The color of money shouldn’t be blood red

By Yury Fedotov
December 18, 2012

HSBC’s $1.92 billion payment to U.S. authorities to avoid prosecution for money-laundering practices, including transferring funds for Mexican drug cartels, raises serious questions about the flow of narco-cash in the international banking system. The time has come to tackle the culture of impunity that allows these illegal transactions.

The illicit drug trade remains international organized crime syndicates’ most lucrative source of income. Drug traffickers may be laundering up to 70 percent of the estimated $320 billion they make from illicit drugs annually, according to United Nations Office of Drugs and Crime (UNODC). Yet officials have been able to seize less than 1 percent of this.

In Central America, for example, we have all seen the effects of crime and drug trafficking. When criminals fight, it is innocent bystanders who often die. The homicide rate in El Salvador is 69 killings per 100,000 citizens; in Guatemala it is 39 per 100,000; and in Honduras it is 92 per 100,000. By contrast, in Great Britain, the homicide rate is roughly 1.2 per 100,000.

Shutting down the cartels’ cash flow could deal a significant blow to their operations and help rein in their lethal power. In 2010, UNODC put the value of the U.S. cocaine market at around $33 billion, closely followed by the European market at $31 billion.

But our efforts will come to nothing if implementation is ineffective, compliance is inadequate and vigilance poor. When legal and institutional weaknesses are exploited, effective regulation is crucial. Without this, sophisticated criminals can always find ways to push dirty money into the legitimate financial system.

Some governments, such as Switzerland, have made great strides in addressing money -laundering and corruption through improved regulatory frameworks. But these regulations are only as strong as the compliance mechanisms at financial institutions, which are crucial in implementing them.

There has been progress. In some countries, including the United States, bank secrecy laws have effectively been scrapped and are no longer obstacles to money-laundering investigations. More financial companies are establishing ethics and compliance programs to build an accountable workforce that has the knowledge and tools to serve as a bulwark against illicit money.

But more needs to be done.

It would help to create a regulatory environment in which breaches are systematically punished. However, the tone must be set at the top. The commitment to deal with institutional failings and strengthen corporate social responsibility must begin with boards of directors and chief executive officers.

A shift in culture cannot happen soon enough. It requires leadership and determination. UNODC can help.

My office is engaged with top international banks in our common fight against money laundering and corruption. They need to adopt policies in line with the United Nations Convention against Corruption, and create checks and balances that reduce the opportunities for wrongdoing. The international legal instruments provide a common framework for cooperation. Let us use it.

Through the Stolen Asset Recovery Initiative of the World Bank and UNODC, we are helping governments confront criminals who launder the proceeds of crime through the international financial system. These are challenges that no country or region should face alone.

With the public’s attention focused on the financial system, regulators and policymakers are eager to improve its robustness and integrity. In this climate, we need to make bankers aware of their obligations to support national and international efforts to combat organized crime, drug trafficking and corruption.

Transparent practices make good business sense. They build credibility and promote investor confidence. But far more is at stake than balance sheets. The laundered drug money is tainting the reputations of leading financial institutions.

Do banks really wish to help the drug kingpins who deal in death and destruction across continents? This moral argument should not be ignored.

We need to remind all bankers that whatever the color of money, it should not be stained red.

PHOTO: An HSBC bank branch in midtown Manhattan in New York City, December 11, 2012. REUTERS/Mike Segar

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I quite appreciate all efforts put in by this author in providing these crucial highlights that touch directly to the fabrics of the evolving international criminal justice system. I have once researched on a similar topic during my Masters Degree programme at the University of East London. In particular, my dissertation topic reads: A CRITICAL ASSESSMENT ON THE PROSPECTS OF TACKLING ORGANISED CRIMES THROUGH ANTI-MONEY LAUNDERING MECHANISMS.

The above exercise really enriched my knowledge, and at the same time deeply exposed me to the root causes of the increasing incidence of organised crimes in our societies, the lapses in the international mechanisms for combating organised crimes and most importantly the possible solutions for addressing the menace.

I am passionately optimistic concerning my ability to contribute bountifully in this field; hencen my current efforts in hunting for job with an NGO or an international agency working for the promotion of global peace and security, justice and development.

I will therefore appreciate any contact that may possibly be of help to me, including an opportunity for volunteer. MY CONTACT: nnadyke2011@yahoo.com, residence in London but can and willing to work any where around the globe.

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