Post by FarticusPost by Marc LurieSensationalist, non-constructive, and innacurate.
.. actually, very true indeed. Don't think that if you ignore it it will go
away.
Le Monde diplomatique, July 2006.
http://mondediplo.com/2006/07/18clearstream
The Devil's Bankers
"Crime is a leading beneficiary of globalisation"
The belief of the US and British governments that they could seize dirty
money thought to be financing terrorism has merely diverted scarce
police resources from the pursuit of criminal money laundering.
By Ibrahim Warde
The Clearstream scandal, which is currently roiling the French political
establishment, exposes two aspects of financial globalisation: the
promise of transparency and the potential for money laundering. Indeed,
the very name of the Luxembourg-based clearing house suggests both
transparency and a cleansing flow.
It was originally assumed that the information revolution and
omniscient, self-regulating markets would provide their own defence
mechanisms. But huge black holes soon appeared in a world in which the
language is coded, the uninitiated excluded and the rules seldom written
and communicable (1).
Senator John Kerry, in his 1998 book The New War: The Web of Crime That
Threatens Americas Security, wrote: The opening of borders to
international commerce and the information highway have benefited
terrorists every bit as much as they have helped legitimate
businesspeople and criminals (2). In 2005 Moises Naim, editor of
Foreign Policy, observed that illicit activities were not limited to the
margins of the international economy and that crime (the most lucrative
business) has been a leading beneficiary of globalisation. Terrorism,
nuclear proliferation, arm sales, drug dealing, counterfeiting, piracy,
human trafficking, tax evasion and money laundering have all exploded (3).
In a system based on speed, efficiency and anonymity, shadowy operators
have an advantage over political and judicial authorities, especially
considering the ground lost by national regulators to the World Trade
Organisation, the International Monetary Fund, the World Bank, the Bank
for International Settlements, the Financial Action Task Force (FATF) or
the Basle Committee.
The rules of the game are now largely determined by the worlds most
powerful nations, especially the United States, in cooperation with
little-known private companies such as Clearstream, of which its former
boss, Andri Lussi, said: Banks have customers and our customers are the
banks. We are the notaries public of the world (4).
In 2004 Lussi was indicted in Luxembourg for money laundering,
manipulation of financial statements, fake accounting, financial fraud
and tax evasion. The Clearstream affair testifies to the potential for
dissimulation and manipulation among those new notaries.
The role of anti-money laundering measures was to fight such
dysfunctions. Money laundering integrates funds derived from criminal
activities into the legitimate financial system: it cleans dirty money.
According to some sources, it goes back to the 1920s (when the gangster
Al Capone bought laundromats to help disguise the criminal origin of his
hard cash). But the idea, just like as the war against it, is of more
recent vintage. The media began to mention it at the time of Watergate
(1972-74), which revealed how the Nixon administration had adeptly
hidden the origin and destination of funds. The phrase first appeared in
legal proceedings only in 1982.
In 1986 the US became the first country to criminalise money laundering,
as part of the escalating war on drugs. The idea was that, since profit
motivates drug dealers, going after the money would damage the drug
trade. The money trail also promised to yield useful clues and unmask
vast conspiracies. None of the three stages of money laundering -
placement (the introduction of funds into the financial system),
layering (multiple conversions and movements designed to confuse the
money trail) and integration (when the funds re-enter the legitimate
economy) - is illegal in itself. But it is illegal to combine them to
hide the criminal origin of funds.
The crime of the 1990s
Money laundering was the crime of the 1990s and throughout that decade
money laundering laws and regulations grew exponentially. Beyond drug
dealing, the range of crimes covered expanded to include almost 200
offences, among them racketeering, theft, trafficking in human organs
and endangered species, and, of course, terrorism. In parallel, the US
effort against dirty money was internationalised through the FATF,
created by the G7 in Paris.
As it expanded, the anti-money laundering apparatus was criticised: the
supply of illegal drugs had steadily increased while the amounts of
dirty money seized by the government were negligible. In 2001 Paul
ONeill, the Bush administrations first Treasury Secretary, noted that
there was little to show for the $700m a year spent by the government on
money laundering: over 15 years there had been only one substantial
catch. Although the apparatus gave law enforcement agencies plenty of
opportunities to go after smalltime dealers, major drug lords, who could
afford to skirt the rules and use the services of the best lawyers,
remained elusive.
The Spanish investigating judge, Baltasar Garzon, said that judges felt
like mammoths chasing leopards in their battle against major financial
criminals: By the time the mammoth reaches his hideout, the leopard is
already far away, laughing (5).
The 1998 bombings of American embassies in Kenya and Tanzania led to
more concentration on dirty money. It was said that Osama bin Laden had
a $300m war chest; and a cottage industry developed in which
self-proclaimed experts purported to reveal the whereabouts of that
fortune. In reality, Saudi Arabia had seized Bin Ladens wealth in 1994,
and his assets in Sudan were confiscated in 1996 when he was forced to
leave (6). Terrorist financing was the result of permanent fundraising
within Islamist networks (7).
In the late 1990s the Clinton administration attempted without success
to introduce know your customer rules which would have forced banks
(already bound to disclose suspicious transactions) to scrutinise their
clients. It also undertook, in conjunction with the Organisation for
Economic Cooperation and Development, to crack down on tax havens.
As soon as he became president in 2001, George Bush scuttled that
initiative and took steps to diminish the anti-money laundering regime
until the 9/11 attacks resulted in a major policy U-turn. With the zeal
of new converts, those who had been intent on dismantling financial
controls presided over an unprecedented expansion of the anti-money
laundering apparatus.
The war on terror began with finance when Bush announced a strike on
the financial foundation of the global terror network on 24 September
2001. The president and top officials kept repeating that money was the
oxygen of terror and that acts of terror could not be conducted without
an important financial infrastructure (8).
The USA Patriot Act (uniting and strengthening America by providing
appropriate tools required to intercept and obstruct terrorism), passed
in October 2001, had a major anti-money laundering component. That
month, at an extraordinary meeting in Washington, the FATF, which the
administration had spurned until then, saw its prerogatives officially
expanded from money laundering to terrorist financing.
The two activities became interchangeable. A new acronym, AML-CFT
(anti-money laundering - combating the financing of terrorism), was
instantly and uncritically adopted, joining two fundamentally different
issues. Money laundering is based on crime-for-money; it involves large
sums and transforms illegally obtained cash into seemingly legitimate
funds. Terrorist financing, by contrast, is a political phenomenon,
involving relatively small amounts, and, at least since 9/11, the
financing happens outside international banking channels.
Terrorist financing is more like money soiling than laundering, since
small sums of clean money (not illegally obtained) are used to fund acts
of terror (9). None of the post-11 September attacks has cost more than
$20,000. The London attacks of 7 July 2005 cost less than $1,000 (10);
their terrorist financier was one of the suicide bombers who made a
living as a substitute teacher. In Iraq, more than half of US casualties
have been the result of cheap roadside improvised explosive devices .
Scorecard logic
Yet the financial terrain, vast and little understood, offers political
advantages. In the days after 9/11 swift action was not immediately
possible against Afghanistan, which harboured Osama bin Laden and
al-Qaida. No contingency plans existed and military action took weeks
(11). Bush was attracted to financial strikes because freezing accounts
was the one seemingly bold action the US could take immediately. An
added advantage was that the financial front was conducive to what he
called a scorecard logic. He gave the order to seize some assets, and
quickly.
The Treasury general counsel, David Aufhauser, later described the
subsequent frantic weekend search: It was almost comical. We just
listed out as many of the usual suspects as we could and said, lets go
freeze some of their assets (12).
Such financial strikes have since become routine. Not surprisingly, they
have done little to dent terrorism (13). Easy and often innocent victims
were targeted, such as the Somali remittance group Al-Barakaat. The
first 100-day progress report of the war on terror set the tone: The US
and its allies have been winning the war on the financial front and
denying terrorists access to funds is a very real success in the war on
terrorism (14).
In reality, shifting resources from money laundering to terrorist
financing caused terrible mismatches. Those trained to spot global
financial crime, and Spanish-speaking specialists in the Latin American
drug trade, found themselves chasing Islamic terrorists, leaving the
business of money laundering unattended.
NOTES:
(1) Denis Robert and Ernest Backes, Rivilations, Les Arhnes, Paris 2001.
(2) Simon and Schuster, New York, 1997.
(3) Moises Naim, Illicit: How Smugglers, Traffickers and Copycats are
Hijacking the Global Economy, Doubleday, New York, 2005.
(4) Denis Robert, La bonte noire, Les Arhnes, Paris, 2002.
(5) Denis Robert and Ernest Backes, op cit.
(6) Jonathan Randal, Osama: The Making of a Terrorist, Alfred A Knopf,
New York, 2004.
(7) See The 9/11 Commission Report, Thomas H Kean, chair, and Lee H
Hamilton, vice chair, authorised edition, WW Norton, New York, 2004;
John Roth, Douglas Greenburg and Serena Wille, Monograph on Terrorist
Financing, National Commission on Terrorist Attacks Upon the United
States, Staff Report to the Commission, 2004.
(8) President Freezes Terrorists Assets, remarks by the President,
Secretary of the Treasury ONeill and Secretary of State Powell, The
White House, Office of the Press Secretary, 24 September 2001.
(9) See Ibrahim Warde, Clean money, just a little soiled, Le Monde
diplomatique, English language edition, November 2001.
(10) Ibrahim Warde, The Price of Fear: The Truth Behind the Financial
War on Terror, IB Tauris, London. 2006.
(11) Bob Woodward, Bush at War, Simon and Schuster, New York, 2002.
(12) Ron Suskind, The Price of Loyalty, Simon and Schuster, New York,
2004.
(13) Daniel Benjamin and Steven Simon, The Age of Sacred Terror, Random
House, New York, 2003.
(14) http://www.whitehouse.gov/news /rele...
Translated by the author
[Ibrahim Warde is adjunct professor at the Fletcher School of law and
diplomacy, Tufts University, Massachusetts, and author of The Price of
Fear: the Truth behind the Financial War on Terror (IB Tauris, London,
2006)]
--
Steve Hayes from Tshwane, South Africa
http://people.tribe.net/hayesstw
E-mail - see web page, or parse: shayes at dunelm full stop org full stop uk