"Dirty Money" Foundation of US Growth and Empire - Size and Scope of Money Laundering by US Banks From La Journada [Mexico], 5/19/01, [Reprinted with permission, James Petras]
—
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.
"This Goes Straight to the Top"
— 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
Millennium.
Operation
Indigo Sky - Massive CIA heroin smuggling operation based in Lagos, Nigeria.
Heroin is grown and processed in Nigeria, then shipped for packaging to
Amsterdam, Netherlands. From there the heroin is shipped to Europe and
various points in the U.S., including bonded warehouses on the East Coast
and Boeing Field in Seattle.