by Juan Gabriel Tokatlián in Buenos Aires*
12-03-2009
Argentinian professor Juan Gabriel Tokatlián claims that banks not only profit from illegal drug money, it actually enables them to survive the financial crisis. The UN Commission on Narcotic Drugs is meeting in Vienna this weekend to discuss the war on drugs and Professor Tokatlián wants this illegal economy to get more attention.
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The UN Office on Drugs and Crime recently revealed something which was hardly reported at all: there are indications that some banks are surviving the financial crisis thanks to 'inter-bank loans'. Without naming any banks or countries, the UNODC states that profits from drug trafficking and other illegal activities help the ailing financial system to keep going. Does that seem feasible? I'm afraid so.
Laundering
According to a report from the US State Department published in 2008, between 2.1 and 3.6 trillion dollars of illegal money is laundered every year. That's between 3 and 5 percent of the Gross World Product. Democratic Party Senator Carl Levin says documents and witness testimony given during hearings indicate that half of that money can be found in the United States.
Hard figures can be found in a National Money Laundering Strategy report from 2008: the US Drug Enforcement Administration confiscated 396 million dollars in the preceding year. The same report says white-collar criminals (often respected businessmen from upper class backgrounds) are responsible for most of the laundering.
The FBI confirms that money laundering activities are far less prevalent in organised crime and drug trafficking circles. However, that still involves enormous sums of money. In 2007 a Chinese Mexican was arrested in the United States in possession of eighty million dollars.
Although the monitoring of money laundering from drug trafficking and other illegal activities is becoming increasing international and more intensive, the results are extremely poor. The results are also disappointing in the Caribbean and Latin America. The islands of the Caribbean, which are under heavy pressure from the United States and Europe, have adopted tougher policies. In Latin America too various countries have introduced more stringent norms to combat money laundering.
The results are not inspiring. Evaluation of the reports submitted to the inter-governmental organisation combating money laundering in Latin America, Grupo de Accion Financiera de Sudamerica (GAFISUD), shows that numbers of confiscations, arrests and convictions are very low, with the exception of Colombia.
Mafia bosses
The fight against drug trafficking does not mean that no negotiation takes place with the major mafia bosses. Three years ago the US authorities made a deal with a family which heads a drugs cartel. In autumn 2006, twenty-nine members of the family signed the agreement with the Justice Department: they confessed, were sentenced to 30 years in prison and paid more than two billion dollars. In exchange, Washington promised to leave the rest of the family in peace.
It's remarkable that the United States and the rest of the world still continue to insist on a ban on drugs. This policy has clearly failed, users have been stigmatised, weak states have been further destabilised and national and international mafias have grown stronger. Moreover, it contributes to the maintenance of an illegal economy from which those in power and the unscrupulous continue to profit.
* RNW translation (imm)
Juan Gabriel Tokatlián is a regular columnist for the Latin-American section of Radio Netherlands Worldwide. He is professor of International Relations at the University of San Andrés in Buenos Aires.
Tags:
banks,
drugs,
money laundering,
narcotics
Steven,
02-04-2009
-
Read Alfred McCoy's "The Politics of Heroin," Gary Webb's "Dark Alliance" or watch this 1997 lecture
http://video.google.com/videoplay?docid=-7009998324250484369&hl=en
Jan ,
18-03-2009
- canada
"Organized crime" are the governments that are currently running the planet.
Steve,
16-03-2009
- USA
Olivia, I realize this is an oversimplification, but only a select few people in the US actually get rich of the drug trade. Obviously fighting it employs people, but it is paid for with public dollars. The point I was trying to make (maybe I didn't make it clearly) was that in the US only a select few make enormous sums of money off the drug trade, while public tax dollars are used to fight it. People are dieing by the hundreds on the Mexican side of the border (and some in the US) and a police chief there was just decapitated. I think if we had a drug policy that more closely resembled the Dutch policy we would have much less death related to this. Also because it would be a legal business, the wealth generated by the industry would then be open to anyone who wanted to take advantage of it. Right now the "war" on drugs is like the war in Iraq, many people are dieing and it is costing taxpayers billions for no real gains. Most taxpayers never see a dime of drug profits yet they are paying billions to fight it. There could be a better way.
Olivia,
16-03-2009
- USA
Steve...LOL, who do you think you're kidding?? Your attempt to explain resulted in an unworthy description. Such a biased patriot...
David Berridge,
14-03-2009
- Canada
The laundering process of drug money through the banking system is only the initial part of the process. Once injected (no pun intended) into the mainstream economy, these funds becom institutionalized, filling the vaccum left by the current financial crisis. As reported in an article so time ago by RNW, a review of the book "McMafia", claimed that oranized crime now controls 15 to 20 per cent of the global economy. This is more dangerous than if the laundered money had just "disappeared' from the radar of legitimate industry, trade, and commerce.
Steve,
13-03-2009
- USA
Vera, actually the US spends $2.5 Billion of public money annually just on the DEA. That does not include the local law enforcement costs, the court costs, and the prison costs. Most of the economies that benefit are from South or Central America. Columbia's top export is now cocaine not coffee. Mexico and other South/Central American countries have huge USD inflows because of the illegal drug trade, the US has a huge OUTFLOW. We import much more goods (incl drugs) from South/Central American countries than we export too them, tipping the balance of trade in their favor. Why do you think we get almost no cooperation with these countries concerning drug production? Because it is such a huge portion of their GDP they are in no hurry to curb drug production. Please do not discuss things you know nothing about. Also, last I checked, Europeans are pretty hearty users of drugs as well.
Vera Gottlieb,
12-03-2009
- Germany
This has been known for quite some time already. It is also known that this illicit drug money is part of the US economy.
Steve,
12-03-2009
- Chicago, USA
This "war on drugs" is clearly a failure. Look at the NL. The most common drug, marijuana is legal, but the Dutch parliament is trying to slowly ban it. If they succeed I am going to invest in a company that makes body bags. In 2008 Chicago had over 500 murders, most of which were gang/drug related. Court costs, jail costs, law enforcement costs all go up exponentially compared with the amount of banned substances in a country. Some things should be illegal, such as meth and heroin, but the punishment should not be jail time as this does nothing to correct the problem. If countries made certain drugs legal it would promote purity restrictions and also would cut off the main source of funding to drug cartels in the Middle East, Mexico, and Latin America. Our governments would save countless dollars, euros, etc. in enforcement and corrections costs, and it would create a huge source of taxable revenue. Overall everyone would be better off including recreational users.
