ERROR RG P4 16.5.1995 A story in last Thursday's edition incorrectly quoted Mr. Peter Rodger, senior vice president and group legal advisor for the Bank of Butterfield, as saying mutual funds are used for money laundering. In fact, Mr. Rodger said that although there is no evidence to suggest mutual funds are used for such activity, money laundering rules will be extended to them as they will be to all other financial activities.

Legislation is likely to play a bigger role globally in determining the identity of mutual fund investors as jurisdictions step up anti-money laundering procedures, said the Bank of Butterfield's top lawyer.

"Several countries like Bermuda have very strict rules to prevent money laundering,'' said Mr. Peter Rodger, Bank of Butterfield senior vice president and group legal advisor.

Through the Bermuda Government, the Bermuda Monetary Authority and the Island's financial institutions, the Island is considered a leader in rules preventing money laundering.

But he alluded there are other jurisdictions which have been lax in adopting legislation to keep laundered money out of mutual funds.

"Despite all the good school report cards submitted by different countries, a surprisingly large number of fund jurisdictions do not yet have identification requirements for mutual fund investors, indeed, there is evidence that mutual funds are commonly used for money laundering,'' Mr. Rodger said yesterday at the sixth annual globalisation of mutual funds conference at the Southampton Princess.

Last week, Dublin published anti-money laundering guidelines while the UK did so a year ago, he said.

"Anti-money laundering programmes world-wide have slowly but surely been moving up the learning curve, two particular developments have been the move away from coupling money laundering only to drug trafficking, and the move away from attacking the simple process of dumping large bags of cash into the banking system. Programmes now include the `need to know' initiative and identification procedures,'' he said.

But how to operationalise simple cost effective rules may generate more administrative costs and raise daunting questions, especially if they have to establish shareholders' identities, he said.

"How will the Caribbean or Bermuda offshore fund administrator verify the identity of a someone investing from Taiwan or a retired colonial administrator subscribing from Zimbabwe?'' According to one report, some mutual funds in Hong Kong require a photocopy of an investors passport before accepting money.

Organisations like the Financial Action Task Force and the Caribbean Financial Action Task Force (CFATF) are involved in developing and promoting measures against money laundering.

Bermuda is a very active member the CFATF, said Mr. Rodger.

Trinidad-headquartered CFATF, has 26 members stretching from northern South America to Mexico and Bermuda.

Mr. Rodger also said the New York Federal Reserve has expressed "concern'' about payable through accounts, used significantly in the US to offer customers a range of commercial services and associated with money market funds.

Criminals might use this type of structure to launder money.

The New York Fed has given US banks until fourth quarter 1995 to comply with new rules on pay through accounts.

The three-day conference, focusing on global developments, was presented by the International Bar Association (IBA) and the Investment Company Institute.