DRUGS: Globalisation Aids Money Laundering, Warns U.N.

By Thalif Deen Reprint | | Print |

Thalif Deen

UNITED NATIONS, May 12 1998 (IPS) - The United Nations says the laundering of drug money – one of the world’s most insidious businesses – is being made relatively easy these days by the growing globalisation of the marketplace.

The U.N. Drug Control Programme (UNDCP) points out that trade liberalisation and free trade zones are now providing additional venues for money laundering by drug cartels.

According to UNDCP, organised crime syndicates are taking advantage of globalisation – open borders, offshore banking centres, privatisation and electronic financial transfers – to launder millions of dollars in drug profits every day.

“International wire transfers number about 70,000 a day, at the end of which some two trillion dollars has criss-crossed the globe,” the IDCP said, in a background paper released here in advance of a U.N. Special Session on the World Drug Problem.

Scheduled for June 8-10, the Special Session of the 185-member General Assembly is expected to come up with a global action plan against drug trafficking and money laundering.

The UNDCP has estimated that illegal drug trade generates more than 400 billion dollars in retail sales every year, nearly double the revenue of the global pharmaceutical industry or about 10 times the sum of all official development assistance (ODA). The International Monetary Fund (IMF) has estimated that about 2.0 percent of the global economy involves drug trafficking.

In another angle to trade liberalisation currently underway, the chairman of the 132-member Group of 77 developing countries said last week that the growing trend towards globalisation is marginalising developing countries from the mainstream of the world economy.

Ambassador Makarim Wibisono of Indonesia said most of the developing world is only marginally benefiting from globalisation because the poorer nations of Africa are not attracting enough investments despite the removal of trade barriers, privatisation of state sectors and incentives to foreign investors.

The UNDCP points out that the deregulation of the banking system and the privatisation of state-owned enterprises have, in fact, facilitated the laundering of drug profits in the former states of the Soviet Union.

Testifying before a U.S. Congressional Committee in 1996, an expert on Russian affairs said that privatised property in the former Soviet republics is being bought up by foreign and domestic criminal organisations to launder and hide illegal profits. “Mobsters launder their ill-gotten gains by investing in gambling, luxury car dealerships in European cities like Budapest, and banks, marinas and resorts in the Caribbean basin.”

Professor John Zdanowicz, of the Florida International University, says that drug cartels are increasingly using international trade – instead of the banking system – to launder money.

A study of U.S. trade data has revealed that since 1992 there has been an increase in phony trade invoices listing razor blades at 30 dollars a piece, telephones at 2,400 dollars each and a bottle of salad oil for 720 dollars.

The UNDCP says that the existence of offshore banks in tax and secrecy havens has permitted drug traffickers to develop complex international networks. The IMF has identified at least seven “major offshore centres”: the Bahamas, Bahrain, the Cayman Islands, Hong Kong, the Netherlands Antilles, Panama and Singapore.

Other smaller offshore centres include Dublin, Cyprus, Madeira, Malta, Malaysia’s Labaun Island, and Thailand’s Bangkok International Banking Facility. According to UNDCP, about 40 countries are now considered secrecy and tax havens.

“There is a constant effort to get the tax havens and offshore centres to tighten up on money laundering,” notes Tom Brown of Interpol. “Our goal is not to shut them down because they are legal and they have a legitimate purpose. Our goal is to put some controls in place so you can regulate them…”

Since 1997, the U.N. Office for Drug Control and Crime Prevention in Vienna has been funding a Global Programme Against Money Laundering. This Programme provides governments with legal advise and assistance in drafting legislation to counter money laundering. In its first year of operation, the Programme provided assistance to 20 countries and also initiated a global database on national money laundering legislation.

Pino Arlacchi of Italy, head of UNDCP, says the Special Session is also intended to increase international cooperation to combat money laundering.

“We are proposing a bold initiative for the abolition of bank secrecy worldwide for the every investigation on organised crime, not just narcotics,” says Arlacchi. “The Special Session should be a turning point for the world to go forward with renewed energy on drug control.”

There are many reasons for optimism, contends Arlacchi, primarily because of a “politically more cooperative international climate” – devoid of East-West and North-South ideological divides.

Arlacchi says the global drug trade also is facing new obstacles: sophisticated technology such as satellite monitoring systems and the accumulated knowledge of the international community in drug control activities.