Financial crime is becoming less visible, periodically
coming to light in one country or another in the guise of scandals
involving companies, banks, political parties, leaders, cartels, mafias.
This flood of illicit transactions - offences under national law or
international agreements - has come to be portrayed just as accidental
malfunctions of free market economics and democracy that can be put right
by something called "good governance". But the reality is quite different.
It is a coherent system closely linked to the expansion of modern
capitalism and based on an association of three partners: governments,
transnational corporations and mafias. Business is business: financial
crime is first and foremost a market, thriving and structured, ruled by
supply and demand.
Big business complicity and political laisser
faire is the only way that large-scale organised crime can launder and
recycle the fabulous proceeds of its activities. And the transnationals
need the support of governments and the neutrality of the regulatory
authorities in order to consolidate their positions, increase their
profits, withstand or crush the competition, pull off the "deal of the
century" and finance their illicit operations. Politicians are directly
involved and their ability to intervene depends on the backing and the
funding that keep them in power. This collusion of interests is an
essential part of the world economy, the oil that keeps the wheels of
capitalism turning.
Three factors have combined to improve the workings of
capitalism. The end of the 1980s saw the complete liberalisation of
capital movements, taking them beyond national or international control.
Then the revolution in communications technology accelerated the expansion
of financial transactions. Finally, tax havens, that planetary archipelago
of centres specialising in the tolerance of financial crime, became more
"reliable".
Revolution, said Mao Zedong, is not a dinner party.
Neither is competition. It has little to do with the tournaments of
gallant knights celebrated by the troubadours of the free market, where by
the grace of God the best always wins - the best product or the best
service at the best price. As in feudal combat, if you want to win the
economic war, anything goes - and the dirtier the better. The arsenal is
well supplied with weapons: restrictive practices, cartels, abuse of
dominant position, dumping, forced sales, insider dealing and speculation,
takeovers and dismembering of competitors, fraudulent balance sheets,
rigging of accounts and transfer prices, the use of offshore subsidiaries
and shell companies to avoid and evade tax, embezzlement of public funds,
bogus contracts, corruption and backhanders, unjust enrichment and abuse
of corporate assets, surveillance and spying, blackmail and betrayal,
disregard for regulations on employment rights and trade union freedoms,
health and safety, social security, pollution and the environment (1). Not
to mention what goes on in the world's growing number of free zones,
including those in Europe and in France, where the ordinary rule of law
does not apply, especially in social, tax and financial matters (2).
Such goings on can be found in all major sectors and on
all markets: arms, oil, public works, civil aviation, air, rail and sea
transport, telecommunications, banking and insurance, chemicals and food,
to name but a few. They result in massive misappropriations of funds which
disappear from the transnationals' bona fide accounts only to resurface in
some tax haven. An incredible plunder, the full extent of which will never
be known.
All this would be impossible without the power of the
state and international and regional organisations, especially their
ability to keep restrictive regulations to a minimum, to abolish or
override such rules as do exist, to paralyse inquiries and investigations
or put them off indefinitely, and to reduce or grant amnesty from any
penalties. In exchange, they offer to "fund democracy" by financing
parties' election campaigns, promoting the most promising political
personalities and senior officials; they have them followed and closely
watched by armies of lobbyists who can be found close to every
decision-making authority and whose brief is to help them "make the right
choices", to corrupt them (3).
On occasion they have no compunction about using the
services of professional organised crime. In most of their subsidiaries
and offshore suppliers in the southern hemisphere, workers have to contend
with thugs hired by the bosses, blackleg trade unions, strike-breakers,
private police and death squads. In Japan, recalcitrant shareholders are
watched by yakusas at general meetings. Or they take out
"contracts" on intermediaries that have become too much of a nuisance or
on over-inquisitive investigators: numerous businessmen, bankers,
politicians, judges, lawyers and journalists have "committed suicide"
drinking a cyanide-laced cappuccino, hanged themselves or fallen from a
tenth floor window with their hands tied behind their backs, shot
themselves twice in the head, drowned fully clothed in a puddle or in the
bath, slipped under a bus or into a vat of concrete or acid, fallen naked
from their yachts into the sea under their bodyguard's very eyes,
disappeared on a flight or car journey.
More than anything else, banks and big business are keen
to get their hands on the proceeds - laundered - of organised crime. Apart
from the traditional activities of drugs, racketeering, kidnappings,
gambling, procuring (women and children), smuggling (alcohol, tobacco,
medicines), armed robbery, counterfeiting and bogus invoicing, tax evasion
and misappropriation of public funds, new markets are also flourishing.
These include smuggling illegal labour and refugees, computer piracy,
trafficking in works of art and antiquities, in stolen cars and parts, in
protected species and human organs, forgery, trafficking in arms, toxic
waste and nuclear products, etc.
Every country has its criminal underworld. The biggest
organisations and the ones that have been active the longest can be found
in the hubs of capitalism: the United States (Cosa Nostra), Europe (the
Sicilian mafia) and Asia (the Chinese triads and Japanese yakusas).
Others have also emerged over the last few decades, such as the Colombian
cartels in Latin America and the Russian mafias. Hundreds of rival groups
share the national and international crime markets. They enter into
alliances and subcontracting agreements, tending to break up into small,
flexible, mobile units specialising in a market sector or a profitable
niche.
The annual profits from drug trafficking (cannabis,
cocaine, heroin) are estimated at $300-500bn (not to mention the rapidly
mushrooming synthetic drugs), that is 8% to 10% of world trade (4).
Computer piracy has a turnover in excess of $200bn, counterfeit goods
$100bn, European Community budget fraud $10-15bn, animal smuggling $20bn,
etc. In all, and counting only activities with a transnational dimension,
including the white slave trade, the world's gross criminal product totals
far above $1,000bn a year, nearly 20% of world trade.
Even allowing for overheads (production and suppliers,
intermediaries and corruption, investment expenditure, management costs,
losses from seizures and crackdowns) amounting to roughly 50% of turnover,
that still leaves annual profits of $500bn. Over ten years that makes
$5,000bn, more than three times the foreign currency reserves of all the
central banks (5), one quarter of the capitalisation of the world's top
five stock markets and ten times that of Paris (6).
All that remains is for this fantastic wealth to be
managed, impossible as it is to dispose of in small denomination notes
(7). It is enough to set the world's financial brains spinning. But these
are the people whose help the criminal organisations need if they are to
launder all this money and recycle it through legal channels. They are
willing to pay the price, and they do. The cost is about one third, $150bn
shared between banking networks and intermediaries: lawyers, brokers and
trust managers. The upshot is that over $350bn are laundered and
reinvested annually, that is $1bn a day.
No sector of activity comes anywhere near these figures
and none can match that capacity, representing as it does between one half
and two thirds of direct foreign investment (DFI) (8). Close watchers of
the markets and of globalisation which they understand perfectly, the
multinational criminal organisations have no time for savings banks. They
go for the highest gains: hedge funds, inflating the bubble of financial
speculation, emerging markets, property, new technologies. At the same
time, they secure for themselves a solid return from the finest of
industry and commerce. In permanent partnership with the transnationals in
which they invest and the banks that manage their investments, they are
the oil in the wheels of the extraordinary expansion of modern capitalism.
And they still have enough money left over to maintain their lifestyle and
help to fund and corrupt the political parties and leaders that are best
placed to preserve the system that serves them so well.
That is precisely the service that the third partner,
political power and bureaucracy, renders in exchange for the financial
assistance that allows it to stay in place, to recover from every setback
and to get richer in the process. It gives the illusion of a permanent
struggle, constantly stepped up and internationally coordinated, by
governments, police and judiciary against financial crime (bribery,
trafficking, laundering) while not affecting the system's operation.
Changing everything so that everything stays the same. The failure of over
30 years of international war against drug trafficking is testimony to the
formula's "success". The same fate awaits the fight against money
laundering and corruption, ostentatiously relaunched by the G7 at the Arch
Summit, Paris, in 1989 and, in addition to the member countries, involving
the United Nations, the Organisation for Economic Cooperation and
Development (OECD), the International Monetary Fund (IMF), the Bank for
International Settlements (BIS) and the European Union.
Specialist organisations have been set up (9) and
international conventions signed and ratified for the prevention of
corruption on international markets (10) and for police cooperation and
mutual judicial assistance (11), while conferences and studies,
commissions of inquiry and reports have multiplied. All this has been
accompanied by the most strongly worded declarations and promises from
those in authority, but the system of financial crime has not been the
least bit shaken. It is poised to win by attrition the battle that the
best are bent on waging against it; the weariness overtaking police and
judges engaged on the exemplary Operation Clean Hands in Italy is evidence
of this. So is the lack of response to the alarm (the "Geneva Appeal")
sounded by seven specialist European judges at the end of 1996 (12).
There is no question of doing away with tax havens, those
places of refuge for financial crime, only of encouraging them to adopt
codes of good conduct. This would be as effective as asking the mafia to
provide security vans, with a moral obligation to submit its vehicles to a
MOT. Nor is there any question of setting up any form of permanent
international cooperation, or even a European judicial area, only of
considering discussing it. Yet it takes 18 months for a request for
judicial assistance to make the round trip between Paris and Geneva.
Better still, under the aegis of international financial
crime's number one partner, the US, we are seeing a rationalisation, or
rather, Americanisation, of corruption techniques, seeking to replace the
somewhat archaic practices of palm-greasing and secret (or open)
"commission" payments by lobbying, which is more effective and
presentable. It is a service industry in which the Americans have a
considerable lead over their competitors, not only in know-how, but also
in the vast financial and logistical resources they are able to make
available to their multinationals; these include the secret services of
the world's most powerful state apparatus, which, with the cold war over,
have moved into economic warfare.
This is evidenced by the media success of the publication
of an annual league table of bribe paying and taking countries drawn up by
Transparency International, a lobbying association and CIA correspondent
funded by governments and corporations, especially American ones, that are
experts in the matter. These include Lockheed, Boeing, IBM, General
Motors, Exxon, General Electric and Texaco (13). The only objective of the
anti-corruption campaigns taken up by international organisations (World
Bank, IMF, OECD) is the "good governance" of a financial crime that is now
an integral part of market globalisation under the leadership of the
American democracy, the most corrupt on the planet.
The headlong rush for profits and capital accumulation by
any means is reflected in the widespread robbery of the fruits of men's
labour and of common wealth and the moral corruption of the ruling
classes. The robber barons are giving way to the pillaging
princes.
* Globalisation Observatory
(1) Znet Commentary, a Canadian site, offers a ranking of the top 100
criminal firms. - http://www.corporatepredators.org/top100.html
(2) On free zones, see Le Monde diplomatique, English edition,
March 1998.
(3) Over 40,000 lobbyists in Washington, thousands in Brussels,
hundreds at the WTO.
(4) $5,250bn in 1998.
(5) The central banks' official reserves totalled $1,636bn at the end
of 1998 (source: 1999 Report of the Bank for International
Settlements).
(6) New York (New York Stock Exchange and Nasdaq), Tokyo, Chicago and
London total $20,000bn (source: International Federation of Stock
Exchanges).
(7) $1bn in $100 bills stacked up would be 1,000m high.
(8) $650bn in 1998, $450bn in 1997 (source: 1998 Report of the United
Nations Conference on Trade and Development - Unctad).
(9) In particular the Financial Action Task Force (FATF), which works
with banks to prevent financial crime and has been churning out
recommendations for ten years.
(10) The most recent concerns the OECD convention on combating bribery
of foreign public officials.
(11) The European Council meeting in Tempere, Finland, in October 1999
decided to strengthen Europol's powers and to create Eurojust as a test
bed for a future European public prosecutor's office.
(12) See Denis Robert, La Justice ou le Chaos, Stock, Paris,
1996.
(13) Le Canard enchaîné, 3 November 1999.
