- 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
- 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
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