Prime Minister Imran Khan has very rightly used the occasion of his virtual speech at the 75th session of the United Nations' General Assembly to bring to the attention of the world body the devastation that is being caused by the menace of rampant money laundering to the economies of developing countries rendering the poorer sections of these countries even more destitute, thanks largely to the developed world's banks and their safe havens.
"Since they are beneficiaries, there is a lack of political will in the rich countries to curb this criminal activity," he said, adding that if money launderers continued to be provided with sanctuaries, the gulf between poor and rich countries will continue to grow and would lead to "a far bigger global crisis than the present migration issue poses".
A day earlier, the premier had presented a nine-point strategy before the international community to stop the flight of "corruption dollars" from poor to rich countries, which he said was bleeding developing economies.
He had made these remarks before a high-level panel on Financial Accountability, Transparency and Integrity (FACTI), which met in New York on Thursday (Sept.24) on the sidelines of the UNGA.
The prime minister had urged rich nations to take immediate steps to return the "stolen assets" of developing nations.
Noting that each year, billions of dollars illicitly flew out of developing countries, PM Imran had said his government came to power with a robust public mandate to get rid of corruption.
"We have taken several initiatives domestically. What is needed is strengthening international cooperation to bring perpetrators of financial crime to justice," he had said. "This bleeding of the poorer countries must stop. International community must adopt decisive actions."
Indeed, only on December 3, 2019 the National Crime Agency (NCA) of the United Kingdom had made a settlement worth £190 million, result of an investigation by the NCA into Pakistani property tycoon Malik Riaz Hussain's UK bank accounts and finding them 'dirty' returned the amount to government of Pakistan. But this is just the minutest tip of the iceberg which Pakistan claims to be as huge as $200 billion of Pakistan's laundered money ensconced in the banks and safe havens overseas.
Actually, over the centuries the European robber Barons and the American carpetbaggers had thrived on loot and plunder of not only their own people but also of countries they could subjugate with their superior gun power. And over the last three centuries or so they had kept fleecing the vulnerable the world over as they perfected an economic system based on the ideology of capitalism and a system of governance inspired by the concept of democracy. They termed this plunder as legitimate trading conducted under the rule of law that they had evolved particularly to serve their own economic self-interest.
And the post-World War-II Globalization phenomenon further accelerated the 'legitimate' plunder of the developing countries by the developed world. Soon, the despotic and dictatorial rulers of developing countries who had taken over these countries as they achieved their independence, through various means-military take overs and tainted elections etc., had joined in in this plunder, laundering their loot to the safe havens set up by the rich countries in various dominions under their rule.
Under the self-serving rule-of-law developed by these rich countries the loot, transferred through their banks and concealed in their safe havens, was regarded as simple off-the-book accounting and no financial crime attracting the long arm of law for tracing the sources and origins of these amounts camouflaged in layers after layers of clandestine cloaks.
But 9/11 twin-tower terror attacks shocked the governments in rich countries out of their stupor as they found out to their utter dismay that a lot of this loot was being used to fund international and national terror organizations. The first reaction of these rich countries was to apply strict sanctions against a number of suspect developing countries including suspect terror organizations and individuals.
This did not help much. So the Financial Action Task Force on Money Laundering (FATF) was established for the purpose. However, despite FATF, money laundering, especially the terror-related ones, continued to thrive because while the origin sources of laundered money were being attempted to be clamped down, the safe havens in rich countries continued to flourish. And it was further found out that banks owned by rich countries were the actual accessories to this kind of corruption.
Documents recently leaked from the Financial Crimes Enforcement Network (FinCEN), an official US set up that have been investigated by BuzzFeed News and the International Consortium of Investigative Journalists (ICIJ), and globally publicised on 20 September 2020 tell a sordid story of abetment and collusion by the banks in rich countries. BuzzFeed News obtained the 2,657 leaked documents, including 2,121 suspicious activity reports (SARs), in 2019 and shared them with the ICIJ. 400 journalists from 88 countries proceeded to investigate the leaks. BuzzFeed News and the ICIJ state that the files flag more than 200,000 transactions dating from 1999 to 2017, worth a total of US$2 trillion. Furthermore, they noted that the findings may not be representative of all SARs, as the files received are less than 0.02% of the more than 12 million SARs that financial institutions filed with FinCEN during this time.
SARs are required to be filed by financial institutions when they suspect their clients are engaging in financial crime. SARs are not evidence of a crime, but the FinCEN claims they provide vital information to investigate crimes.
BuzzFeed News names "JPMorgan Chase, HSBC, Standard Chartered, Deutsche Bank, and Bank of New York Mellon" as "involved" in money laundering. BuzzFeed and ICIJ have also claimed that American Express, Bank of America, Bank of China, Barclays, China Investment Corporation, Citibank, Commerzbank, Danske Bank, First Republic Bank, Société Générale, VEB.RF and Wells Fargo as being "involved" in the SARs. The ICIJ noted 62% of the leaked filings "involved" Deutsche Bank, with at least 20% involving addresses in the British Virgin Islands.
Prominent individuals highlighted within the leaks include former Donald Trump campaign manager Paul Manafort, Iranian-Turkish gold trader Reza Zarrab, fugitive businessman Jho Low, and alleged Russian organised crime boss Semion Mogilevich. The Indian Express claimed that Jindal Steel and Power was flagged by Deutsche Bank for money laundering.
In Malaysia, the Malay Mail reported that several international banks had been flagged in numerous suspicious transactions "involving" fugitive Malaysian businessman Low Taek Jho, involving 103 transactions worth US$2.53 billion. The banks "involved" included Citibank, Deutsche Bank, HSBC, JPMorgan Chase, and the Bank of New York Mellon. Jho played a role in being the main person in the laundering of proceeds from the government unit 1Malaysia Development Berhad (1MDB).
In the Philippines, the Philippine Center for Investigative Journalism (PCIJ) reported that the files show that two Philippine remittance agents Philrem Service Corp. (Philrem) and Werquick Inc. sent more than $1 billion of what were deemed "suspicious" wires from 2012 to 2016, that were coursed through their foreign currency accounts held at Philippine banks Banco de Oro (BDO), Metrobank and Rizal Commercial Banking Corporation (RCBC). Philrem and RCBC were "involved" in the illicit transfer of stolen funds from the Bangladesh Bank in 2016.
It was reported that the Turkish bank Aktif Bank was a financial "facilitator" for Wirecard and was alleged to have laundered money for the Taliban.
Deutsche Welle (DW) notes that Deutsche Bank was "responsible" for $1.3 trillion worth of "suspicious" transactions. BuzzFeed News also reported that the files revealed Deutsche Bank was a major "source" for money laundering for organised crime, terrorists and drug traffickers.
The FinCEN Files show only the tip of the iceberg that is the global financial system's vulnerability to abuse by criminals and the corrupt. The FinCEN Files are further proof that the global anti-money laundering system is broken. Banks are meant to be the first line of defence against corrupt money flows, but without proper supervision and accountability for banks and their employees, they have little incentive to cut off suspicious clients. It is not enough to submit poor-quality or delayed SARs and continue processing payments.
Banks in 25 EU member states were also named as destination, transit, or origin account for suspicious money.
As this issue is cross-border in nature, what is needed is to set up an anti-money laundering supervisory body and a financial intelligence unit to help detect wrongdoing and harmonize regulation. These bodies must also be able to step in to enforce the rules to prevent this from happening again.
Copyright Business Recorder, 2020
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