KARACHI, April 24: President Pervez Musharraf has called for international legislation to help the looted wealth of developing countries slashed away in the banks of the world by corrupt leaders, politicians and businessmen.
Money laundering allows the corrupt and the criminals to hide and legitimize proceeds from illegal activities through multiple banking transactions, relying on existing financial systems and operations.
US officials say that laundered money is not only a problem in the world's major financial markets but also emerging markets. Indeed, any country integrated into the international financial system is at risk.
In early 2001, the worldwide money laundering was estimated at $1 trillion a year by the US Department of State. Over decades, according to one estimate, Pakistanis have accumulated amounts in bank deposits/assets equivalent to about the current size of the GDP placed at $70-75 billion.
The share of Pakistanis in money laundering activity is nominal compared to global volumes as the country's total informal and formal foreign trade and remittances is less than $30 billion and does not offer sizeable opportunity for money laundering. Trillions of dollars in money laundering business is handled by giant foreign banks. Local banks do not have global reach. And after 9/11, some of the tainted money is coming back home to stimulate economic activity.
Generally, capital from developing countries flows towards the major financial centres located in Europe and the United States. President Musharraf says: "Western banks are flourishing with the money looted from developing countries. Give billions of dollars back to us. No one should be allowed to take billions of dollars away. This is biggest source of corruption."
Over 90 per cent of the global daily currency transaction of $1.5-2 trillion is speculating trading. Foreign exchange liberalization helps banks to make enormous money through speculation. Before 9/11, the then US Treasury secretary did not feel the need for anti-money laundering legislation which he said publicly was not justified because of $700 million cost involved at that point of time. The legislation was being opposed by leading American banks.
After 9/11, the situation changed. Even donations for Islamic charity came to be seen as dirty money for terrorists. One of the leading foreign banks was closely involved in anti-money laundering exercise both in the United States and Pakistan.
A staff study of the US Senate says that "US correspondent banking provides a significant gateway for rogue foreign banks and their criminal clients to carry on money laundering." The regime change in "rogue states" helps the United States open up markets for it's goods and service. The classification of "rogue banks" helps contain expansion of alien banks. In fact Pakistani banks are not allowed to open branches in Europe, the United States and Canada.
In specific cases, banks from developing states are treated differently from those of the developed world. In a money laundering case in Paris, the Central bank of France advised the National Bank of Pakistan to remove the general manager of its Paris branch even before the formal official investigations started.
Sources say that French regulators alleged that the manager was not competent because he did not know French language/banking culture and the 20-member staff was loosely managed for "know your customer." The key advice was that a French national should be appointed.
The fault of the new general manager, who had just then taken over, was to go for aggressive deposit mobilization. Six to eight accounts were opened and closed within a short span of time. The amounts involved were nominal compared to enormous dirty money deposited in leading American and French banks whose chairmen and managing directors were also charged with anti-money laundering activity. None of them were removed from their positions.
