The article below, about money laundering, is taken from
the latest issue of Free Life, the journal that I edit.
If you like it and want to read more, send a $5
dollar bill to the Editorial address at the bottom
of this text. If you want to read lots more, send me
$20 for a four issue subscription.
Comments always welcome!
Sean Gabb
Editor
Free Life
London
25th July 1995
A R T I C L E B E G I N S
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International Efforts to Combat Money Laundering
William C. Gilmore (ed.)
Grotius Publications Limited, Cambridge, 1992, 335pp, 48 (pbk)
(ISBN 0 521 46305 X)
Money Laundering: A Practical Guide to the New Legislation
Rowan Bosworth-Davies and Graham Saltmarsh
Chapman & Hall, London, 1994, xii and 304pp, 49.50 (hbk)
(ISBN 0 412 57530 2)
The first of these books is a collection of treaties, plus other
documents, concerned with the international fight against money
laundering. The second explains how these treaties have been enacted
into, and are enforced under, the laws of the United Kingdom. Both
works will repay the closest study. In clear detail, they show the
growth of what must be called a New World Order, and how, without
some interposing cause, this may produce a universal slide into
despotism.
The fight against money laundering begins with realising that the
"War on Drugs" has been lost. When goods are portable and easily
concealed, and when demand for them is strong enough to bear almost
any cost of bringing them to market, the main effect of prohibition will
be to put a bounty on crime. For all the efforts of the past three
generations, illegal drugs are available in most high security prisons.
In much of the West, street prices have been stable or even falling
since 1980.
The official response, however, has not been to give in and legalise the
trade, but to expand the War to a front where previously there had
been few hostilities. While keeping up their efforts against the trade
itself, the authorities have turned increasingly to confiscating its
proceeds. This new approach has three alleged benefits:
First, it will deprive criminals of their incentive to enter and remain
in the trade;
Second, it will allow the punishing of those in charge of the trade -
people who never touch or see illegal drugs, but to whom the main
profits ultimately flow;
Third, it can make the War on Drugs self-supporting, and perhaps
yield a surplus for other public spending.
There is, however, one practical difficulty. Before the authorities can
confiscate the money, they must find it. To do this, they must keep it
from being merged beyond recall into the general flow of investment.
This involves ending bank secrecy and imposing a mass of financial
regulation. Now, most people - especially the rich - dislike having
their lives pried into. Nor do banks like higher costs and limitations
on what business they can do. And so, given the present freedom of
capital markets, no government acting alone can afford a strict policy
of confiscation. It would, sooner or later, cause a flight of transactions
to more liberal places.
The solution has been to try making everywhere in the world equally
illiberal. Such was the purpose of the United Nations Convention
Against Illicit Traffic in Narcotic Drugs and Narcotic Substances,
signed in Vienna in December 1988 [full text in Gilmore, pp.75-97].
This is one of the most important international treaties of the past 50
years. It not merely requires its signatory states to criminalise the
laundering of drug money, and to confiscate it where found, but lays
down so far as possible a common wording for the criminal statutes,
and a common mode of enforcement. It also requires full and prompt
cooperation between the signatory states for the enforcement of these
laws anywhere in the world.
The Convention had little direct or immediate effect on British law.
Many of its requirements, indeed, had already been met in the Drug
Trafficking Offences Act 1986. Most others were only met in the
Criminal Justice Act 1993, which enacts the European Community
Directive of 1991 on the Prevention of the Use of the Financial System
for the Purpose of Money Laundering [full text in Gilmore, pp.250-67].
This itself derives from the Vienna Convention only through the
Council of Europe Convention on Laundering, Search, Seizure and
Confiscation of the Proceeds from Crime 1990 [full text in Gilmore,
pp.177-91]. Even so, this country is fast becoming a financial police
state of the kind agreed at Vienna - and where the process cannot be
traced to the Convention, it can be traced to the same international
pressures of which the Convention is itself a result.
Let me explain. When I talk about a New World Order, I do not mean
some grand conspiracy of bankers, or Jews, or Illuminati, or even -
with far more probability - the American Government. There are
countries where policy is largely dictated from outside. But for rich
and powerful countries, the truth is more complex. Most international
obligations imposed on this country, for example, were not only
consented to by our rulers, but were usually proposed by them, and
are enforced by agencies in which our own countrymen often occupy
senior positions.
Where others see conspiracies, I see public choice economics.
Whenever a government tries to do something dangerous or
unnecessary, like banning drugs or educating the poor, it must set up
an agency through which to spend the allocated funds. Once
employed, the agents will - as if directed by an invisible hand - start
to find more and more justifications for expanding their status and
numbers. They collect the statistics. They know which ones to
publish and which to hold back. They are the politicians' first and
favoured source of advice. They have their pet journalists. They trade
favours with the relevant interest groups. They know exactly how to
give themselves a pleasing life, and how to see off threats to it.
Unless the money runs out, or the public turns really nasty, they can
write their own budget cheques.
By natural extension, the same is now happening at the international
level - though with potentially far worse consequences. In the first
place, there is limitless money: budgets would need to swell
unimaginably large to reach even one per cent of gross planetary
product. In the second, public anger seldom crosses borders; and, if all
else fails, the politicians and bureaucrats in one country can shelter
behind the excuse of treaty obligations that cannot be unilaterally be
cast off - not, at least, without consequences more horrible than words
exist to describe. Third, the enforcement of international treaties
means the growth of what is in effect an international bureaucracy.
The local enforcers of a treaty may be citizens of the signatory states,
who will live and work in their home countries, and may even occupy
positions in the domestic administration. Yet these are people who,
by virtue of the agreements they enforce, and the contacts they make
and maintain in other countries, are members of an international
order. And, in at least the case of money laundering, they will share
an agenda that is often deeply hostile to their native institutions.
This can be seen - expressed with almost naive honesty - in the book
by Messrs Bosworth-Davies and Saltmarsh. Both are British police
officers: the latter is a departmental head at the National Criminal
Intelligence Service. Both take it for granted that the world needs an
international police force. Both are unable to believe that anyone can
disinterestedly object to the necessary harmonisations of law, and the
corresponding abolition of Common Law protections. They "know one
senior clearing banker who has described this [money laundering]
legislation as the nearest thing he has experienced to
'McCarthyism'...".[p.172] Of course, they see things differently. The
legislation
discloses, on mature reflection, a set of carefully structured
laws which, with good will, due diligence and a modicum of
responsible attention from the industry as a whole, should
not prove too burdensome. Indeed, the authors believe that
some of the regulatory requirements have been diluted too
much already, in a misguided attempt to placate the
sensibilities of certain sectors of the industry....[Ibid.]
With people like this advising the politicians and lecturing the rest of
us, little wonder the Drug Trafficking Offences Act predates the
Vienna Convention by two years! Though they will hotly disagree -
and even perhaps consider a libel writ - Messrs Bosworth-Davies and
Saltmarsh cannot be regarded as our countrymen. More at home in
a gathering of Bulgarian or Filipino police chiefs than with any of us,
they are foreigners with British passports.
Somewhat less honest, though still interesting, is the Explanatory
Report of the Committee of Experts who drafted the Council of Europe
Convention [full text in Gilmore, pp.192-237]. Though formally
subordinate to a committee of the various European Ministers of
Justice, these experts plainly saw their first duty as lying elsewhere.
Call it "the international community" or their own order, their duty
was collective and not to any single country.
Look at their dislike of the narrow focus of the Vienna Convention.
They wanted something that would also allow confiscation for
terrorist offences, organised crime, violent crimes, offences
involving the sexual exploitation of children and young
persons, extortion, kidnapping, environmental offences,
economic fraud, insider trading and other serious offences.
[Gilmore, p.204]
But they had to concede that not every European country might like
its own laws against these acts to be written by an international
committee. And so they allowed each signatory state to reserve
whatever of these acts to its own legislative process.
The experts agreed, however, that such states should
review their legislation periodically and expand the
applicability of confiscation measures, in order to be able
to restrict the reservations subsequently as much as
possible. [Ibid.]
And this is only the beginning. As yet, the shape of world government
exists barely in outline. But the tendency ought to be plain. Power
is moving from national - and mostly democratic - governments to
unaccountable and even invisible bureaucracies. Liberal institutions
that are often the work of ages are being hammered into the
transmitters of unlimited power. We are beginning to known how
people in the Greek city states felt after absorption into the Roman
Empire.
When the American militiamen cry out that the United Nations is
about to invade in black helicopters and plant microcomputers in their
bottoms, I am at least sceptical. This is not the New World Order that
I see. What I do see is actually worse. We can shoot the helicopters
down, and dig out the microcomputers, and put the ringleaders on
trial. We can go about playing the hero of our choice from Star Wars.
But in the real world, there is no Death Star to blow up - no Darth
Vadar to push into the void. There is just a huge, elastic network of
people, all acting in what they believe is the public good, most with
some degree of public support.
How this kind of despotism can be resisted is another question, and I
have said enough already. But I will repeat - the books here reviewed
do repay a very close study. At the very least, it is useful to see the
enemy's future plan laid out in such detail.
Sean Gabb
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