By Roberto Saviano: Rome. The global financial crisis has been a blessing for organized crime. A
series of recent scandals have exposed the connection between some of
the biggest global banks and the seamy underworld of mobsters,
smugglers, drug traffickers and arms dealers. American banks have
profited from money laundering by Latin American drug cartels, while the
European debt crisis has strengthened the grip of the loan sharks and
speculators who control the vast underground economies in countries like
Spain and Greece.
Mutually beneficial relationships between bankers and gangsters aren’t
new, but what’s remarkable is their reach at the highest levels of
global finance. In 2010, Wachovia admitted
that it had essentially helped finance the murderous drug war in Mexico
by failing to identify and stop illicit transactions. The bank, which
was acquired by Wells Fargo during the financial crisis, agreed to pay
$160 million in fines and penalties for tolerating the laundering, which
occurred between 2004 and 2007.
Last month, Senate investigators found
that HSBC had for a decade improperly facilitated transactions by
Mexican drug traffickers, Saudi financiers with ties to Al Qaeda and
Iranian bankers trying to circumvent United States sanctions. The bank
set aside $700 million to cover fines, settlements and other expenses
related to the inquiry, and its chief of compliance resigned.
ABN Amro, Barclays, Credit Suisse, Lloyds and ING have reached expensive settlements
with regulators after admitting to executing the transactions of
clients in disreputable countries
like Cuba, Iran, Libya, Myanmar and
Sudan. (A: WTF? Don't know enough about Myanmar and
Sudan but Cuba and Iran are free compared to the UK and Libya, well we f*@ked that up on a recent pillage, no?)
Many of the illicit transactions preceded the 2008 crisis, but
continuing turmoil in the banking industry created an opening for
organized crime groups, enabling them to enrich themselves and grow in
strength. In 2009, Antonio Maria Costa, an Italian economist who then
led the United Nations Office on Drugs and Crime, told
the British newspaper The Observer that “in many instances, the money
from drugs was the only liquid investment capital” available to some
banks at the height of the crisis. “Interbank loans were funded by money
that originated from the drugs trade and other illegal activities,” he
said. “There were signs that some banks were rescued that way.” The
United Nations estimated that $1.6 trillion was laundered globally in
2009, of which about $580 billion was related to drug trafficking and
other forms of organized crime.
A study last year by the Colombian economists Alejandro Gaviria and Daniel Mejía concluded
that the vast majority of profits from drug trafficking in Colombia
were reaped by criminal syndicates in rich countries and laundered by
banks in global financial centers like New York and London. They found
that bank secrecy and privacy laws in Western countries often impeded
transparency and made it easier for criminals to launder their money.
At a Congressional hearing
in February, Jennifer Shasky Calvery, a Justice Department official in
charge of monitoring money laundering, said that “banks in the U.S. are
used to funnel massive amounts of illicit funds.” The laundering, she
explained, typically occurs in three stages. First, illicit funds are
directly deposited in banks or deposited after being smuggled out of the
United States and then back in. Then comes “layering,” the process of
separating criminal profits from their origin. Finally comes
“integration,” the use of seemingly legitimate transactions to hide
ill-gotten gains. Unfortunately, investigators too often focus on the
cultivation, production and trafficking of narcotics while missing the
bigger, more sophisticated financial activities of crime rings.
Mob financing via banks has ebbed and flowed over the years. In the late
1970s and early 1980s organized crime, which had previously dealt
mainly in cash, started working its way into the banking system. This
led authorities in Europe and America to take measures to slow
international money laundering, prompting a temporary return to cash.
Then the flow reversed again, partly because of the fall of the Soviet
Union and the ensuing Russian financial crisis. As early as the
mid-1980s, the K.G.B., with help from the Russian mafia, had started
hiding Communist Party assets abroad, as the journalist Robert I.
Friedman has documented. Perhaps $600 billion had left Russia by the
mid-1990s, contributing to the country’s impoverishment. Russian mafia
leaders also took advantage of post-Soviet privatization to buy up state
property. Then, in 1998, the ruble sharply depreciated, prompting a
default on Russia’s public debt.
Although the United States cracked down on terrorist financing after the
9/11 attacks, instability in the financial system, like the Argentine
debt default in 2001, continued to give banks an incentive to look the
other way. My reporting on the ’Ndrangheta, the powerful criminal
syndicate based in Southern Italy, found that much of the money
laundering over the last decade simply shifted from America to Europe.
The European debt crisis, now three years old, has further emboldened
the mob.
IN Greece, as conventional bank lending has gotten tighter, more and
more Greeks are relying on usurers. A variety of sources told Reuters
last year that the illegal lending business in Greece involved between 5
billion and 10 billion euros each year. The loan-shark business has
perhaps quadrupled since 2009 — some of the extortionists charge
annualized interest rates starting at 60 percent. In Thessaloniki, the
second largest city, the police broke up a criminal ring that was
lending money at a weekly interest rate of 5 percent to 15 percent, with
punishments for whoever didn’t pay up. According to the Greek Ministry
of Finance, much of the illegal loan activity in Greece is connected to
gangs from the Balkans and Eastern Europe.
Organized crime also dominates the black market for oil in Greece;
perhaps three billion euros (about $3.8 billion) a year of contraband
fuel courses through the country. Shipping is Greece’s premier industry,
and the price of shipping fuel is set by law at one-third the price of
fuel for cars and homes. So traffickers turn shipping fuel into more
expensive home and automobile fuel. It is estimated that 20 percent of
the gasoline sold in Greece is from the black market. The trafficking
not only results in higher prices but also deprives the government of
desperately needed revenue.
Greece’s political system is a “parliamentary mafiocracy,” the political expert Panos Kostakos told the energy news agency Oilprice.com
earlier this year. “Greece has one of the largest black markets in
Europe and the highest corruption levels in Europe,” he said. “There is a
sovereign debt that does not mirror the real wealth of the average
Greek family. What more evidence do we need to conclude that this is
Greek mafia?”
Spain’s crisis, like Greece’s, was prefaced by years of mafia power and
money and a lack of effectively enforced rules and regulations. At the
moment, Spain is colonized by local criminal groups as well as by
Italian, Russian, Colombian and Mexican organizations. Historically,
Spain has been a shelter for Italian fugitives, although the situation
changed with the enforcement of pan-European arrest warrants. Spanish
anti-mafia laws have also improved, but the country continues to offer
laundering opportunities, which only increased with the current economic
crisis in Europe.
The Spanish real estate boom, which lasted from 1997 to 2007, was a
godsend for criminal organizations, which invested dirty money in
Iberian construction. Then, when home sales slowed and the building
bubble burst, the mafia profited again — by buying up at bargain prices
houses that people put on the market or that otherwise would have gone
unsold.
In 2006, Spain’s central bank investigated the vast number of 500-euro
bills in circulation. Criminal organizations favor these notes because
they don’t take up much room; a 45-centimeter safe deposit box can fit
up to 10 million euros. In 2010, British currency exchange offices
stopped accepting 500-euro bills after discovering that 90 percent of
transactions involving them were connected to criminal activities. Yet
500-euro bills still account for 70 percent of the value of all bank
notes in Spain.
And in Italy, the mafia can still count on 65 billion euros (about $82
billion) in liquid capital every year. Criminal organizations siphon 100
billion euros from the legal economy, a sum equivalent to 7 percent of
G.D.P. — money that ends up in the hands of Mafiosi instead of
sustaining the government or law-abiding Italians. “We will defeat the
mafia by 2013,” Silvio Berlusconi, then the prime minister, declared in
2009. It was one of many unfulfilled promises. Mario Monti, the current
prime minister, has stated that Italy’s dire financial situation is
above all a consequence of tax evasion. He has said that even more
drastic measures are needed to combat the underground economy generated
by the mafia, which is destroying the legal economy.
Today’s mafias are global organizations. They operate everywhere, speak
multiple languages, form overseas alliances and joint ventures, and make
investments just like any other multinational company. You can’t take
on multinational giants locally. Every country needs to do its part, for
no country is immune. Organized crime must be hit in its economic
engine, which all too often remains untouched because liquid capital is
harder to trace and because in times of crisis, many, including the
world’s major banks, find it too tempting to resist.
Roberto Saviano is a journalist
and the author of the book “Gomorrah.” He has lived under police
protection since 2006, when he received death threats from organized
crime figures in Italy. This essay was translated by Virginia Jewiss
from the Italian. Source
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