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"Dirty Money" Foundation of US Growth and Empire -
Size and Scope of Money Laundering by US Banks From La Journada [Mexico],
5/19/01, [Reprinted with permission, James Petras]
by James Petras - Professor of Sociology, Binghamton University -- There is a consensus among U.S. Congressional
Investigators, former bankers and international banking experts that U.S. and
European banks launder between $500 billion and $1 trillion of dirty money each
year, half of which is laundered by U.S. banks alone. As Senator Carl Levin
summarizes the record: "Estimates are that $500 billion to $1 trillion of
international criminal proceeds are moved internationally and deposited into
bank accounts annually. It is estimated that half of that money comes to the
United States".
Over a decade then, between $2.5 and $5 trillion
criminal proceeds have been laundered by U.S. banks and circulated in the U.S.
financial circuits. Senator Levin's statement however, only covers criminal
proceeds, according to U.S. laws. It does not include illegal transfers and
capital flows from corrupt political leaders, or tax evasion by overseas
businesses. A leading U.S. scholar who is an expert on international finance
associated with the prestigious Brookings Institute estimates "the flow of
corrupt money out of developing (Third World) and transitional (ex-Communist)
economies into Western coffers at $20 to $40 billion a year and the flow
stemming from mis-priced trade at $80 billion a year or more. My lowest estimate
is $100 billion per year by these two means by which we facilitated a trillion
dollars in the decade, at least half to the United States. Including the other
elements of illegal flight capital would produce much higher figures. The
Brookings expert also did not include illegal shifts of real estate and
securities titles, wire fraud, etc.
In other words, an incomplete figure of dirty money
(laundered criminal and corrupt money) flowing into U.S. coffers during the
1990s amounted to $3-$5.5 trillion. This is not the complete picture but it
gives us a basis to estimate the significance of the "dirty money factor" in
evaluating the U.S. economy. In the first place, it is clear that the combined
laundered and dirty money flows cover part of the U.S. deficit in its balance of
merchandise trade which ranges in the hundreds of billions annually. As it
stands, the U.S. trade deficit is close to $300 billion. Without the "dirty
money" the U.S. economy external accounts would be totally unsustainable, living
standards would plummet, the dollar would weaken, the available investment and
loan capital would shrink and Washington would not be able to sustain its global
empire. And the importance of laundered money is forecast to increase. Former
private banker Antonio Geraldi, in testimony before the Senate Subcommittee
projects significant growth in U.S. bank laundering. "The forecasters also
predict the amounts laundered in the trillions of dollars and growing
disproportionately to legitimate funds." The $500 billion of criminal and dirty
money flowing into and through the major U.S. banks far exceeds the net revenues
of all the IT companies in the U.S., not to speak of their profits. These yearly
inflows surpass all the net transfers by the major U.S. oil producers, military
industries and airplane manufacturers. The biggest U.S. banks, particularly
Citibank, derive a high percentage of their banking profits from serving these
criminal and dirty money accounts. The big U.S. banks and key institutions
sustain U.S. global power via their money laundering and managing of illegally
obtained overseas funds.
U.S. Banks and The Dirty Money Empire
Washington and the mass media have portrayed the
U.S. as being in the forefront of the struggle against narco trafficking, drug
laundering and political corruption: the image is of clean white hands fighting
dirty money. The truth is exactly the opposite. U.S. banks have developed a
highly elaborate set of policies for transferring illicit funds to the U.S.,
investing those funds in legitimate businesses or U.S. government bonds and
legitimating them. The U.S. Congress has held numerous hearings, provided
detailed expos�s of the illicit practices of the banks, passed several laws and
called for stiffer enforcement by any number of public regulators and private
bankers. Yet the biggest banks continue their practices, the sum of dirty money
grows exponentially, because both the State and the banks have neither the will
nor the interest to put an end to the practices that provide high profits and
buttress an otherwise fragile empire.
First thing to note about the money laundering
business, whether criminal or corrupt, is that it is carried out by the most
important banks in the USA. Secondly, the practices of bank officials involved
in money laundering have the backing and encouragement of the highest levels of
the banking institutions - these are not isolated cases by loose cannons. This
is clear in the case of Citibank's laundering of Raul Salinas (brother of
Mexico's ex-President) $200 million account. When Salinas was arrested and his
large scale theft of government funds was exposed, his private bank manager at
Citibank, Amy Elliott told her colleagues that "this goes in the very, very top
of the corporation, this was known...on the very top. We are little pawns in
this whole thing" (p.35).
Citibank, the biggest money launderer, is the
biggest bank in the U.S., with 180,000 employees world-wide operating in 100
countries, with $700 billion in known assets and over $100 billion in client
assets in private bank (secret accounts) operating private banking offices in 30
countries, which is the largest global presence of any U.S. private bank. It is
important to clarify what is meant by "private bank."
Private Banking is a sector of a bank which caters
to extremely wealthy clients ($1 million deposits and up). The big banks charge
customers a fee for managing their assets and for providing the specialized
services of the private banks. Private Bank services go beyond the routine
banking services and include investment guidance, estate planning, tax
assistance, off-shore accounts, and complicated schemes designed to secure the
confidentiality of financial transactions. The attractiveness of the "Private
Banks" (PB) for money laundering is that they sell secrecy to the dirty money
clients. There are two methods that big Banks use to launder money: via private
banks and via correspondent banking. PB routinely use code names for accounts,
concentration accounts (concentration accounts co-mingles bank funds with client
funds which cut off paper trails for billions of dollars of wire transfers) that
disguise the movement of client funds, and offshore private investment
corporations (PIC) located in countries with strict secrecy laws (Cayman Island,
Bahamas, etc.)
For example, in the case of Raul Salinas, PB
personnel at Citibank helped Salinas transfer $90 to $100 million out of Mexico
in a manner that effectively disguised the funds' sources and destination thus
breaking the funds' paper trail. In routine fashion, Citibank set up a dummy
offshore corporation, provided Salinas with a secret code name, provided an
alias for a third party intermediary who deposited the money in a Citibank
account in Mexico and transferred the money in a concentration account to New
York where it was then moved to Switzerland and London.
The PICs are designed by the big banks for the
purpose of holding and hiding a person's assets. The nominal officers, trustees
and shareholder of these shell corporations are themselves shell corporations
controlled by the PB. The PIC then becomes the holder of the various bank and
investment accounts and the ownership of the private bank clients is buried in
the records of so-called jurisdiction such as the Cayman Islands. Private
bankers of the big banks like Citibank keep pre-packaged PICs on the shelf
awaiting activation when a private bank client wants one. The system works like
Russian Matryoshka dolls, shells within shells within shells, which in the end
can be impenetrable to a legal process.
The complicity of the state in big bank money
laundering is evident when one reviews the historic record. Big bank money
laundering has been investigated, audited, criticized and subject to
legislation; the banks have written procedures to comply. Yet banks like
Citibank and the other big ten banks ignore the procedures and laws and the
government ignores the non-compliance.
Over the last 20 years, big bank laundering of
criminal funds and looted funds has increased geometrically, dwarfing in size
and rates of profit the activities in the formal economy. Estimates by experts
place the rate of return in the PB market between 20-25% annually. Congressional
investigations revealed that Citibank provided "services" for 4 political
swindlers moving $380 million: Raul Salinas - $80-$100 million, Asif Ali Zardari
(husband of former Prime Minister of Pakistan) in excess of $40 million, El Hadj
Omar Bongo (dictator of Gabon since 1967) in excess of $130 million, the Abacha
sons of General Abacha ex-dictator of Nigeria - in excess of $110 million. In
all cases Citibank violated all of its own procedures and government guidelines:
there was no client profile (review of client background), determination of the
source of the funds, nor of any violations of country laws from which the money
accrued. On the contrary, the bank facilitated the outflow in its prepackaged
format: shell corporations were established, code names were provided, funds
were moved through concentration accounts, the funds were invested in legitimate
businesses or in U.S. bonds, etc. In none of these cases - or thousands of
others - was due diligence practiced by the banks (under due diligence a private
bank is obligated by law to take steps to ensure that it does not facilitate
money laundering). In none of these cases were the top banking officials brought
to court and tried. Even after arrest of their clients, Citibank continued to
provide services, including the movement of funds to secret accounts and the
provision of loans.
Correspondent Banks: The Second Track
The second and related route which the big banks
use to launder hundreds of billions of dirty money is through "correspondent
banking" (CB). CB is the provision of banking services by one bank to another
bank. It is a highly profitable and significant sector of big banking. It
enables overseas banks to conduct business and provide services for their
customers - including drug dealers and others engaged in criminal activity - in
jurisdictions like the U.S. where the banks have no physical presence. A bank
that is licensed in a foreign country and has no office in the United States for
its customers attracts and retains wealthy criminal clients interested in
laundering money in the U.S. Instead of exposing itself to U.S. controls and
incurring the high costs of locating in the U.S., the bank will open a
correspondent account with an existing U.S. bank. By establishing such a
relationship, the foreign bank (called a respondent) and through it, its
criminal customers, receive many or all of the services offered by the U.S. big
banks called the correspondent.
Today, all the big U.S. banks have established
multiple correspondent relationships throughout the world so they may engage in
international financial transactions for themselves and their clients in places
where they do have a physical presence. Many of the largest U.S. and European
banks located in the financial centers of the world serve as correspondents for
thousands of other banks. Most of the offshore banks laundering billions for
criminal clients have accounts in the U.S. All the big banks specializing in
international fund transfer are called money center banks, some of the biggest
process up to $1 trillion in wire transfers a day. For the billionaire criminals
an important feature of correspondent relationships is that they provide access
to international transfer systems - that facilitate the rapid transfer of funds
across international boundaries and within countries. The most recent estimates
(1998) are that 60 offshore jurisdictions around the world licensed about 4,000
offshore banks which control approximately $5 trillion in assets.
One of the major sources of impoverishment and
crises in Africa, Asia, Latin America, Russia and the other countries of the
ex-U.S.S.R. and Eastern Europe, is the pillage of the economy and the hundreds
of billions of dollars which are transferred out of the country via the
corresponding banking system and the Private Banking system linked to the
biggest banks in the U.S. and Europe. Russia alone has seen over $200 billion
illegally transferred in the course of the 1990s. The massive shift of capital
from these countries to the U.S. and European banks has generated mass
impoverishment and economic instability and crises. This in turn has created
increased vulnerability to pressure from the IMF and World Bank to liberalize
their banking and financial systems leading to further flight and deregulation
which spawns greater corruption and overseas transfers via private banks as the
Senate reports demonstrate.
The increasing polarization of the world is
embedded in this organized system of criminal and corrupt financial
transactions. While speculation and foreign debt payments play a role in
undermining living standards in the crisis regions, the multi-trillion dollar
money laundering and bank servicing of corrupt officials is a much more
significant factor, sustaining Western prosperity, U.S. empire building and
financial stability. The scale, scope and time frame of transfers and money
laundering, the centrality of the biggest banking enterprises and the complicity
of the governments, strongly suggests that the dynamics of growth and
stagnation, empire and re-colonization are intimately related to a new form of
capitalism built around pillage, criminality, corruption and complicity.
"This Goes Straight to the Top"
-- James Petras is a Professor of Sociology at
Binghamton University in Binghamton, New York. He is the author of 57 books. His
latest, Globalization Unmasked: Imperialism in the New Millenium
Michael C. Ruppert P.O. Box 6061-350, Sherman Oaks, CA 91413 (818)788-8791 * fax(818)981-2847 [EMAIL PROTECTED] � COPYRIGHT 1998, 1999, 2000, 2001 MICHAEL C. RUPPERT. ALL RIGHTS
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