required that suspect offshore banks be automatically forbidden access to the United States banking system.

”In my years as a legislator, I’ve observed time and again that in the international arena, discretion is usually a code word for delay and avoid,” Senator Schumer said. ”There is no reason to allow any of these banks to exist because we know their sole — and only — purpose is money laundering. What discretion do we need?”

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Summoned to a downtown bank last month, the police arrested a woman who they suspected was laundering profits for foreign racketeers. A native of Chechnya, she had reportedly tried to open an Israeli account with $50 million in Venezuelan checks in the name of an apparently fictitious Gibraltar investment firm.

If so, it would not have been the first time Israel had attracted professional money-scrubbers.

In recent months, the authorities have been asked to investigate cash transfers linked to a $340 million insider-trading deal involving a Russian telecommunications company and to the huge money laundering scandal involving the Bank of New York. Last summer, the conviction of an Israeli crime boss in Miami for running a money laundering business for the cartel in Cali, Colombia, prompted renewed concern about the recycling of cocaine money here.

But the police and prosecutors here face an almost insurmountable problem: Money laundering is not a crime in Israel.

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The House passed legislation to fight money laundering today, then tonight Congressional negotiators reached a deal that could clear the way for the new antiterrorism surveillance and investigatory powers sought by the Bush administration.

Under an agreement in principle on the antiterror measure, some of the new powers would expire in four years, a Senate aide said. The time limit, known as a sunset provision, was a critical area of disagreement in the bills passed by the House and Senate.

The original House bill called for a three-year limit, to ease the concerns of lawmakers on the left and the right that while the new powers are necessary in the current crisis, they could be subject to abuse. The bill that ultimately passed the House, after intensive negotiation with the Bush administration, called for a five-year limit.

Negotiators also reached an agreement to include in the overall anti terrorism legislation provisions intended to fight money laundering.

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Citing their tougher stances against money laundering, the Treasury Department said today that it had notified American financial institutions that they could relax their scrutiny of transactions involving Israel, Lebanon and St. Kitts and Nevis.

The announcement follows last month’s decision by the Financial Action Task Force on Money Laundering, an intergovernmental body, to remove the three countries from its list of countries and territories that were judged to be uncooperative.

Fighting money laundering has taken on greater importance since the Sept. 11 attacks as authorities work to thwart militants in their financing of operations. Inclusion on money-laundering blacklists can harm a nation’s economy by causing nervousness among investors, who may worry that they could be associated with illegal practices.

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The Clinton administration plans to ask Congress for sweeping new powers to combat money laundering including the authority to ban financial transactions between United States banks or brokerage houses and off-shore financial centers, administration officials said today.

The request is the centerpiece of administration efforts to tighten money-laundering laws after the Bank of New York was found to have served as a conduit for about $7 billion in Russian money, some of which investigators believe was derived from illegal activities. The administration has also been searching for ways to make it harder for drug traffickers to funnel their profits through American banks.

Treasury Secretary Lawrence H. Summers plans to announce proposed legislation in a speech to bankers on Thursday, officials said. The legislation would give his department a broad range of powers to investigate and in serious cases forbid transactions between American financial institutions and individual foreign banks or entire foreign countries.

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The scene would make a mob boss proud: workers in a windowless hallway scoop armfuls of grimy cash out of plastic garbage bags and sling them into a washing machine. Others fill the dryers and iron the clean bills. Nearby, a half-dozen women count the freshly pressed bills and bundle them into thousand-dollar wads.

In an era of cashless and instantaneous transactions, this laundering operation, which has been up and running since shortly after Hurricane Katrina hit on Aug. 29, is no mirage. In fact, it is part of the recovery process for one of Mississippi’s largest financial institutions, Hancock Bank, which like most banks in Katrina’s path is still repairing its network.

Hancock Bank’s branches in the worst-hit areas had no phone or data lines or power for weeks. Bank tellers could not find account balances or swap crucial information with the bank’s backup data centers in Baton Rouge, La., and Chicago. Automated teller machines were inoperable.

About 90 of the bank’s 103 branches in the New Orleans area and along the Mississippi coast were damaged in some way. Many of them lost connections to the main data center in the company’s headquarters in Gulfport, which was shattered. Most branches are now functioning again, but seven were smashed and have been temporarily replaced by mobile operations in R.V.’s.

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Robert E. Brennan, the financier who built a financial empire and a lavish style of living selling penny stocks on television in the 1980’s, was convicted in federal court today of money laundering and bankruptcy fraud.

Mr. Brennan was charged with failing to list $4.5 million in assets on bankruptcy documents he filed in August 1995, including $525,000 in casino chips from the Mirage Hotel in Las Vegas that prosecutors said he cashed in less than a month after filing for protection from his creditors.

After deliberating for seven days, a jury of eight women and four men found Mr. Brennan guilty of 7 of 13 charges filed against him last August by the United States attorney in New Jersey.

Mr. Brennan, 57, stood rigidly, his hands clasped in front of him and his face slightly flushed, as Judge Garrett E. Brown of Federal District Court here announced the verdict about 4:30 p.m.

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ATIP for last-minute Christmas shoppers: For the best price on Johnnie Walker Black Label, do your buying in Colombia. It’s cheaper there than in Scotland, steps from the distillery.

The reason has nothing to do with Latin American drinking habits but everything to do with money laundering. A worldwide squeeze on safe havens for dirty cash has forced drug traffickers, and many others with an interest in moving huge sums of cash around the world without notice, into the liquor business. They now take the proceeds of drug sales in the United States, buy whisky (or General Electric refrigerators, Sony televisions, Microsoft software and in one case last year a Picasso) and ship them back home, where they are sold quickly at below-market prices. The drug cartels lose 20 or 30 percent of their earnings, but in a high-margin, high-risk business that’s not considered a terrible price.

That is only one of the latest maneuvers as the science of money laundering — the life-blood of any enterprise that wants to turn illicit profits into palatial houses and fleets of Mercedes — soars to new heights.

The days when you could trust a Swiss banker to hold on to your millions and keep his mouth shut are long gone: Just ask Imelda Marcos or, better yet, Paulina Castanon, the sister-in-law of Mexico’s former President, Carlos Salinas de Gortari. She spent several weeks in a Geneva jail recently after showing up to make an $84 million withdrawal from an account that Mexican prosecutors say was filled with the proceeds of drug deals. The assumption is that it was controlled by the Salinas family, but the former President, in self-imposed exile, isn’t saying much. His brother has just been indicted for “inexplicable enrichment.”

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The securities industry has been called the weak link in efforts to combat money laundering. But Wall Street firms are facing the same anti-money-laundering regulations that banks have faced for years — and a raft of new ones adopted after the terrorist attacks.

So, too, are a variety of other companies, from insurers to jewelers, from car dealers to travel agents.

These new regulations are coming thanks to the USA Patriot Act, which passed by lopsided votes in both chambers of Congress and was signed into law on Oct. 26. While the measure primarily gave the government vast new powers of surveillance and investigation, it also provided for sweeping new anti-money-laundering requirements that will affect a broad range of companies.

As the Treasury Department begins to write rules to carry out the law, the scope of these changes is just beginning to be understood. The first of the regulations is expected to be released by the end of the year.

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To prosecutors, it was a classic organized-crime case. The mob forced a contractor renovating a Midtown hotel to make weekly payments to prevent interference from unions.

But charges against one defendant fell apart, prosecutors said, because of a weakness in New York’s money-laundering laws, even though they were able to prove that the defendant had strong-armed the contractor into giving him $50,000, which was transferred to an account in Northern Ireland.

The case was one of several that law enforcement officials cited after Gov. George E. Pataki proposed legislation last week to expand the definition of money laundering in the current state statute, and to increase penalties for laundering money.

The governor cited concerns that too many money-laundering cases in New York were slipping through the cracks. His proposal has gained strong support from state and federal law enforcement authorities, and some powerful state legislators.

The bill would allow state prosecutors to file hundreds of additional charges against potential defendants each year, state officials said.

Federal authorities often use laws against money laundering — the transfer of money to make proceeds from criminal activities appear to be legitimate gains — to pursue criminals who would otherwise be difficult to prosecute.

The federal statute is broader than the New York one. Under the New York law, a person cannot be convicted of money laundering unless the money being laundered is exchanged for other currency or a narrow list of other valuable items.

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An international consortium fighting money laundering has taken action for the first time in its 12-year history against a sovereign state — the tiny Pacific island of Nauru.

The independent Financial Action Task Force on Money Laundering said today that it would take action against Nauru, a Pacific island nation, that is accused of acting as a center for laundering money for the Russian mafia. The consortium, which operates under the auspices of the Organization for Economic Cooperation and Development, was established in 1989 by the major industrialized nations.

The consortium said in a statement that its members ”will take countermeasures against Nauru,” which it said had failed to meet a Nov. 30 deadline ”to make appropriate legislative amendments to its Aug. 28 law against money laundering.”

It said it would ”closely follow the situation in Nauru and would raise the issue at its next meeting in Hong Kong, from Jan. 30 to Feb. 1, next year.”

The consortium’s statement says that it ”hopes that Nauru will address the shortcomings that have been raised before this meeting.”

The 29-nation body had given the Pacific atoll until last Friday to make the necessary legal changes and focus its attention on about 450 offshore banks that are based on the island and registered to a single government post office box.

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