Free Life Commentary,
an independent journal of comment published on the Internet
Issue Number 3
29th September 1997
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 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 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….[ I b i d.]
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. [ I b i d.]
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.
© 1997 – 2018, seangabb.
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