World Bank urges action on asset plundering, graft

* Looting costs developing nations up to $40 billion per yr

* Greek crisis shows corruption also hits developed nations

* Financial centres must lead the way in tackling problem

By Vicky Buffery

PARIS, June 8 (Reuters) - World leaders must take action to stop the theft of assets from developing countries, which strips them of up to $40 billion a year that could be used to pay for vital medicines and clean water, the World Bank said on Tuesday. But bribery and corruption is also a problem for developed economies that are struggling to bring their finances under control, World Bank Group Managing Director Ngozi Okonjo-Iweala said during an international forum on recovering stolen assets.

"The Greek crisis shows corruption can be debilitating to development, not just in developing countries," Okonjo-Iweala told a news conference.

"As world leaders convene at G20 meetings and other forum in coming weeks to discuss the economic crisis, stimulus plans and financial regulation, the fight against corruption and asset theft should be at the top of their agenda," she added.

Leaders of G20 nations are due to meet in Canada at the end of the month to discuss ways of bolstering the global financial system and introducing regulatory reforms.

According to World Bank estimates, between $20 and $40 billion dollars is plundered each year from developing nations by corrupt officials, before being laundered through major financial centres where it finds a safe haven.

But $20 billion of these looted funds, if found and returned, would pay for 48,000 km of two-lane roads or first-line treatment for 120 million people with HIV/AIDS.

Greece, too, has paid dearly for its failure to stem systemic corruption, losing nearly $30 billion a year or 8 percent of GDP to financial malpractice, battering fragile state accounts.

"Our failure to stem and reverse the criminal flows comes at a high cost," Okonjo-Iweala said.

Speaking alongside Swiss Foreign Minister Micheline Calmy-Rey, the World Bank Group chief said tackling looting must fall to both the public and private sector.

But financial centres such as Switzerland must take the lead in pursuing foreign and domestic corruption cases, she said, conducting thorough due-diligence procedures and detecting the proceeds of corruption.

Calmy-Rey said Switzerland aimed to introduce legislation to seize and return assets that are clearly illicit.

"If adopted it will be possible finally to return the Duvalier assets to Haiti," Calmy-Rey told reporters.

In one of the most notorious cases of kleptocracy, Jean-Claude or "Baby Doc" Duvalier allegedly embezzled between $300 million to $800 million of assets from Haiti during his presidency which ran from 1971 to his overthrow in 1986.

Duvalier's assets in Switzerland have been frozen for eight years, Calmy-Rey said, adding that Haitian authorities were too weak to begin criminal proceedings against the former leader and allow the Swiss state to confiscate and return the funds. (Editing by Ron Askew)