Last week I exposed several of the myths and fallacies surrounding money laundering operations in Guyana. Specifically, I noted that money laundering (1) is not the exclusive domain of organized crime 2) involves all types of financial transactions, as well as selected commodities 3) is directly related to the overall underground economy (which is broader than the phantom economy controlled by organized crime) 4) is not a “victimless crime” as many presume 5) operates not only through banks but all financial institutions and 6) is an exceedingly complex multi-stage process. This week I shall conclude this discussion of these myths and fallacies before taking up the broader issue of global efforts aimed at containing money laundering.
Remaining fallacies
A seventh fallacy about money laundering is that it has always been the same. It is, in other words, a fixed and static process. In fact over the years the scope of money laundering has been rapidly expanding and in the process has become far removed from what it was only a decade ago. Thus, for example, after 9/11 terrorist financing has become a key constituent of the money laundering process. Here the primary effort is seen not as turning ‘dirty money’ into ‘clean money’ but to reverse the process and move ‘clean money’ into ‘dirty activities.’
Of course this type of money laundering (clean money into dirty activities) has been taking place well before 9/11 but for far less sinister purposes than terrorism. In fact, political groups, including those that are well-established, respectable, and even conservative, seek to hide their sources of corporate or individual financing and so engage in money laundering tactics. The charges brought against Ken DeLay of the Republican Party (USA) for money laundering is one of the famous recent examples of these tactics at work.
This example also highlights the prominent role being played by political bosses in modern-day money laundering. Several of these political bandits, especially from the Third World, have raided their national treasures, robbed taxpayers, and lodged untold billions of clean dollars in tax havens and other banks outside of their own countries for their own private purposes. In some of these cases, gold, diamonds and artefacts have also been among the main objects used for storing their ill-gotten gains.
Finally, another category of money laundering that has risen to prominence recently is the movement of funds stolen by means of computer fraud.
The important conclusion from all this is that money laundering is complex, dynamic, transforming its nature and character in Guyana and elsewhere all the time. This therefore requires close and coordinated monitoring by the financial intelligence community, local, regional, and international.
In concluding this aspect of the discussion, let me emphasise that these observations are not intended to detract from the consideration that, in the view of most analysts, organized crime remains today the main driver of the money laundering process, even though it is recognised that the process involves all those forms of criminal wrongdoings which seek to hide and not report the proceeds of economic activities. The process, in other words, remains ultimately one that is profit-driven and criminal-based.
Countering money laundering:
Global reach
Money laundering is a global activity. It has been greatly facilitated by the explosion of information technology, which allows transnational financial institutions to conduct with ease trillions of transactions on a daily basis. Controlling money laundering in such real life conditions is an exceptionally formidable task.
It is estimated that today money laundering involves the equivalent of several trillions of US dollars annually. The question that therefore arises is: How is this problem being tackled internationally?
The global assault on
money laundering
A dedicated coordinated global approach to the containment and eventual eradication of money laundering and its consequences was commenced in 1989, when the G-7 Summit of that year convened a Financial Action Task Force (FATF) to handle these matters. A year later (April 1990) the task force reported and set out what has been labelled as its ‘Forty Recommendations,’ which form the basis of a comprehensive plan of action for the international community to counter this threat. From an initial membership of the G-7 countries, the President of the European Commission of the EU and eight other countries the FATF now has 34 members.
The most significant development since the establishment of FATF has been that after the 9/11 terrorist attacks in the USA, special focus has been given to developing counter-measures against terrorist financing. This has undoubtedly raised the profile and significance of all types of money laundering activities in the international community.
Although the FATF spearheads the global anti-money laundering effort, this effort involves many other global, regional, and national organizations with related missions. It also involves a large number of general criminal, drug, and corruption control agencies. In the first category we have organisations like the World Bank, and the Bank for International Settlements, which together help to establish prudential safeguards and some oversight of financial institutions. These are buttressed by local and regional cooperation agencies. In Guyana’s case these are located in Caricom and the Organisation of American States.
In the latter category Interpol is clearly the chief global agency with a criminal focus. In support are the United Nations Crime and Drug Control agency and prominent national bodies like the USA Drug Enforcement. The United Nations Convention on Corruption was adopted in 2003. This seeks to bring about global cooperation against corrupt practices especially in the government and public sectors. Regrettably, as at the beginning of this year Guyana was not yet an acceding member to the convention.
Next week I shall continue this discussion with reference to some Guyana-specific issues.
