In an interesting article on Terrorism and money laundering, the old Hot Money contradiction of capitalism is exposed by Prem Sikka in the Guardian. Before the world worried about Bin-Laden Inc., the various American franchise states that got monies from the IMF and from drug running, and being clients of the CIA would ship their funds offshore, to banks in the Caribbean and Switzerland. Canadian banks have a reputation for having been early money laundering operations in the Caribbean. Today billions in hot money transeverses the globe and guess who profits?
What is interesting is that in all the debate in Canada about Income Trusts their role in money laundering was never brought up. Nor has the hot money/money laundering connection been made between mutual funds, international loans, or the infamous mutual fund IOS scandal that has become the modern model of both these.
With the advance of electronic money transfers, easy formation of companies and deregulation, money laundering has escalated to an estimated $2,500bn each year. The laissez-faire US washes about half of this laundry and Britain probably accounts for over $300bn. Secrecy is the key ingredient for this trade.Banks have technologies to trace suspicious transactions, but profits always come first. Following a US Senate inquiry, it was alleged that General Augusto Pinochet, the former Chilean dictator, used British banks to launder money. There is silence from the British authorities. Of the billions stolen by General Sani Abacha, the former Nigerian dictator, at least $1.3bn turned up in 42 accounts at 23 UK banks. The British government has refused to name these banks and warn the public about their standards. Unlike Switzerland, it has failed to return any of the loot to Nigeria.
Almost every money-laundering scam reveals the use of shell companies: firms that have virtually no assets, employees, physical presence or trade, though large sums of money pass through their bank accounts. These can be formed for a few pounds and are fronted by banks, accountants and lawyers to disguise true ownership. As with other corporate vehicles, they can be owned by foreign and domestic trusts with post-office-box addresses. A recent US treasury report noted that trusts are key vehicles for disguising illicit funds. Yet there is no regulation, registration or public accountability of trusts in the UK and it is impossible to know their beneficiaries.
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