San Marino banks seek to polish thuggish image

Landlocked inside Italy, this dwarf nation of 30,000 people has earned a reputation of turning a blind eye to ill-gained money and allowing fake companies to launder the cash.

But the heyday of tax-hopping and stashing away dodgy money may be over as the Most Serene Republic of San Marino is carrying out a quiet financial revolution -- with the intent of leaving some bad habits behind.

"If we have to give up dodgy money we will," said Secretary of State for Finance Stefano Macina.

"Those who come here to organize a tricky business or bring funds from the Mafia will be at risk."

A global crackdown by watchdogs makes criminal money a risky business for banks, while wealthy clients at the same time are no longer happy sitting on a pile of undeclared cash, looking for legal ways to lower tax and boost returns.

There are no checks at the border of this idyllic, hill-top stronghold of bank secrecy and anyone can walk into a bank and open an anonymous account with few questions asked.

Such habits meant that criminal organizations like the Mafia turn to the mini-republic for money laundering, experts like Pierluigi Vigna, a former chief prosecutor of Rimini, told a San Marino conference this month.

Fearing it would be cut out from competing in the global marketplace, San Marino began a complete overhaul of its financial system six years ago that sent a buzz across the medieval steps of its sleepy streets.

"Two years ago we just were not presentable," said Antonio Valentini, the chairman of the newly created central bank of San Marino, which says it is the world's oldest republic.