-Caveat Lector-
an excerpt from:
Drug Politics
David C. Jordan
University of Oklahoma press©1999
Norman Publishing Division of the University
ISBN 0-8061-3174-8
288 pps -- first edition -- In-print
--[4]--
--With the drugging of the general population, governing elites come to see
themselves as a ruling class and not as public servants accountable to a
public that believes in limits on private and public behavior. And, finally,
as these unaccountable elites forge alliances with their counterparts in
other countries, a transnational alliance of finance capital is facilitated,
an alliance freed of democratic republican accountability. Borderless and
unchecked capital is thus available for speculative assaults on states
resisting the agendas of unaccountable money interests.--
Quite the interesting book. A bit of a view from an ivory tower, but all in
all thought-provoking.
It would have been a bit more interesting if he had used Kwittney , Marshall,
PD Scott, and Stitch in his sources. Highly recomended. A taste
Om
K
--[4]--
CHAPTER 6
THE CRIMINALIZATION OF THE INTERNATIONAL FINANCE SYSTEM
Organized crime and governments are interconnected with a third constituent
part of narcostatization, the transnational financial system. This challenges
two main assumptions regarding the international financial system and
organized crime. The first assumption is that banks and the various national
financial systems are essentially opposed to any activity that allows
criminals to launder their profits and invest them in legitimate businesses.
The second assumption is that the complexities of the globalized financial
and trade systems make it difficult to control money laundering. However, the
rise of criminal banks and the activities of legitimate banks undermine the
first assumption and indicate that some components of the financial system
are frequently willing participants, rather than victims, of money
laundering. Furthermore, examples of cooperation across national borders
provide proof of successful enforcement against money laundering and
undermine the second assumption.
The breakdown of communism and state socialism and the incorporation of the
former states of the Soviet Union into a worldwide capitalist economy have
contributed to the expansion of global capitalism. Within this enlarged
capitalist environment, the organized criminal elements of the West have been
able to forge alliances and mutual financial relationships. The movement of
illicit commodities and illegally obtained legitimate goods and the financing
and laundering of profits have become global activities. In short,
international criminal organizations and illicit drug markets could not
operate successfully without the help of the international banking community.
This financial community—both wittingly and unwittingly—has been used
effectively to launder the profits generated by drug trafficking and other
criminal activities.
THE GLOBALIZATION OF FINANCIAL MARKETS
International political economists debate whether the globalization of
financial markets is the result of technological and economic developments or
of state policies. Interesting as that debate is, it does not alter the
reality that financial globalization has occurred. Policies of the most
powerful states, together with the agreements of the major central banks,
support globalization. However, the exploitation of the neoliberal
international financial order undermines its legitimacy. This
deligitimization arises from the enormous opportunities the new financial
order provides the criminal organizations to launder their illegal money.
The Bretton Woods system since the mid-1940s intended the global financial
system to be subordinate to the states' individual interests.[1] The
agreement was supposed to prevent international capital flows from
undermining welfare policies and trade liberalization. The Bretton Woods
system requested that the Bank for International Settlements (BIS) be put out
of business. Set up in 1930 under the sponsorship of private and central
bankers to manage the international debt problem created by Germany's
difficulty in meeting its reparation payments from World War 1, BIS hosted
meetings of private and central bankers on a monthly basis. At these meetings
rules and procedures were developed for the BIS to act as the international
lender of last resort in financial crises. With headquarters in Basel,
Switzerland, the Bank of International Settlements served as a "central
banker's bank" and permitted international payments to be made by moving
credits from one country's account to another on the books of the bank. The
Young Plan, the effort to solve Germany's reparation problem, embodied this
arrangement. Owen D. Young, for whom the plan was named, was an agent of J.
P. Morgan, the most powerful U.S. bank at the time.
Several governments that came to power in the 1930s blamed the international
financial community for much of the economic problems of the period. Franklin
Delano Roosevelt believed the Morgan financial empire was the major culprit
in the financial decline, and the Glass-Steagall Act signed on June 16,1933,
divided commercial and merchant banking, which affected the House of Morgan.
According to Ron Chernow,
The Glass-Steagall Act took dead aim at the House of Morgan. After all, it
was the bank that had most spectacularly fused the two forms of banking. It
had, ironically, proved that the two types of services could be successfully
combined; Kuhn, Loeb and Lehman Brothers did less deposit business, while
National City and Chase had scandal-ridden securities affiliates. The House
of Morgan was the active double threat, with its million-dollar corporate
balances and blue-ribbon underwriting business.[2]
However, the private and central bankers did not share the hostility of the
Bretton Woods system to the movement of financial capital across state lines.
They supported the BIS as a positive influence in disciplining governments
against inflationary policies. The resurgence of these central and
international private banks was evident after the 1960 dollar crisis. At that
point, the Europeans invited a representative of the Federal Reserve Board to
attend the BIS monthly meetings. They also brought in representatives of the
Banks of Canada and Japan.
The Bretton Woods system with its exchange control preferences became defunct
in 1973. The U.S. government stopped backing the Bretton Woods system and
began supporting the open system when its trade deficits grew and reversal
did not appear likely. The open system preserved U.S. economic policy
autonomy by forcing foreign governments either to buy U.S. dollars or to
raise the value of their currencies. President Jimmy Carter's appointment of
Paul Volcker in August 1979 to head the Federal Reserve Board made clear the
U.S. commitment to financial openness. Beginning at this time, the United
States asserted and maintained its financial preeminence vis-a-vis other
countries while becoming increasingly disciplined by the growing global
financial markets.
At the end of the Carter administration and throughout the Reagan
administration the U.S. policy community accepted a system of floating
exchange rates. This subjected domestic economies to international restraints
that were coordinated through central banks and the BIS. The BIS thus became
critical to the management of a liberal international financial capital
system. As a result of the liberalization of international capital markets,
the financial power of the United States did not decline relative to other
states, but it did decline in contrast with the growing power of global
financial markets and their managers.
Much of the discipline of America's monetary policy developed because of the
unregulated Eurodollar market based in London. To use this market, banks
operated offshore, out of the control of the Federal Reserve. Then, in 1981,
the Federal Reserve established tax- and regulation-free international
banking facilities (IBFs) on U.S. territory, and U.S. banks were no longer
obliged to go offshore to increase their participation in unregulated
international capital markets. Some central bankers remained concerned about
this globalization process because Of its impact on domestic autonomy and
stability. However, the central banks were encouraged that they could
effectively maintain global financial stability because of the successful
cooperation they had experienced through the BIS. Even so, international
financial authorities realized that the criminalization of the global
financial system represented a threat to the stability of the capital
markets. As one observer said, "The development of efficient and stable
capital markets requires that participants have full confidence in them. If
markets were to be contaminated by money controlled by criminal elements,
they would react more dramatically to rumors and false statistics, thus
generating more instability. "[3]
INTERNATIONAL MONEY LAUNDERING IN THE FINANCIAL SYSTEM
An estimated $500 billion, or 2 percent of global GDP, is illegally laundered
each year.[4] Drug traffickers are not alone in using the international
financial system to launder illicit proceeds. They are joined by arms
merchants, corrupt political officials, and tax evaders. The international
money-laundering market has exploded in terms of volume, sophistication, and
access to legitimate financial resources. The ability of authorities to
respond effectively has diminished. According to the U.S. Customs Office, at
the end of 1992 there were more than 6,290 active money-laundering cases
under investigation.[5]
At one time money laundering in the United States was a fairly simple
process. "Launderers" would make large cash deposits openly in commercial
banks. But, as laws regulating cash deposits evolved, the drug launderers
moved to offshore banks located in nations with less stringent financial
regulations. Among the most popular offshore bases known for their lax
secrecy laws are Aruba, Bahamas, Barbados, Bermuda, British Virgin Islands,
Cayman Islands, Costa Rica, Cyprus, Gibraltar, Guernsey, Hong Kong, Isle of
Man, Jersey, Liberia, Lichtenstein, Nauru, Netherlands, Netherlands Antilles,
Nevis, Panama, Switzerland, Turks and Caicos, and Vanuatu. Banks in these
areas offer the benefits of easy access, no questions asked, and simple
withdrawal. Less widely recognized, Canadian banks have also been used by
drug-running organizations to launder substantial amounts of money.
An example of the magnitude of the problem was provided by the DEA's
crackdown, code-named Casablanca, on Mexican banks. On May 18, 1998, a
federal grand jury in Los Angeles brought charges against three Mexican banks
and more than twenty Mexican bankers. This indictment was the first to charge
Mexican banks as institutions that were knowingly helping the drug
traffickers to launder their money. The three banks indicted were Bancomer,
Mexico's second largest bank, Banca Serfin, Mexico's third largest bank, and
Banca Confia, a top-twenty Mexican bank. Mexican authorities indicted
Confia's chairman, Jorge Lankenau, for large-scale bank fraud only a few days
after Citibank purchased Confia on May 11, 1998.
The Federal Reserve Board announced civil actions against five other Mexican
banks with branches in the United States. These included Banco Nacional de
Mexico (Banamex), the nation's largest bank; Bital, Mexico's fourth largest
bank; and Banco Santander, the nation's fifth-ranking bank. The Federal
Reserve charged that these banks had "serious deficiencies in their
anti-money laundering programs. "[6]
Sophisticated computer and telecommunications equipment simplifies the
illegal movement of capital around the world, making these transfers
difficult to detect. The money-laundering system has been further
internationalized by the borderless European Union, which is connected to the
numerous states of the former Soviet Union. In the Pacific Basin, Hong Kong,
Macao, Thailand, and Japan move illegal money among themselves as well as
with China. The development of unregulated global financial markets
facilitates a system where crime syndicates based in the Americas, Europe,
the Middle East, Africa, the Pacific Basin, and Russia launder money
throughout the world and reinvest in legitimate businesses.
CRIMINAL BANKS
Legitimate banks can be used by criminal elements to launder illegal profits
as part of their normal business practices. But outlaw banks knowingly use
normal business practices to launder criminal profits. One of the most famous
outlaw banks was the Bank of Credit and Commerce International (BCCI);
another is the Banca Nazionale del Lavoro (BNL).
Meyer Lansky, the New York mafia leader, pioneered the modem techniques of
money laundering. His methods included using offshore bank accounts in the
Bahamas and Switzerland and layering account records. Before Castro's rise to
power in 1959, Cuba was the major offshore laundering site of the American
mafia. After Fidel Castro took over Cuba and shut down U.S. mafia operations
there, Meyer Lansky initiated a multistate laundering system, moving his
operations to the Bahamas and continuing his practice of corrupting
politicians. In the Bahamas, Lansky supported Lynden Oscar Pindling, the head
of the Progressive Liberal Party (PLP), who came to power in 1967 as the leade
r of a Caribbean black power movement. When the Bahamas achieved full
independence in 1973, Pindling became the central facilitator of Lansky's
offshore operations.[7] It is indicative of the scant attention the British
government gave to this problem that Pindling was knighted by Queen Elizabeth
in 1983.
It was not long before the Colombian mafia also began using the Bahamas. By
the early 1980s, nearly 80 percent of the cocaine and marijauna that came to
the United States traveled through the Bahamas.[8] In addition, the Bahamas
were identified as an important way station for heroin arriving from the Near
and Far East.
The Bahamas have regulations that prevent authorities from examining bank
records on the islands unless granted special permission by a Bahamian court.
When money is deposited in a Bahamian bank, it can easily be transferred to
other banks and escape detection from the legal financial system. This method
owes its success to cooperation between the Bahamas and four major
Canadian-owned banks-the Bank of Nova
Scotia, the Bank of Montreal, the Royal Bank of Canada, and the Canadian
Imperial Bank of Commerce-which operate freely in the United States. These
four banks control approximately 80 percent of the Bahamian banking business.
Unlike U.S. banks, Canadian banks do not have a system for reporting large
cash transfers and deposits of dubious origin.[9]
As charges of money laundering and government corruption in the Bahamas
increased, Prime Minister Pindling was forced to call for a Royal Commission
of Inquiry in hopes that it would exonerate him. The Royal Commission's
report found no conclusive evidence tying Pindling to money-laundering
schemes. However, there were enough irregularities and damaging information
to force substantial Bahamian cooperation in cracking down on drug
trafficking. This situation changed drug trafficking patterns and made Mexico
the principal transit route for drugs into the United States. Rachel
Ehrenfeld reported in the early '90s that
One unintended consequence of Bahamian cooperation has been the development
of alternative drug-running routes. In recent years Colombian drug
traffickers have shifted their air routes from the Bahamas to other countries
in the region, including isolated airports in Mexico's Yucatan or Baja
peninsulas as well as the northern states of Chihuahua, Nuevo Leon, Sonora,
and the northwestern state of Sinaloa. The cargo is transferred to cars and
trucks and smuggled into the United States across the border. Puerto Rico,
Panama, Brazil, and Guatemala, to name a few, are heavily used as drug
transshipment points to the United States and to growing European markets.[10]
An additional problem in checking money laundering is the increasing use of
nonfinancial institutions for the transfer of funds. Among the favorite
money-laundering venues are money exchange centers and wire transfers through
such legitimate agents as Western Union and American Express. It is
estimated, for example, that as much as $5 million per month is transferred
between the United States and Mexico through legal money exchange houses.
Offshore casinos operating on American Indian reservations that are not
subject to close federal oversight are also increasingly attractive
money-laundering sites. And import-export transactions can be used to veil
the transfers of illegal money
Most prominently, however, drug traffickers take advantage of the developed
transnational mafias, gain control over legitimate banks, and cooperate with
banks that are completely outside the control of any state. An example of a
criminal takeover of a legitimate bank is the Italian Banco Ambrosiano affair
in the 1970s and early 1980s.
The Banco Ambrosiano
In the late 1960s, the infamous Sicilian banker Michele Sindona owned banks
in Italy and Switzerland. Sindona got his financial start during the Allied
invasion of Sicily in 1943 when the American-Sicilian mafia, headed by Lucky
Luciano and Meyer Lansky, played a key intelligence role for U.S. forces.
With the protection of the mafia, Sindona purchased a truck from U.S. forces
to begin his illegal smuggling operations. Sindona was backed by Bito
Genovese, a member of Lucky Luciano's Italian-American crime family, who
provided Sindona his produce, papers, and safe routes. After the war,
Sindona. moved to Milan where he had an introduction from a Sicilian bishop
addressed to the priest who became the archbishop of Milan, Giovanni Battista
Montini, later Pope Paul VI.
The Vatican, an independent state in Italy, is a potential offshore banking
resource for Italians. In 1942, Pope Pius XII created a bank called the
Instituto per le Oppere di Religione (IOR), more commonly known as the
Vatican Bank. During World War II many Italians protected their money from
confiscation by the Germans by depositing it in the IOR. After Italy formally
declared the Vatican a tax haven, the IOR moved fund!; out of Italy in
support of church activities worldwide.
Sindona cultivated very carefully his Vatican contacts and in 1960 he
purchased a small bank called Banca Privata that received deposits from the
IOR. Three years later, in 1963, when Montini was elected pope, Sindona
strengthened his relationship with the IOR. He induced the IOR to purchase
shares in his other Italian bank, Banco Unione, and in his Geneva-based bank,
Banque Financement.
In addition to his Vatican connections, Sindona forged an important tie with
a major French Bank, Banque de Paris et des Pays-Bas. He also had powerful
relationships with the Hambros Bank in London and the Continental Bank in
Chicago. His connection with the Continental Bank gave Sindona access to
Pres. Richard Nixon through the bank's chairman, David Kennedy, Nixon's
secretary of the treasury after his election in 1968. Sindona was also a
member of a secret Masonic lodge called Propaganda 2 (P2). P2's leader was
Licio Gelli, who in 1965 was inducted into the Grande Oriente, a wing of
Italian Freemasonry that supported ending the hostility between the church
and the Masons. Pope Paul VI responded to this overture by permitting
Catholics to join the Grande Oriente. Gelli maintained covert high-level ties
with businesses, governments, and intelligence agencies in Italy and South
America; he was, for instance, an economic consultant to Juan Peron. All
these relations produced a positive synergy for Sindona, and in 1968 he was
named one of the top advisors to the Vatican Bank, where he worked closely
with Paul Cassimir Marcinkus, an American-born bishop who became the bank's
president. All in all, Sindona's banking network proved to be "a convenient
vehicle for the laundering of 'dirty money' earned from the heroin traffic
and other mob-connected businesses."[11]
The Banco Ambrosiano had been founded at the turn of the century with the
help of the Roman Catholic Church to compete with Italy's secular banks.
Named after Saint Ambrose, it served Milan's Catholic bourgeois, small
artisans, and traders who operated in northern Italy. Roberto Calvi, who
would play an important role in corrupting the bank, joined Banco Ambrosiano
in 1946. Calvi had considerable talents, and he rose in the bank initially on
the basis of his professional skills, but he also got a boost from forces
outside the bank through his contact with Michele Sindona, who had vast
sources of power, some of them highly secret. He had, for instance, front
companies in Luxembourg and Liechtenstein where bank secrecy was nearly
absolute.
In November 1970, Ambrosiano bought an offshore company from Sindona and
named it Banco Ambrosiano Holding (BAH). Calvi was now in a position to use
BAH to operate in the Italian market as well as to control other banks and
companies outside Italy. Not surprisingly, one of the offshore banks set up
by BAH was in the Bahamas. This bank, Cisalpine Overseas Bank, was founded in
March 1971 in Nassau. Later it was renamed Banco Ambrosiano Overseas and was
owned by BAH with a minority holding by IOR. Bishop Marcinkus was named to
the board of directors. This appointment further strengthened Calvi's ties to
the Vatican, and he moved to extend his holdings in Italian banks. Soon his
bank was seen as part of a major up-and-coming financial empire.
The beginning of the troubles for Banco Ambrosiano came with the collapse of
Sindona's empire. In July 1972, Sindona acquired the Franklin National
Bank-which at the time was ranked the twentieth largest bank in the United
States-for $40 million. Unfortunately for Sindona, Franklin was not a healthy
bank. Large amounts of its loans were considered dubious and hints of
Sindona's mafia connections further undermined investor confidence. The
October 1973 Arab oil embargo hit Franklin hard. Sindona was able to get some
support from David Kennedy and President Nixon's former New York law firm,
but despite this help and additional support from his Italian allies,
including former prime ministers and the P2 lodge, Sindona could not prevent
the collapse of his empire. Franklin Bank suffered insolvency on October
8,1974.
Franklin Bank's bankruptcy is an example of how the criminal takeover of a
legitimate bank can bring about a financial crisis. Warnings of the near
collapse of Franklin National Bank in May 1974 threatened bankruptcies of
associated banks. Further collapse of the financial sector was prevented by
the intervention of the U.S. Federal Reserve Bank and the cooperation of
foreign central banks facilitated by the BIS. The Fed provided a large loan
to the Franklin National Bank and permitted it to use these funds in its
foreign branches, including Nassau. In addition, the Federal Reserve
guaranteed Franklin's foreign exchange contracts and found a buyer for the
bank.
At the May 1974 BIS meeting, the foreign central banks in the G-10 countries
agreed to defend the dollar against speculation caused by rumors of the
Franklin Bank's problems. This meeting showed the international financial
community's ability to react successfully to a criminalized bank's troubles.
It also illustrated how the U.S. government, the Vatican, and the
international capitalist system can in turn be threatened by the
criminalization of the financial system. The Franklin Bank's failure could
also have exerted an independent impact on the macroeconomy,
With Sindona's disgrace, the Vatican turned to Roberto Calvi as its principal
financial advisor. Sindona blamed Calvi for not helping him save his Italian
financial empire and started a vendetta against him. In order to protect
himself, Calvi, among other things, provided money to the political leaders
of all the major parties and gave generous loans to P2 members. In spite of
these precautions, his power began to crumble when a police raid accidentally
turned up the membership list of P2, which revealed the extensive corruption
of the Italian political elite. The list in Italy included Victorio de
Saboya, the son of the former king, Umberto; 3 members of the cabinet; 43
members of parliament; 30 generals; 8 admirals; the editor of Italy's leading
newspaper, II Corriere della Sera; 58 university professors; the directors of
the top three intelligence agencies; 183 officers of the armed forces; and
other members of the establishment—a total of 953 people.[12] In Argentina
the list included Gen. Carlos Suarez Mason and Adm. Emilio E. Massera.[13]
The list helped a magistrate investigating Calvi's Ambrosiano Bank determine
the means by which Calvi avoided Italy's foreign exchange laws and led to
Calvi's arrest, trial, and conviction for violation of these laws. While
Calvi was free on bail during an appeal, his body was found hanging from
Black Friar's Bridge in London.[14]
The BCCI Case
The Ambrosiano Bank case illustrates how an established bank under state
regulation can be corrupted and become part of an illegal international
financial system. The case of the Bank of Credit and Commerce International
(BCCI) is an example of drug traffickers working with a bank that was
completely outside the control of any state's regulatory system and shows how
a transnational financing system can be set up with an illegal purpose and
activity at its heart.
Agha Hassan Abedi, a Pakistani financier, founded BCCI in 1972. Abedi and his
family had moved to Pakistan from India where, as Muslims, they felt
threatened by the Hindu-dominated state. Deeply influenced by Islam's
hostility to secular, Zionist, and Christian dominance in world finance,
Abedi wanted to forge an Islamic third world institution that could compete
with the developed world's financial power. And indeed, he founded "a
globe-straddling, multinational Third World bank that would break the
hammerlock the giant European colonial banks held on the developing
world."[15]
BCCI provides one of the most dramatic examples of how the globalization of
international economy has permitted underworld networks to operate globally.
It was "the largest criminal corporate enterprise ever, the biggest Ponzi
scheme, the most pervasive money-laundering operation in history, the only
bank—so far as anyone knows—that ran a risky sideline business in both
conventional nuclear weapons, gold, drugs, turnkey mercenary armies,
intelligence and counter-intelligence, shipping, and commodities from cement
in the Middle East to Honduran coffee and Vietnamese beans. "[16]
Principal backing for the bank, which was incorporated in Luxembourg with
branches in London, came from Zayed bin Sultan al-Nahayan, the head of Abu
Dhabi's ruling family and president of the United Arab Emirates, who invested
$1.875 billion. From its beginning, the BCCI was also backed by A. W. "Tom"
Clausen, the chairman of the Bank of America, at that time the largest bank
in the world.[17] The Bank of America took a 30 percent share in BCCI on the
basis of a $625,000 investment. The bank flourished after the October War in
1973, when the Arab oil embargo against the West produced a massive transfer
of wealth to the Arab oil-producing countries.
Abedi knew that stateless Eurodollars[18] permitted BCCI to operate beyond
the control of any government. In 1976, he set up another independent entity,
the International Credit and Investment Corporation (ICIC) in the Cayman
Islands. This new multinational stateless corporation permitted Abedi's
enterprise to compete with the established international banking system and
to operate a shadowy political, economic, and criminal enterprise. He was
also able to penetrate and violate American banking laws, purchasing the
American Banking Holding Company in Washington, D.C., through middlemen like
the influential Clark Clifford, who acted as his attorney and
representative.[19]
When the massive profits from petroleum declined in the 1980s, BCCI generated
financial revenues by forging relationships with intelligence agencies and
supporting the arms and drug trades. It provided very important services to
U.S. intelligence agencies. One of the most important was its aid in
transferring money to the Afghan resistance after the Soviet invasion in
1979. BCCI also facilitated various mob activities. Its basic role in these
activities was to provide commercial letters of credit that provided cover
for smuggling and money laundering. BCCI became the world's leading under-
and overworld bank. Since the underground economy is estimated to be between
$350 billion and $500 billion a year, such a stateless offshore facility was
an enormous support to international crime and all those who sought to escape
taxation, law enforcement, and legitimate regulation.[20]
One of the more sensational activities of the BCCI was its help in acquiring
three Columbine warheads that were sold to Iraq. These devices, one of the
most closely held technologies of the United States, are triggers for the
fuel air bomb sometimes identified as the "poor man's hydrogen bomb." The
"Black Network," another aspect of Abedi's empire, was facilitated by ICIC.
The Black Network operated as a global intelligence and enforcement agency
centered in Karachi, Pakistan, with about fifteen hundred employees. It has
been accused of such crimes as extortion, kidnapping, bribery, and murder. It
was logistically supported by Abu Nidal and other terrorist organizations,
and it assisted Pakistan's nuclear program by obtaining blueprints for a
uranium enrichment factory and the high-speed switches designed to trigger
nuclear weapons. In addition to these enterprises, BCCI assisted the
Palestine Liberation Organization (PLO) in providing $12 million during the
1980s to the Sandinista government of Nicaragua in its struggles against El
Salvador. BCCI also supported narcoterrorist groups in Peru by facilitating
drug trafficking and arms trade in that country's chronic internal wars.
Despite these many connections, the BCCI enterprise collapsed when British
and American regulators closed down its U.S. operations in 1991. The key
figure in exposing BCCI was Manhattan district attorney Robert Morgenthau. By
the DEAs own account, "sixteen deaths around the world were related to the
BCCI investigation."[21]
More than one analyst rejects the argument that "BCCI was masterminding spy
operations, terrorist activities, drug conspiracies, illegal arms sales, or
tax evasion conspiracies." These analysts claim that BCCI merely provided a
convenient and friendly place for individuals involved in illegal
activities.[22] And, of course, in Abedi's view, BCCI was to be a mighty
force for good in the third world.
The culture of the BCCI operation made regulation difficult. It operated very
much on personal relationships and on providing money to nonspecified
charities. In 1987 alone it donated over $21 million to charity. This,
together with prize giveaways, was seen as a way of making friends. In 1979,
BCCI endowed a $10 million third world prize, placing members of Indira
Gandhi's family on the prize committee. Gandhi herself gave the prize away,
and, despite customary opposition in India to a Pakistaniheaded bank, BCCI
received permission to open a branch in Bombay's financial district in 1983.
In 1987, the Bombay branch of BCCI contributed nearly 10 percent of the
entire network's aftertax profits to charities.
BCCI was successful in other regions around the world. It boasted
thirty-three branches in Nigeria and thirty branches in Hong Kong. It owned
99 percent of the Banco de Credito y Comercio of Colombia, which operated
thirty-one branches, two of them in Medellin. According to the parent
company's annual report, the Colombian operation alone turned in a pretax
income of $5 billion.[23]
LEGITIMATE BANKS AND MONEY LAUNDERING
Substantial evidence from the Banco Ambrosiano and BCCI cases show that these
banks were consciously involved in criminal activity and that top officials
knowingly supported this activity. There is also abundant documentation of
the involvement of major legitimate American banks in money laundering.
In February 1985, the U.S. Justice Department filed criminal felony charges
against the First National Bank of Boston, the largest bank in New England.
The Bank of Boston was indicted for "knowingly and willfully" failing to
report to the federal government the movement of over $1 billion between the
bank's home office and several Swiss banks. The third point in the indictment
read:
>From on or about July 1, 1980, and continuing through on or about September
30, 1984, in the District of Massachusetts, the defendant, Bank of Boston, a
banking institution engaged in the business of dealing in currency, knowingly
and willfully failed to file, and caused the failure to file, Currency
Transaction Reports (IRS Forms 4789) with the Commissioner of the Internal
Revenue Service, for currency transactions it engaged in, as required by
law.[24]
The indictment was signed by William F. Weld, the U.S. attorney and later
Republican governor of Massachusetts, and Jeremiah T. O'Sullivan, then chief
attorney of the New England Organized Crime Strike Force. The investigation
revealed that the New England Angiulo crime family had exchanged $50,000 in
old $100 bills for five $10,000 cashier's checks beginning in February 1980.
But that was nothing: By the time the charges were brought, approximately
$1.218 billion in cash had been laundered at the bank.[25]
The case did not go to trial. The bank pleaded guilty to the felony charge
before U.S. District Judge A. David Mazzone, who imposed a fine of $500,000.
No individuals were indicted after the plea bargain agreement and
responsibility for the money laundering was never assigned. judge Mazzone
later questioned why no individuals were charged.[26]
Further supporting the trend toward the criminalization of the international
financial system was the 1996 Citibank case. The bank helped Raul Salinas de
Gortari, the brother of the former president of Mexico, Carlos Salinas de
Gortari, launder more than $80 million. Raul Salinas approached Citibank for
assistance with his finances in early 1993.
The basic principles for handling Mr. Salinas's money were straightforward,
and designed to get his money to a safe haven without being traceable.
Cashier's checks from Raul Salinas would be sent to the Mexico City office of
Citibank, mostly drawn from the accounts of Banco Cremi, a local Mexican
bank.... [T]he money went electronically to the bank's own accounts in New
York, and then was routed to a Citibank subsidiary in Switzerland.... The
money was deposited in accounts bearing, the name of companies set up in the
Caymans, Caribbean islands whose secrecy laws make it possible to create
corporations without disclosing their owners....The bank] transferred tens of
millions back and forth from Switzerland to England when money market rates
in London were at their peak.[27]
Raul Salinas has been tied to an additional $240 million trust fund in
Switzerland. Under interrogation by Mexican authorities, Salinas acknowledged
having accounts in either his name or a pseudonym in four Swiss banks,
including Pictet & Cie., Bank Julius Baer in Zurich, and Banque Edmond de
Rothschild.[28]
Between 1989 and 1993 Citibank was under the effective receivershipof the
Federal Reserve Board of Governors. The bank's procedures indi-cate that the
movement of Salinas's millions required the approval of higher-ups. These
higher-ups would be the Citibank executive vice president in charge of the
international private banking group and the chief of the Europe and North
America division who directly reports to
Citicorp chairman John Reed. Reed has been described as a personal friend of
President Salinas who was warmly received at the presidential residence
whenever he visited Mexico. Also, William R. Rhodes, one of Citibank's vice
presidents, had negotiated Mexico's historic debtreduction agreement on behalf
of hundreds of foreign banks in the 1980s and was a trusted advisor to the
Salinas administration.[29] Money Laundering Alert, an industry journal,
reported that "senior international bankers ... say it is 'virtually
impossible' that the chairman of a bank, even one of Citibank's size, not
know about a new customer who met the Salinas pattern."[30]
When an internal probe was begun into the transfer of Salinas's money out of
the country, Citibank's top money-laundering compliance officer, Jane Wexton,
was excluded from participating. It was then that Michael Zeldin, head of the
Justice Department's money-laundering section until 1992, stated, "Within
banking, Jane is among the best in-house compliance people at any bank in the
U.S.... If there was a problem, she should have been one of the people
consulted, and the fact that there apparently was a problem leads me to
believe she wasn't consulted."[31]
In July 1996 Citibank hired Robert Fiske to defend the bank in the Raul
Salinas money-laundering case. A congressional report released on December 3,
1998, criticized Citibank for secretly transferring nearly $100 million for
Raul Salinas without examining the source of the funds or Salinas's financial
background. A Citibank official told the U.S. government that the failure to
conduct the background check violated Citibank's internal "know your
customer" policy. To prove criminal wrongdoing prosecutors have to
demonstrate that an institution was "willfully blind" to the fact that funds
came from an illegal source. If a bank willfully ignores its own policy, it
makes "willfull blindness" easier to prove. It was also alleged that Citibank
failed to tell the government about the network of foreign shell companies
and offshore accounts that it had set up to shield the Salinas fortune.[32]
Besides the interest legitimate private banks have shown in servicing clients
with large amounts of money from questionable sources, there may be lack of
due diligence within the U.S. government itself. The effectiveness of the
federal oversight of legitimate banks is called into question, particularly
after the unfortunate experiences of Franklin National Bank and Citibank. The
report of the General Accounting Office, the investigative arm of Congress,
on Salinas demonstrates a U.S. government attempt to rectify its oversight
failures with respect to legitimate banks.
The U.S. Treasury is also under observation. It is vulnerable because it
fears the loss of substantial benefits if it seriously reduces underground
financial flows. According to Christopher Whalen,
Within the domestic finance division of the Treasury, the dollarization of
local economies from Tijuana to Shanghai is viewed as a considerable source
of revenue for the U.S. government.... [A] related concern for the successive
Republican and Democratcontrolled Treasury chiefs has been the worry that any
disruption of the international market (for example, by clamping down on
transactions between the New York money markets and banks located in the
Cayman Islands or Moscow) will raise U.S. interest rates and scare skittish
investors already worried by Washington's spendthrift nature.[33]
KEEPING THE SYSTEM CLEAN
The dilemma facing the United States and the managers of the globalized
financial markets is how to keep a liberal financial system open and yet
prevent the corruption of that system and the states. There would be serious
consequences if the international financial system became corrupted. First,
there would be an increased likelihood that criminal elites would gain
control of both the market-regulating system and governments. Second, there
would be increased opposition to policies espousing traditional morality and
accountability. Finally, there would be an inevitable nationalistic and
protectionistic reaction to the global capitalist system, despite its
antistatist and liberty-producing benefits.
The implication of both the criminalization of legitimate banks and the
creation of criminal banks is that the international capitalist environment
provides a structural incentive for banks to launder dirty money The
combination of the structural nature of the international economy with the
anarchical structure of the international political arena makes it rational
and possible for states to cooperate with criminal enterprises.
These structural implications could be transformed if a powerful state, such
as the United States, assumed leadership and sought the cooperation of other
major states and the central banks. An international system could emerge that
would check money laundering and relieve the anarchical pressures on states
to behave criminally. Such an international system under the leadership of
the United States would strengthen an anti-money-laundering regime and
provide incentives for cooperation. This country has sufficient leadership
capability to forge cooperative relations with other states and to develop an
effective international monetary regulatory system. Unless the United States
vigorously pursues this agenda, the prospect of other states assuming the
responsibility of combating the criminalization of states and the world
economy is unlikely.[34]
The United States has in place a system of certification of foreign nations.
Under the U.S. Foreign Assistance Act (Section 490), the president of the
United States must certify foreign countries as either cooperating or not
cooperating with the United States in the war on drugs. To be certified as
fully cooperating, a country must fulfill the following requirements: It must
seize illegal narcotics, restrain money laundering, eliminate corruption,
prosecute drug lords, eradicate illegal crops, and break up drug cartels.
Countries where the narcotics business operates with de facto government
protection do not receive U.S. certification. Countries that cooperate
receive bilateral aid, and the United States supports their loans from
multilateral lending institutions such as the IMF and World Bank. The
countries that are "decertified" lose U.S. bilateral aid and U.S. support for
funds from the multilateral lending institutions. Some countries may be
certified as not cooperating but receive a "national security" waiver, a
decision made at the discretion of the president.
The process of corruption in democratic and democratizing states suggests the
United States will be faced with more and more difficult decisions in
certifying states as cooperating in the fight against drug trafficking.
pps. 99-116
--[notes]—
CHAPTER 6
1. The July 1944 Bretton Woods Agreement permitted governments under Article
6-3 to use exchange controls to curtail capital movements. In addition, the
agreement under Article 8-2b permitted governments to cooperate in
controlling capital movements. The two leading theorists of the agreement
were John Maynard Keynes and Harry Dexter White. They sought a restrictive
regime with respect to international capital movements. The participants at
Bretton Woods also passed a resolution calling for the liquidation of the
Bank for International Settlements (BIS) at "the earliest possible moment."
Nonetheless, the decision to liquidate the BIS was not enforced, and in
November 1946 the European Central Bankers resumed the monthly meetings that
had been suspended in 1939. From the beginning, the U.S. financial community
opposed capital controls, as they would interfere with New York's position as
the principal international financial center after World War 11. American
interests, supported by the liberal ideologists William Ropke and Friedrich
Hayek, influenced the intellectual and political climate to support the
globalization of the international financial markets under the BIS regime.
One of the best accounts of this development is found in Eric Helleiner's Stat
es and the Reemergence of Global Finance: From Bretton Woods to the 1990s (Ith
aca, N.Y.: Cornell University Press, 1994).
2. Ron Chernow, The House of Morgan: An American Banking Dynasty and the Rise
of Modern Finance (New York: Simon and Schuster, 1990), 375.
3. IMF Survey, published by the International Monetary Fund, July 29,1996,
246.
4. Ibid.; The Economist, "Money-Launderers on the Line," June 25, 1994, 81.
5. House Committee on Banking, Finance, and Urban Affairs, Federal
Governments Response to Money Laundering: Hearings before the House Committee
on Banking, Finance, and Urban Affairs, May 25-26,1993, 26.
6. See Douglass Farah, "Mexican Banks Laundered Drug Money, U.S. Charges," Was
hington Post, May 19,1998, Al, A17; and Don Van Natta, Jr., "U.S. Indicts 26
Mexican Bankers in Laundering of Drug Funds," New York Times, May 19, 1998,
A6. Mexico's chief bank regulator, Eduardo Fernandez Garcia, complained to
Alan Greenspan, the chairman of the U.S. Federal Reserve, that Mexico had not
been informed of the undercover operation. Since its beginning in November
1995 the undercover operation was kept secret from the Mexican government for
fear of leaks and cartel penetration of the government. As a result of the
sting there was a sharp deterioration in U.S.-Mexican relations.
7. Rachel Ehrenfeld, Evil Money: Encounters along the Money Trail (New York:
Harper Business, 1992), 5-10.
8. Ibid., 13.
9. Ibid., 43. Since the 1970s, U.S. banks are required to file reports on all
cash transactions larger than $10,000. Since 1986, these Cash Transaction
Reports (CTRs) have been required to be filed with the Internal Revenue
Service (IRS) under the Bank Secrecy Act. U.S. banks that do not comply face
penalties.
10. Ibid., 53.
11. Larry Gurwin, The Calvi Affair: Death of a Banker (London: MacMillan,
1983), 14.
12. William Whalen, Christianity and American Freemasonry (San Francisco:
Ignatius Press, 1958), 179-80.
13. "Conociose en Italia una lista de miembros de una logia masonica: Figuran
entre otros argentinos Lopez Rega, Lastiri, Massera, Suarez Mason y de la
Plaza," La Prensa (Buenos Aires), May 22, 1981, 2.
14. Although the official cause of Calvi's death was listed as suicide, the
actual circumstances surrounding it remain a mystery. Shortly before his
death, Calvi was seen in the company of people linked to the mafia and
Italian intelligence agencies. Calvi's family believes he was prepared to
tell all he knew of his financial, political, and underworld connections and
claims he was murdered. In 1992, supporting evidence for the murder thesis
came from Juerg Heer, a senior executive and credit manager at the private
Rothschild Bank AG in Zurich, who worked closely with the bank's chairman,
Baron Elie de Rothschild. After being charged for taking kickbacks, Heer told
investigators that he had helped Baron Rothschild concoct front companies for
Italian interests that wished to avoid taxes and that he had "personally
handed over a suitcase stuffed with what he later was told was $5 million for
the killers of Roberto Calvi." Peter Gumbel, "A Swiss Bank Squirms as Officer
It's Suing Tells of Sleazy Deals: He Says Baron Who Headed Rothschild Bank AG
Hid the Ownership of Assets," Wall Street journal, October 11, 1992, Al.
15. Beaty and Gwynne, Outlaw Bank, 135.
16. Ibid., xxiv. Under a "Ponzi scheme," a bank illegally repays old
depositors from new deposits. Such a scheme is sustainable only as long as
deposits continue to double or increase beyond the demand of the old
depositors.
17. Ibid., 136.
18. The first Eurodollars came into being after World War 11 when the Soviet
Union deposited its dollars in Paris and London. With Eurodollars came
"Euromarkets," unregulated overseas markets, or markets that U.S. banks could
use to avoid domestic regulations. Using the 1919 Edge Act, which allowed
them to take equity stakes in foreign banks if the country did not allow U.S.
branches there, American banks began to finance overseas businesses through
the Euromarket. U.S. involvement became substantial after the middle of 1963
when President Kennedy proposed an Interest Equalization Tax to check U.S.
capital outflows.
19. Beaty and Gwynne, Outlaw Bank, 151-52.
20. For more information on this, see Christopher Byron, "Body of Evidence," N
ew York 27 (January 24,1994), 14-15; and James Ring Adams, "Closing the BCCI
Curtain," American Spectator, September 1994.
21. Beaty and Gwynne, Outlaw Bank, 266.
22. Robert E. Powis, The Money Launderers: Lessons from the Drug Wars-How
Billions of Illegal Dollars Are Washed through Banks and Businesses (Chicago:
Probus, 1992), 237.
23. Jagannath Dubashi, "The Bank That Knows Too Much," Financial World, Novemb
er 29, 1988, 32-33. Juerg Heer of the Rothschild Bank reported that one of
the general managers of the bank, Alfred Hartmann, constructed front
companies "to siphon some BCCI funds out of Nigeria." Heer further tied the
Rothschild Bank to BCCI, claiming that Hartmann was the chairman of the Swiss
unit of BCCI. Heer's charges connected a major transnational financial
enterprise to BCCI's illegal operations and suggested that money-laundering
operations are far more pervasive among legitimate banks than had been
discovered thus far. Gumbel, "Swiss Bank Squirms," A6.
24. United States v. First National Bank of Boston, filed in Clerk's Office,
United States District Court, District of Massachusetts, February 7, 1985.
25. Most of the money was shipped to three Swiss banks: Credit Suisse of
Zurich, Swiss Bank Corp. of Basel, and Union Bank of Switzerland in Zurich.
Other banks involved with lesser amounts included the Bank of Boston's own
branch in Luxembourg, Barclays Bank International, and the Canadian Imperial
Bank, among others.
26. John Wong and William F. Doherty, "Bank of Boston Guilty in CashTransfer
Case," Boston Globe, February 8, 1985, 1, 70. This case may have contributed
to opposition in Congress to President Clinton's 1997 appointment of Governor
Weld as U.S. ambassador to Mexico because it raised doubts about his
commitment to combating money laundering.
27. Anthony DePalma with Peter Truell, "A Mexican Mover and Shaker and How
His Millions Moved," New York Times, June 5, 1996, A12. Banco Cremi SA was
one of two banks owned by Carlos Cabal Peniche, who in late 1994 made illegal
contributions to the PRI party in Mexico, using his banks in an elaborate
self-lending scheme that involved several hundred million dollars. Cabal
Peniche later became a fugitive from Mexican justice.
28. "Raul Salinas May Be Tied to Huge Fund," Wall Street Journal, June 7,
1996, A9.
29. DePalma, "Mexican Mover and Shaker," A12.
30. Money Laundering Alert, April 1996.
31. Laurie Hays, "Citibank 'Cop' Was Kept Off Salinas Probe," Wall Street
journal, June 111996, A6.
32. Robert Fiske had previously represented former defense secretary Clark
Clifford and Washington lawyer Robert Altman in the BCCI case and had served
as independent counsel for the U.S. government in the 1994 investigation of
the Whitewater Development Corp. investments. Laurie Hays, "Citibank Hires a
Noted Defense Lawyer as Salinas Inquiry Appears to Deepen," Wall Street
journal, July 30, 1996; Kathleen Day, "Citibank Faulted for Mexican
Transactions," Washington Post, December 4,1998, Al, A24; Tim Golden, "U.S.
Says Citibank Bent Rules for Salinas Deposit," International Herald Tribune, D
ecember 5-6,1998, 1.
33. Christopher Whalen, "The G3 Money Launderers: How Russia, Mexico and, of
All Countries, Israel Are Cleaning Up in a Dirty Business," International
Economy, May/June 1996, 55.
34. According to the definition of an anarchical political system, the units
of that system are functionally undifferentiated, distinguished primarily by
their greater or lesser abilities to perform similar tasks. If organized
criminal activity with respect to narcotics raises such abilities of the
state, then it can be expected that more and more states will forge ties with
criminal organizations.
-----
Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
All My Relations.
Omnia Bona Bonis,
Adieu, Adios, Aloha.
Amen.
Roads End
DECLARATION & DISCLAIMER
==========
CTRL is a discussion and informational exchange list. Proselyzting propagandic
screeds are not allowed. Substance—not soapboxing! These are sordid matters
and 'conspiracy theory', with its many half-truths, misdirections and outright
frauds is used politically by different groups with major and minor effects
spread throughout the spectrum of time and thought. That being said, CTRL
gives no endorsement to the validity of posts, and always suggests to readers;
be wary of what you read. CTRL gives no credeence to Holocaust denial and
nazi's need not apply.
Let us please be civil and as always, Caveat Lector.
========================================================================
Archives Available at:
http://home.ease.lsoft.com/archives/CTRL.html
http:[EMAIL PROTECTED]/
========================================================================
To subscribe to Conspiracy Theory Research List[CTRL] send email:
SUBSCRIBE CTRL [to:] [EMAIL PROTECTED]
To UNsubscribe to Conspiracy Theory Research List[CTRL] send email:
SIGNOFF CTRL [to:] [EMAIL PROTECTED]
Om
