The world of dirty money

Published on Pambazuka News, by Charles Abugre, July 21, 2011.

Charles Abugre introduces ‘the web of secrecy, collusions and the players that drive and sustain the world of illicit money flows’, with reference to the ongoing case of Kenyan public officials Chris Okemo and Samuel Gichuru and multinational corporation Alcatel-CIT.

… THE WORLD OF ILLICIT CAPITAL FLOWS – THE PERMISSIBLE CONDITIONS

I intend to draw out in greater detail the role of the key players that drive, sustain and thrive on illicit capital flows. In the concluding part I merely want to draw out briefly, some of the dynamics underpinning the world of dirty money flows.

1) POLITICIANS, BUNGA BUNGA PARTIES AND THE PEOPLE  

  • It comes down to the motivation of people in politics and their ethics. If all you care for is being rich and powerful, even when the people you are supposed to be serving languish in poverty and suffering you will identify with Papi Silvio who, when confronted with a bribery case proclaimed that ‘If I, in taking care of everyone’s interests, also take care of my own, you can’t talk about a conflict of interest.’
  • If all that matters is to manipulate political institutions and law to serve your greedy interest, then you could also do no better than Papi Silvio. Confronted by a group of ‘Clean hands’ prosecutors determined to nail him for fraud and tax evasion and unearth the hundreds of millions of dollars he stashed away in tax havens and offshore secrecy jurisdictions, Papi Silvio, responded by putting his legal team in charge of re-writing the laws, installed a number as the head of the Justice Commission, made his own personal tax lawyer the minister of economy and finance, and made his three henchmen in legal trouble parliamentarians so they would enjoy immunity.
  • Not surprisingly, parliament decriminalised the type of accounting he was accused of using to channel bribes; tax evaders suddenly had amnesty. Faced with a charge of bribing a judge, Papi Silvio had a new law passed granting immunity from prosecution to Italy’s highest ranking leaders. There is lot more juice in Vanity Fair’s ‘Dolce Viagra’ story if you are interested – including of course the story of the string of sexy babes. I am sure that Papi Silvio’s behaviour resonates with the experiences of our countries, some of which have been highlighted in the NLM article on how Kenya’s parliament was leaned upon to make laws favourable to the concealment of wealth.
  • The point is this, whether it is in poor or rich countries, integrity in public service is necessary to minimise bribery and dirty money. Institutions and rules help but individuals bear moral responsibility. So Okemo and Gichuru have personal moral responsibility that no legal argument can make good. But of course institutions help and public scrutiny is essential. We shall revert to this issue in the concluding part of this article.

2) RENT-SEEKING PRIVATE SECTOR AND ENABLING DOMESTIC ENVIRONMENT OF CORRUPTION AND DIRTY MONEY FLOWS

  • The mantra that ‘the private sector is the engine for growth’ is not true of all who operate in the private sector. There are those who making profit by adding value to goods and services, and then consume, reinvest and pay tax on these profits. These are the engine for growth and transformation. There are criminal elements in the private sector and there are those who merely become wealthy through unproductive rent-seeking activities such as speculative activities, corrupt activities, and aggressive tax avoidance behaviour. This lot are prone to colluding with equally rent-seeking politicians to break or exploit loopholes in the law. These are the ones that aggressively seek channels to conceal wealth generated from activities that are illegal or bordering on the illegal. They turn to invest heavily in mutually corrupting relationships with the biggest political actors in the country and warrant the term, ‘politically exposed persons’. These strong personally and mutually corrupting relations are necessary for dirty money to be accumulated, concealed and transferred. The Oremo and Gichiru case demonstrate this clearly. The key here is transparency in all dealings. This requires rules, but more importantly a vigilant society.

3) A GLOBAL NETWORK OF LEGALLY ACCEPTABLE BUT MORALLY REPUGNANT PROVIDERS OF SECRECY AND TAX AVOIDANCE AND EVASION SERVICES

  • Democracy is impossible without transparency and with it, accountability. To permit jurisdictions to thrive by depriving other jurisdictions of their share of wealth and revenues simply by enacting and enforcing laws designed to undermine their regulations and deny them a legitimate share of revenues is morally reprehensible. This is the reality of tax havens and secrecy jurisdictions, without which the movement of dirty money across boundaries would be severely constrained. A democratic society must not permit this. This can be defeated by collective rage of citizens, effective campaigning and simple rule changes.

4) THE BANKING, ACCOUNTANCY, LEGAL AND INTERNATIONAL FINANCE PROFESSIONS ARE DESIGNERS, THE IMPLEMENTERS, THE MAJOR BENEFICIARIES AND THE JUDGES AND JURIES OF THE SYSTEM THAT FACILITATES THE MOVEMENT OF DIRTY MONEY

  • These professions need not thrive from doing harm to the poorest people but the system is too lucrative for self-regulation. Given their influence, formal regulation is unlikely to succeed without organised citizen pressure and a strong and effective judiciary. We shall return to this.

5) A DORMANT CIVIL SOCIETY AND BLINKERED PRESS

  • Secrecy damages society. There is no doubt about that. Yet there is not enough outrage about the fact that the law in Kenya (and many other places) permits companies to register and make money without having to identify who are the persons behind them. This is the one rule in the registration of companies laws that must changed and changed urgently if the fight against corruption to be meaningful. The media should be screaming ‘murder’ if they are interested in democracy and they should look beyond the reprehensible behaviour of individual politicians and public servants to the system that perpetuates the harbouring and movement of dirty money or clean money illicitly.
  • Whilst this first part has concentrated on technicalities, we need to keep in mind the implications of the illicit money. It thrives on inequality and perpetuates inequality; it enriches a few and keeps the majority in desperate poverty and without jobs; IT KILLS.

(full long, long text).

  • (* Charles Abugre is the regional director for Africa, United Nations Millennium Campaign.
  • * This article first appeared on Charles Abugre’s blog, Righting tomorrow, where he writes about himself:
  • I am a Ghanaian development economist, who has been active in international development for over 20 years; as a researcher and lecturer, as an NGO activist and development professional in several parts of the world. Working with others, I co-founded several development organisations around the world, including the Third World Network, ISODEC and the Centre for Public Interest Law in Ghana. I currently head the United Nations Millennium Campaign in Africa).

Links:

UN’s MDGs worldwide;

Charles Abugre on The Guardian about Enforcing aid promises – and on End Poverty 2015 about MDGs.

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