Hi, Natalia, Yes, I take your point about the right (of governments) to investigate deposits and depositors. And I say this despite a rising skepticism of the honesty and civil rights respect of national governments.
I think we are agreeing that the banks should not be saddled with the responsibility of fighting criminal activity, if I read you correctly. I would add, that to the extent that there are 'obvious' suspicious depositors that this would cease to be the case if bankers were to be held responsible for stopping the laundering process: they would simply state the criteria that would suggest 'suspicion', and the criminals would take the extra steps needed to not trigger the new criteria. I would like to raise what I see as a larger issue: globalization has been carried out in such a way that national credibility and authority has been challenged. Corporations can and do shop for friendly governments. Wealthy individuals are establishing residence in low-taxation countries. If a country says it will improve its environmental rules, corporations can and do threaten to pull out of the country. So there is a large shift of power now going on toward the globalized corporations, away from national governments. Individuals, other than the wealthy who can take advantage of the same opportunities that corporations are finding in globalizations, are going to be hurt by this shift because individuals have no effective control over corporations, where they have some, sort of, over their governments. And, more speculatively, I wonder sometimes if the corporate-orientation of the Bush crew is responsible for their public emphasis on 1) democracy (which implies that popular control over government is the only issue that individuals should be truly concerned with (rather than the burgeoning de facto power of globalized corporations), and 2) attacks on the UN and other international forms of regulation, which probably represents the only set of institutions that might yet have a chance to reign in the global corporations. I do believe that this larger issue will be the one that dominates human affairs and well-being in this age, rather than global weather changes, or terrorism, or stem cell research or any of the other things that people seem so ready to have distract them.... I am really eager to see what members of the list think about this. Am I being too alarmist? Is the game already won by the globalized corporations? If I am right about the threat, what might yet be done to curb the wild-West lawlessness of the globalized world? Cheers, Lawry -----Original Message----- From: Darryl and Natalia [mailto:[EMAIL PROTECTED] Sent: Tuesday, October 11, 2005 3:47 PM To: [EMAIL PROTECTED]; 'W.-Robert Needham'; [email protected] Subject: Re: [Futurework] US Bank Money Laundering - by James Petras Hello Lawry, I understand what you are saying about the inability of banks to determine whether or not money is clean in most situations. And I certainly appreciate that privacy is essential for trust. Where I feel they can effectively exercise their right to investigate is with multi-million dollar deposits/transfers from companies or individuals who are highly suspect, such as those patently obvious ones named in the article. Further, the very fact that these banks have their own illegal offshore accounts (overlooked or rarely investigated by feds) by which to perform their magic acts of turning the money "clean", does put the onus on the banks themselves. They are doing the extra rinse. My example of the scrutiny employed for small loans, usually bypassed for multi-million dollar loans, was to illustrate that there is a process of conscious choice made as to whom they will subject to precautionary rules. It's done for the little guy to create public perception of security measures adhered to, but for the wealthy, or those who appear to be, these measures are seldom carried out to a solvent degree, hence the vast numbers of big bad debts in the last decade. Another point: billions are spent on security, millions in terms of time spent on qualification processes for small loans, but how much is spent to ensure that the banks are not capitalizing on obvious dirty money? Proportionately, I would wager very little because there's little chance the feds will be there to investigate. Very little because they stand to lose too much immediate profit. But they are supposed to be exercising their right to investigate in these highly suspicious transfers by law. It's done for the little guy, it can be done for both. Regards, Natalia All mail scanned by NAV ----- Original Message ----- From: Lawrence de Bivort <[EMAIL PROTECTED]> To: 'Darryl and Natalia' <[EMAIL PROTECTED]>; 'W.-Robert Needham' <[EMAIL PROTECTED]>; <[email protected]> Sent: Monday, October 10, 2005 12:12 PM Subject: RE: [Futurework] US Bank Money Laundering - by James Petras Hi, Natalia, Yes, in a sense banking profits are increased when deposits are increased, including those that come from criminals. But this is an oblique argument, at best, for holding banks responsible for discerning and not accepting deposits from criminals. Laundered money comes from legitimate activities. I know this may seem counter-intuitive, but this is how laundering works: 1. Criminal steals money (bribes, extortion, theft, etc) 2. Criminal buys a legitimate business, e.g. laundry, or casino, or restaurant 3. Criminal makes an income on the business 4. Criminal, or his best buddy, deposits the income from the legitimate business at the bank. So, how can the bank know what is money being laundered and money being deposited by a normal laundry owner, or restaurant owner? Short answer: the ban cannot know. Yes, the bank will make a profit on the deposit, but that doesn't change the reality that the bank can't distinguish between laundered and non-laundered monies. You pay your bills by check. How can your local electricity company know whether you are using stolen money or not? Cheers, Lawry -----Original Message----- From: Darryl and Natalia [mailto:[EMAIL PROTECTED] Sent: Sunday, October 09, 2005 10:33 PM To: [EMAIL PROTECTED]; 'W.-Robert Needham'; [email protected] Subject: Re: [Futurework] US Bank Money Laundering - by James Petras Just as much as it is a social choice to say these banks are doing something wrong, it holds true that we also choose to ignore where the dirty money comes from. The means for obtaining dirty money the world over goes largely unchallenged because the authorities/judiciary are set up to protect the wealth of every nation, and illegal activity is a substantial underpinning to that end. I understand that the task of sound judgment should not be left up to the bankers for the reasons you cited, but the main reason for this, I believe, is because their profit margin depends on not using their better judgment, if they possess much at all. It would indeed be just as difficult, if not more so, than dismantling the laws and red tape that protect the commander-in-chief from being prosecuted for war crimes, betrayal of the public and stock fraud. The banks do have laws by which they should abide with respect to confirmation of the source of funds and are also obliged to investigate the laws within the countries from which these huge sums appear. It is not in the interests of transparency to foster illegitimate companies within the banking system itself in order that no trace of accounts be apparent to criminal investigations. Except today in the case of terrorist activities, (and in these the feds will be selective mostly to appear that they are getting tough) it would seem that government doesn't care to prosecute banks for even the brazenly obvious misdeeds they conduct, (as suggested in the later part of this article after the break in transmission). It is the banks who are laundering at huge profits, in full knowledge (knowledge also on the part of government) that the money is dirty. They aren't bothering to investigate the source of transfers because any questioning of same would result in the client taking their business elsewhere. The feds dare not upset the labyrinth of bookkeeping for incoming capital lest its own financial house be revealed as a shell. The US system itself is attractive to criminal activity because the checks are not done, and money is secreted away at once because of the confidentiality policies. Banks, like so many other public institutions--many of which are now privatized, certainly only cater to the wealthy few. Should an ordinary citizen try to get a bank loan, for example, they are put through every scrutiny possible, with every penny accounted for, prior to approval. Should a wealthy person wish for a loan, very little is investigated. Over the last decade big banks, not just in N. America, but in Japan and Europe as well, had huge bad money debts because of high risk investments. The million and billion dollar bad debts were forgiven, but woe to the individual who was behind on a small mortgage to repay. Then they compensated since about '94, when bank services alone earned, at least in N. America, only about $378 billion, to double that by 2004. All that for a lousy 1--2% interest paid today for the average depositor. The banks with public charters should be serving the public to help them prosper, but given today's governments have allowed the broader array of services, they have become but another extortionist system not unlike the very sources of popularly named dirty money. Stock brokers are usually swindling the average investor, and their history of losing money for Jo Public should have forfeited any inclusion of their services in public banking. The private banking systems are too often about dirty money, and the laws that protect it are what need to be dismantled. I don't believe that this is impassable, though their formidable wealth would have us see things otherwise. I would liken it to the myth about quitting smoking being almost impossible to overcome. Did it ever occur to us to ask, Who started the myth in the first place? Perhaps it was the tobacco companies themselves? Perhaps government? Certainly no interests that have faith in our capacity, nor that want us to have faith in ourselves. Ah, greed! Natalia All mail scanned by NAV ----- Original Message ----- From: Lawrence de Bivort <[EMAIL PROTECTED]> To: 'W.-Robert Needham' <[EMAIL PROTECTED]>; <[email protected]> Sent: Sunday, October 09, 2005 8:56 AM Subject: RE: [Futurework] US Bank Money Laundering - by James Petras I think we should remember that 'laundered' money is not the problem, but it is the criminal activity that generated the money that is. The 'launderers' are banks. It is a social choice whether to say that these banks are doing something wrong. If we do make that choice we have to solve a practical problem, which is to devise means that would allow the banks to distinguish deposits from honest depositors from those being made by criminals. My own view is that banks do not have this capability; it is very hard to tell where a depositor's money comes from. I am not challenging Petras's numbers; I am challenging the automatic notion that bankers can be held responsible for the legal, political, or moral sources of the monies they accept. It would seem to me that law enforcement should focus on where the crimes occur, and not on a tertiary node in the flow of criminally-derived money. Nor should Petras's findings unnecessarily point the finger at the US; I would guess that the proportion of laundering that he finds US institutions involved in probably reflects the general proportion of invested funds world-wide. Never imagined I would be defending banks or other financial institutions! Cheers, Lawry -----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On Behalf Of W.-Robert Needham Sent: Sunday, October 09, 2005 11:44 AM To: [email protected] Subject: [Futurework] US Bank Money Laundering - by James Petras Rense.com US Bank Money Laundering - Enormous By Any Measure By James Petras Professor of Sociology, Binghamton University 9-1-2 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 exposés 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. 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 The URL of this article is: http://www.globalresearch.ca/articles/PET108A Email This Article MainPage http://www.rense.com This Site Served by TheHostPros Dr. W. Robert Needham DEPARTMENT OF ECONOMICS University of Waterloo Waterloo, Ontario, Canada, N2L 3G1 Tel: 519-888-4567 ext 3949 Fax: 519-725-0530 Home: 519-578-4143 http://economics.uwaterloo.ca/fac-needham.html ["We cannot live only for ourselves. A thousand fibers connect us with our fellow men; and among those fibers, as sympathetic threads, our actions run as causes, and they come back to us as effects." - Herman Melville] ["Fascism should be more properly called corporatism, since it is the merger of state and corporate power." Benito Mussolini] ---------------------------------------- This mail sent through www.mywaterloo.ca _______________________________________________ Futurework mailing list [email protected] http://fes.uwaterloo.ca/mailman/listinfo/futurework _______________________________________________ Futurework mailing list [email protected] http://fes.uwaterloo.ca/mailman/listinfo/futurework _______________________________________________ Futurework mailing list [email protected] http://fes.uwaterloo.ca/mailman/listinfo/futurework _______________________________________________ Futurework mailing list [email protected] http://fes.uwaterloo.ca/mailman/listinfo/futurework
