Citations & References:"When his printing ink began to grow faint, a man called a local repair shop. The friendly salesperson who answered the phone said the printer would probably only need to be cleaned. Because the store charged fifty dollars for the cleaning, he advised the caller that he might be better oʃ reading the printer’s manual and trying to clean the machine himself.Pleasantly surprised by his candor, the caller asked, 'I don’t think your boss would like that you’re discouraging business, would he?''It’s actually my boss’s idea,' the employee admitted. 'He says we usually make more money on repairs if we let people try to fix their equipment first.'"The Moon went on, "Our biggest debts are to those who were generous enough to give us their time in talking to us (either individually or together) about corruption, money laundering, and the relationship between them.David Chaikin and J.C. Sharman tell us that the twin problems of corruption and money laundering, together have a devastating impact on national economies, international security, and human development.The World Bank and the International Monetary Fund (IMF) consider corruption the greatest obstacle to lifting millions of people out of poverty. Money laundering is vital to all profit-driven crime: the illegal trafficking of drugs, arms, and people, extortion and kidnapping, tax evasion and fraud, and especially corruption. From the spectacular collapse of the Bank of Credit and Commerce International in the early 1990s, to current controversy over the British government’s cancellation of an investigation into a corruption-tainted $86 billion arms deal, such crimes have attracted the attention of governments and the general public alike. As a result, these closely linked problems are the targets of a panoply of international policy and legal initiatives.Corruption produces enormous profits to be laundered, estimated at more than $1 trillion of illicit funds annually, funds that are increasingly laundered in the international financial system. At the same time, bribery, trading in influence, and embezzlement can compromise the working of Anti-Money Laundering (AML) systems.The term corruption covers a vast range of activities, from petty bribery to grand corruption, private sector insider trading to public sector embezzlement. In seeking to communicate the essence of the concept Transparency International initially hit upon the formula that corruption was 'the abuse of public office for private gain.' Even this expansive rendering was not broad enough, and thus to include private sector corruption this was revised to read 'the misuse of entrusted power for private gain.' A slew of international organizations including the Asian Development Bank, World Bank, and the IMF agreed in 2006 to settle on a definition of corruption as 'the offering, giving, receiving, soliciting, directly or indirectly, of anything of value to influence improperly the actions of another party.'The UNCAC (United Nations Convention against Corruption) is more specific, including all of the following activities: the active and passive bribery of domestic and foreign public officials as well as officials from international organizations; the embezzlement or diversion of public property by an official; trading in influence or illicit enrichment by a public officials; and bribery and embezzlement in the private sector (Articles 15–22). Active bribery refers to the party paying the bribe, while passive bribery is the party receiving the money. According to the various international conventions and agreements, offering and soliciting bribes count as corruption, even if the advances are rejected and no exchange takes place; it is the intention that matters. Offering kickbacks through an intermediary or to a third party related to the target is also included, as is being an accessory or accomplice. Officials that steal public property (embezzlement) or improperly favor family or friends in discharging their duties (nepotism) are engaged in corruption. Corruption generally involves monetary stakes, but does not have to. Companies and other legal persons can be held criminally liable for corruption as well as individuals; the criminal liability of parent companies for the criminal acts of subsidiaries is less clear. There is a growing consensus that corruption can also occur between two private companies, rather than always having to involve a public official.Largescale or grand corruption, involving cross-border financial transfers.Money laundering refers to the process of obscuring the illicit origins of money derived from crime. Aside from the general metaphor of taking illegal 'dirty' money and 'cleaning' it to look legitimate, the term more directly derives from the (possibly apocryphal) story of Al Capone’s strategy of using laundromats and other small businesses to disguise profits from bootlegged alcohol during the prohibition era. The term only became common in the wake of the Watergate investigations in the 1970s.Wouter H. Muller in his article Anti-Money Laundering–A Short History [in Anti Anti-Money Laundering: International Law and Practice edited by Wouter H. Muller, Christian H. Kalin, and John G. Goldsworth] desribes to us that Money laundering is probably as old as money itself. In the past, however, nobody looked at it as a crime as such. It was more the underlying crime that was looked at than what was done with the proceeds of that crime.It is a coincidence that Switzerland, by strengthening its bank secrecy laws in the early 1930s, more with the aim of helping people hide away money in fear of the Nazi regime than for other reasons, came into the view of people who wanted to hide money for all kinds of legitimate and less legitimate reasons at that time. Not that Switzerland was alone in having bank secrecy rules, but it already had for a long time a well-established name for being discreet. Tax evasion not being a crime in Switzerland at the time, money could be safely put away without too many questions being asked. Only two directors of the bank in question had to know the identity of the client. For all others it was a numbered account or an account with a certain agreed code. Putting away money, however, was one thing, but using this money in a way that it could help to make ‘business’ grow was another.It was already in the late 19th century that the ‘offshore’ world was created. New Jersey was the first to offer companies, established in that state and doing business in another state, to pay the lower New Jersey tax rate. The state of Delaware was quick to follow and is to date still one of the most important offshore centers in the world and certainly the most important within the USA.The Bahamas, next door to the USA, became an important offshore center when it was detected by the ‘gambling industry’ and international trading companies. Goods were traded from one country to another and ‘on paper’ via a Bahamian company who had to pay little or no taxes at all. When this trading business started to grow the need for offshore banks was evident. Well-known and reputable banks settled on the Bahamas to facilitate this business. Also, wealthy individuals were in a position to establish offshore trusts to safeguard their wealth for others than their designated beneficiaries.World War II, however, was the factor that initiated the big growth for the ‘financial offshore industry’. International companies like Shell and Philips moved their corporate seats to Curacao in the Netherlands Antilles to be safe from the invading Third Reich in Europe. Based on this occurrence the Netherlands Antilles adopted the Law Seat Transfer in order to accommodate companies to transfer their seats in case of threat of war. Certainly during the period of the Cold War lots of companies included these kinds of safety measures into their company articles.The ‘big boom’ for the financial offshore industry in the Netherlands Antilles started in the late 1960s a.o. with the creation of the so-called ‘Euro dollars’. Euro dollars already existed for a long time. With the implementation of the Marshall Plan after WW-II US dollars started to flow into Europe. As the USA became the biggest export market for Europe after the rebuilding of its industry, even more dollars flowed into Europe and so enormous amounts of US dollars were held in custody by non-US banks in Europe. The Soviet Union at that time also held US dollars, however in US banks, secured by Certificates of Deposit. After the invasion of Hungary in 1956, when the Cold War started to become really grim, the Soviet Union feared that the USA might freeze their US dollar deposits held in US banks. It was then that a British bank came up with the solution. The Soviets could place their US dollar deposits with the British bank and the British bank would then deposit its US dollars with a US bank. The USA could never freeze these dollars now that they no longer belonged to the Soviets but to the British bank. It is said that this transaction was the first to create the so-called ‘Euro dollars’.Back to Chaikin and Sharman, Money laundering occurs after a predicate offence has brought money into the hands of criminals. Predicate offences such as robbing a bank, selling heroin, or people trafficking are motived by criminals’ desire for profits, but may leave the offenders with the problem of reintroducing large sums of money into the legitimate financial system without arousing the suspicions of law enforcement authorities. Consider, for example, the problem of those who robbed the Northern Bank in Northern Ireland in 2004 of almost $50 million in cash. It is hardly viable to simply walk into another bank and try to deposit this sum of money. Money provides both the motive for many crimes, but also the means, in terms of working capital. By disrupting this illicit finance, AML measures aim to make the predicate offences less profitable, and thus less attractive, as well as denying criminals working capital. By countering money laundering as an offence distinct from the underlying crime it is hoped that the number of predicate offences will fall.An important new strategy in combating serious forms of international corruption is anti-money laundering (AML) regulations governing high-level political figures. The Swiss authorities were the first to recognize the connection between grand corruption and money laundering, largely as a result of their experience in dealing with the illicit assets of Philippine president Ferdinand Marcos. The U.S. Patriot Act in 2001, the Financial Action Task Force (FATF) in June 2003, the United Nations (UN) in December 2003, and the European Union (EU) in 2005 have enacted measures addressing the challenge of senior public officials to AML systems. The new international and national standards recognize that senior public officials, who are frequently called politically exposed persons (PEPs), pose a higher risk of money laundering, especially in connection with corruption. In turn, the Basel Committee on Banking Supervision has identified grand corruption as posing a significant reputational risk to banks, financial centers, and to the international banking system.Why should senior public officials be managed as part of AML obligations? It deals with the question of whether domestic senior public officials have inhibited the adoption and the effective implementation of adequate AML measures. It outlines the vulnerabilities of AML institutions to PEPs. A major challenge is that there is no single agreed-upon definition of PEPs, or even a consensus that this is the best term. Questions of terminology aside, perhaps the best-developed definition of PEPs is that contained in the EU Third Directive on Money Laundering. This definition is more precise than FATF standards, in particular its treatment of legal persons connected to PEPs by beneficial ownership or control.The FATF first examined the risks posed by senior public officials to the financial sector in 2001 when it analyzed the money laundering vulnerabilities of private banking. Senior public officials who used the private banking services of international financial institutions posed a risk because of the possibility that the source of their deposits was illicit, especially corruption.Senior public officials enjoy a special status in their country of origin because of their executive, legislative, judicial, military, and/or bureaucratic power. They are in a unique position of influence in their nation state and perhaps also diplomatically when they are acting abroad. The enactment and implementation of AML laws and systems are potentially vulnerable to PEPs because such measures may threaten the financial interests of PEPs.One unique legal problem that senior public officials present is that of legal immunities. In corruption cases, senior public officials and politicians accused of corruption will frequently object to civil and criminal jurisdictional claims on the basis that they are protected by specific privileges or immunities.According to Chaikin and Sharman, Ferdinand Edralin Marcos is a practical case study of the money laundering-corruption nexus. Marcos was able to use his position as president of the Philippines to become reputedly one of the biggest thieves in history. Current estimates are that Marcos stole at least $10 billion which grew through illicit investments to a multiple of this figure. The Marcos case displays the wide variety of forms of corruption that may occur in countries controlled by authoritarian political leaders. Corruption under the Marcos regime ranged from theft of foreign and military aid to the domestic system of crony capitalism.The scale of the grand corruption of Ferdinand Marcos, his family, relatives, and cronies necessitated an extensive use of money laundering devices. The money laundering methods used by Marcos in hiding his corrupt proceeds were so sophisticated that government officials believe that less than 10 percent of his illicit assets have been recovered. Marcos’s financial advisers in the Philippines and overseas utilized numerous mechanisms of secrecy to conceal and launder his illicit wealth through financial institutions, investments, and multilayered corporate shareholdings. Favored money laundering jurisdictions for Marcos included Switzerland and Liechtenstein.Chaikin and Sharman concludes that corruption and money laundering have increasingly come to the top of the international policy agenda (if not the symbiotic relations between them). There is no guarantee they will stay there, however. These kinds of crime undoubtedly cause massive harm at present and with all likelihood will continue to do so in the future. But this is not sufficient to ensure that they will always enjoy the prominence they do currently. There is no necessary correlation between the quantity of human suffering attributable to a given policy problem and the political priority that problem receives.The corruption-money laundering nexus imposes massive costs and exacts a staggering human price. Often the appropriate response does involve transferring new powers to governments. But a campaign fundamentally premised on the values of good governance and the rule of law must make sure that the means do not displace the ends."It's time for suhoor, and the Moon took her leave while singing,Tetapi kenyataan, hidupnya pengorbanan[But the fact is, his life is a sacrifice]Tinggal penghabisan, lamunan berlalu[All that remains, the daydream's passed]Semua kehidupan dia, berkhayal tinggal yang ada[All his life, fantasized about what's still there]Rindu sayangi sesama, hidupmu sebentar saja *)[Longing to love other, your life is only for a moment]
- Jeffrey Robinson, The Laundrymen: Inside Money Laundering - The World’s Third Largest Business, 2009, Arcade
- Varun Chandna, The Curious Case of Black Money and White Money: Exposing the Dirty Game of Money Laundering, 2017, Notion Press
- David Chaikin and J.C. Sharman, Corruption and Money Laundering: a Symbiotic Relationship, 2009, Palgrave
- Wouter H. Muller, Christian H. Kalin, and John G. Goldsworth [ed.], Anti-Money Laundering: International Law and Practice, 2007, John Wiley & Sons
*) "Damai Tapi Gersang" written by Ajie Bandi
[Part 1]
