Friday, May 31, 2013

The Bonfire of the Regulations - Why the Financial Services Act 1986 failed to control the City.

I have said repeatedly that the City of London is an organised criminal enterprise that owes no allegiances to anyone but itself.

I have made that assertion by applying the accepted definitions of organised crime to the way in which business is conducted within the Square Mile, and by extrapolating from the outcomes.
This blog is the first in a short series of articles looking at the history of the regulation of the financial sector, and why it is always doomed to fail!

William Chambliss, the American criminologist once said;

"...One of the reasons we fail to understand business crime is because we put crime into a category that is separate from normal business. Much crime does not fit into a separate category. It is primarily a business activity..."

Examining the activities of a recognisably-defined 'organised crime'  (OC) family, such as the Gambino or the Lucchese family in New York, one is immediately struck by the essential business-like nature of the enterprise.  To some extent, the same could have been said of British criminal families, like the Krays, the Richardsons, the Nashes, or the Tibbs families, to name but a few. The core group of the family has been traditionally made up of people who are bound by common ties of ethnicity, blood links, and a common culture. Their ambitions are to run a variety of business enterprises, all of which may serve to support the other elements of the profit-making operations.

In many of the more well-researched American cases, they have traditionally offered access to commodities and services which were demanded by the public more generally,  but marginalised by contemporary 'straight' society, alcohol in the early days, later drug trafficking, prostitution, counterfeit products; or services which were effectively closed to their constituents by the straight world, such as financial lending to borrowers of limited or no means, which became known as 'loansharking'.

Such 'criminalised' businesses were supported by many other, 'straight' business enterprises, food supply services, restaurants, clothing industry products, garbage hauling, etc, indeed, many OC enterprises operate among other functions, as legitimate front companies through whom the profits from the illicit enterprises are laundered.

What has traditionally differentiated these OC groups from their straight world counterparts, is their residual willingness to resort to means of 'self-help' to settle commercial  disputes, finding the judicious use of a sawn-off shotgun or machine pistol to be far more efficacious than spending vast sums of money on lawyers and litigation.

When we come to make comparisons between such OC enterprises and their counterparts in the straight world of the City of London, once we drill down beneath the very thin veneer of utmost respectability with which the City cloaks itself, there is in fact, very little to provide any great sense of differentiation between the two enterprises. Indeed, one gets to marvel at the levels of similarity.

I will confess, it has taken me a long time to overcome my natural reluctance to view the City as anything other than an entity of utmost probity and transparent ethical standards. Like you, I was brought up to believe that the City was a vital element in the British economic infrastructure, and was part of our enviable ability to engage directly with the rest of the commercial world. I fondly remember watching films and Pathe News reels when the received diction of Mr Cholmondley-Warner would extol the virtues of Threadneedle or Throgmorton Street.

I genuinely used to believe that the City was there to facilitate GB plc's financial and economic well-being, in the same way as the National Health Service looked after our bodies, the police, our safety, the teachers, our education and the church, our souls! It was only when I was at the Fraud Squad, and I started to engage with City institutions, (and then only when I could get past the Praetorian guard of the City's own police force, who jealously obstructed our every attempt to conduct our own enquiries within their bailiwick), that I began to see the place in a different light, and began to realise that the City owed a duty to no-one but itself and its private members.

Today, with the  examples of the recent criminal scandals still raw in our memories, I have started to examine the financial sector, and to try and understand why the regulatory agencies, the early SIB and the alphabet soup of self-regulating organisations (SROs), and the FSA, failed so dismally to control the Square Mile; and try and identify why the FCA will fare no better in the future.

I have come to this difficult conclusion as a result of observing how the financial sector has repeatedly and efficiently managed to survive every scandal, every allegation of fraud and financial crime, every money laundering allegation, but without one member of its upper circle ever having been prosecuted or brought low through the criminal justice process.

I have come to the conclusion that the City is indeed so powerful and all-embracing, that they are indeed, a protected species, that even the Government is frightened of its threats to migrate from its present home, if its members or its customs and practices are impacted too heavily by the civil power. I believe that the City has the means, through its many avenues and back channels, to let Government know what it will and what it will not put up with, and to make it clear to Government that if it harbors any ambitions to continue to be in receipt of the 11% or thereabouts of GDP that the City contributes every year to its coffers, it had better do the City's bidding, and keep its nose out of the Square Mile's affairs.

"...Leave us alone, and don't ask too many awkward questions..." is the way of the Square Mile, and Government does just that!

So, what was the means by which the City achieved this level of hegemony, became so powerful that it could resist even the most intrusive investigations and survive?

"...Go where you will, in business parts, or meet who you like of businessmen, it is - and has been for the last three years - the same story and the same lament. Dishonesty, untruth, and what may, in plain English, be termed mercantile swindling within the limits of the law, exists on all sides and on every quarter…"

For many years the City had been able to operate with virtually no regulatory oversight whatsoever, as this quote from Temple Bar Magazine, of 1866 identifies.. The impetus for reform only really began to gain momentum in the early 1980s as the result of a series of scandals within the fabric of the City of London, scandals so bad, they attracted significant publicity.

During this period, it became abundantly clear that the existing machinery of City self-regulation had proved to be wholly ineffectual in providing the necessary degree of regulatory control. 

When discussing the constraints previously placed upon the activities of City practitioners, Professor Gower, the architect of the Financial Services Act 1986, later stated;

"...It is not easy to detect any rationale for the choice of one method rather than another. All one can perhaps say is that the practice has been to avoid any form of regulation until some scandal has shown it cannot be avoided and then to choose statutory Government  regulation, unless there is a traditional self-regulatory agency in existence to which the task may be left..."
At first glance, the proposed new system of City regulation called 'practitioner-based, self-regulation' introduced by the Financial Services Act 1986, and applying legally-backed re-regulation to an exercise in de-regulation, appeared to contain a fundamental paradox: the system, while being essentially market-influenced and non-governmental in function, incorporated a considerable degree of statutory underpinning, the very last thing the financial sector wanted to accept.

The Securities and Investments Board, (SIB) described as 'an unprecedented body', was a perfect example of the kind of new agency being introduced. It possessed wide powers to investigate alleged breaches of criminal and regulatory provisions, to call for evidence and to bring prosecutions, in exactly the same way as only the statutory agencies and more importantly, the police, had hitherto had the power so to do. The SIB was unusual however because it was not a statutory agency, but a company, limited by guarantee.

Professor Gower realised that the City establishment would be very reluctant to recognise the proposed changes and that attempting to introduce an American-SEC style body would not be 'practical politics'.  Indeed, the proposed legislation was widely resented and led to considerable friction between the Conservative government and the various sectors of the City, who saw the new proposals as an entirely unwarranted intrusion into their traditional hegemony.

Once it realised however that direct opposition to the legislation was fruitless, commercial pragmatism quickly reasserted itself. The City Establishment recognised that too public a degree of controversy generated by overt antagonism to legislation would potentially provide a threat to its own autonomy, and possibly undermine its traditionally perceived position of being wholly supportive of the agencies of control.

In 1992, as part of my thesis for the award of my Master of Arts degree at Exeter University, I had observed;

"...This traditional position of the City was deliberately inculcated to give the abiding impression to any outsider that the City was a complete supporter of all the control mechanisms that Government cared to introduce, a law-abiding, ethical establishment entity..."

"...As a classic example, when dealing with the issue of Insider Trading, a common practice which had underpinned the foundation of the entire fortunes of the entire stockbroking community since time immemorial, the City Panel on Take-Overs and Mergers issued a statement on insider dealing as far back as February 1973, with the full support of the Stock Exchange and the then Governor of the Bank of England..."

"...It proposed that insider dealing should be a specific criminal offence...which should be properly enforced by the Police...and the Police should be given statutory powers to investigate the beneficial ownership of securities..."

"...This encouragement for the provision of investigative powers to the Police (by which they meant the City Police), was merely part of the traditional posture of support for law enforcement which the City has always been keen to be observed to adopt..."

"...It provides the City with a dual benefit because it enables the financial sector to be perceived to be high-profiled in its support for law enforcement, thus perpetuating its required image of absolute probity and utmost good faith, while resting secure in the knowledge that those same agents of the State deputed to investigate and regulate its activities, are so ineffectual and their reputation for concerted action so poor, that they are unlikely to be able to do little more than conduct the most cursory examination of any allegations of misconduct..."

"...By continuing a policy of encouraging the same agencies to be granted ever-increased powers, the egregious sector knows that it is simply facilitating an increased dilution of investigatory effectiveness...."

Yet again, when confronted by the Financial Services Bill, the City therefore reverted to its traditional defensive posture of closing ranks and started preparing instead to undertake a policy of passive resistance, first with a view to marginalising the legislation, and then, by supplying a wide variety of City practitioners to the various boards, committees, sub-groups, working parties and review teams, ultimately becoming responsible for its administration, and thereby, rendering it wholly ineffectual!

The paramount need was to retain self-regulation, a technique for which Professor Gower would later shrewdly observe 'the City believes it has a genius'. This need became an article of faith for those who opposed the introduction of a wider degree of financial regulation.

The appearance of being a willing co-participant in the regime of financial regulation; the provision of members for the various committees and sub-committees; contributing to the ever increasing degree of bureaucratisation and thus generally being observed to undertake a 'responsible' approach towards the public administration of the new policies, ensured that enforcement of the new regulatory provisions would in fact be made more difficult than politically envisaged, and in reality, wholly worthless.

The City establishment succeeded in emasculating the intentions of the Financial Services Act 1986, even before it got off the ground, and rendered its intentions irrelevant.

It was further able to minimalise the effects of the legislative intentions of Parliament by employing men and women in the new compliance role who, in the early days, were totally imbued with the cultural appreciation of the primacy of the 'commercial' ethic of their masters. 

These people were expected to be capable of undertaking the proposed compliance role, but without engaging in too close an approximation of a policing function. They were expected to know how to behave without having to be schooled in the issue, and what business practices should be treated as in the paramount interests of their employers. Almost inevitably, they were recruited primarily from within the ranks of those who had worked in the financial sector for many years, and who were thus, well versed in the mores and norms of the sector. These experienced old hands, in their turn, have schooled the newcomers to the compliance function, thus maintaining the hegemony of their financial masters, and ensuring that the internal compliance function recognises the limits of its role within the profit-making nexus!

The SIB, from the beginning, showed little interest in enforcement. The chairman himself was reported in the press as stating; "I am a regulator, a watchdog and a policeman in that order." It was widely rumoured that the SIB was most reluctant to recruit personnel who showed any sign of being "enforcement minded" and instructed  its head hunters accordingly..Dr Barry Rider of Cambridge University put it thus;

"...It would seem there is little alarm on the part of those who have been systematically abusing  the system..."

In this way, the City saw off the most ambitious plans to provide a regulatory edifice which it was hoped would bring the UK into line with the regime extant in the USA. Before the ink was dry on the Statute Book, the legislation was stumbling along, blinded and toothless, all its important functions being overseen by City Insiders.

Just as with its successor, the FSA, we should not be surprised when the lead regulator proves to be utterly toothless and supine, when its leading functionaries are a bunch of passed-over bankers.

As with the SIB, the City was able to see off the FSA, and we shall look at some more reasons in the next edition of this blog! 

Thursday, May 23, 2013

Why we must never trust the banks again!

The BBC2 program, 'Bankers' aired its 3rd edition last night.

It demonstrated most clearly and succinctly the levels of criminality that the British retail banking sector had sunk to during the era of the great PPI fraud, and it posed the question "...Can anyone ever trust the banks again..?"

It followed the timeline of corruption which gripped the banks after Big Bang, and demonstrated how the traditional role of relationship banking had been replaced by the urgent need to provide the highest possible returns to shareholders.

It demonstrated how in the aftermath of Big Bang, so many traditional savings institutions had changed their status to become banks in order to get in to the great big free-for-all promised by the changes in the City's structure. We should have read the writing on the wall, even then.

Bankers talked glibly in those days of wanting to get hold of the largest possible share of the client's wallet, as they changed their culture from being relationship managers to sales machines.

This ruthless pursuit of profit at all costs, the PPI fraud alone is estimated to have raised in excess of £25 billion in revenues, enabled the banks to exhibit their Janus face, looking in both directions at the same time, and demonstrating their wholly duplicitous nature.

Of all the issues raised by the programme, the most poignant was that of the way in which banks had ceased to be the providers of honest and careful advice to their customers, and had instead become competitors for the largest share of the client's wealth. One client wept while she described the way that her bank had defrauded her husband and herself by bombarding them with telephone calls aimed at getting them to sign up to a vastly onerous interest rate swap contract, after having borrowed money to help to develop a hotel business.

She talked hopelessly of how she had once trusted her bank to give her 'best advice', and demonstrated how, like so many other thousands of clients, her bank had become an aggressive competitor, seeing her as someone whom they could mislead and defraud, secure in the knowledge that they would be protected from any action for fraud!

One former bank employee, when talking about his part in the sale of interest-rate swap contracts, talked about how he and his colleagues would swap successful client sale stories, saying how they had 'raped' the client. The use of this aggressive, domineering, sexual imagery is regularly used by bankers in discussions with contemporaries to describe their conquests in the market.

What was instructive was how the programme demonstrated so well the way in which the financial sector managed to hoodwink and bamboozle the politicians, in this case, Gordon Brown, when he was Chancellor of the Exchequer. 

Along the way, as Alastair Darling explained that at this time, the City was contributing about 10% of UK GDP, and when talking about the failure of the regulators to deal with the PPI scandal effectively, he admitted that in view of the amount of money being contributed by the City, there would have been no real political support for any regulator who had started to bring interventionist action against a regulated member, so nothing was done.

So besotted was Brown by the money being handed over by the City that he regularly accepted invitations to go down to the Square Mile and address the assembled usurers, "...hosing the oligarchs of financial services with sycophantic flattery..." as Andrew Rawnsley so succinctly observes.

When the bubble eventually burst, it was discovered that so misleading were the terms under which these contracts had been fraudulently created, that 85% of PPI applications were turned down, when hapless clients came to need their dubious benefits.

As usual, the FSA was very slow off the mark to deal with this. They had enjoyed responsibility for insurance products since 2005, but it took them another 6 years before they started to look at the PPI issue. Adair Turner was filmed making yet another of his alarming confessions, agreeing that the regulator was slow to act, but saying that of course, it wasn't the role of the FSA to deal with PPI matters.

He conveniently forgets that the FSA had a residual role to deal with City fraud, and that they could have stepped in and investigated the criminal fraud that was taking place under their noses, and had they done so, neither Gordon Brown nor Alastair Darling could have tried to prevent these criminal investigations.   

This was a powerful article and deserves re-viewing because what it demonstrates is the sheer wanton slippery slope, down which so many city practitioners slid into criminal activity.
It also demonstrates so well just how ill-prepared the regulators were to deal with the change in culture which was enveloping the banking business.

The way in which the City and its habitu├ęs were so willing to embrace the tactics of criminals, is worthy of consideration. What became clear is that the sales of these dubious products were being driven by an industry which sought short-term profits at all costs, and had come to look upon its natural clients as sacrificial victims.

Of course, the usual suspects were paraded to both admit that what had happened was wrong, and that everything in the garden was now rosy, and the banks were going to be your friend again in the future.

This is all very well, but it deserves to be remembered that these men, these 'reformed' characters have all benefited very nicely from the criminal years. They had still received their salaries, the funding for their pension funds, and more disgracefully, their vast bonuses, most of the money to pay for these excesses coming from the proceeds of crime, the wholesale defrauding of their client base. Believe me, they wouldn't be paying back this money at the rate they are being required to, if they felt they had any chance of arguing that is was straight money!

So, these old wolves in their new sheep's clothes, want us to believe that it is now safe to go back into the water again.

Well, Alastair Darling put it quite succinctly at the end of the programme. To paraphrase him he said, that " time, a new product will become available and people will be required to sell it, and that will lead to yet another scandal for which the regulator is not equipped to deal..!"

I go back to what I have been saying before.

The City of London and its banking component is an entity to itself. These men belong to a powerful private club that exists to serve the interests of its shareholders, not the British people at large.

At the moment they are smarting because the spotlight of publicity has been shone on their activities, and the resultant bad publicity has hurt them. But not enough to make any great difference. They will soft pedal for a while, but like the scorpion, they cannot help themselves, it's in their nature to sting, and their ugly face will be revealed again ere too long when it comes time to top up the coffers, or their shareholders demand greater value from their investments!
Earlier, I mentioned how many institutions changed their status in order to become banks, in the aftermath of Big Bang.

One such was The Abbey National Building Society which back in 1989, persuaded its mutual members to vote in favour of conversion into a bank. I wrote an article about the risks that Abbey clients would face when this happened, and drew parallels between this process and the Savings and Loans scandals in the USA. My article, needless to say, pissed off quite a few people down at the Abbey conversion centre! 

Imagine my surprise when, after the conversion had successfully been negotiated, the Building Societies Commission published its findings on the way in which the conversion had been achieved and the way in which its clients had been influenced by the glossy PR work done on behalf of the new bank!

Phrases such as "...A biased view of the conversion from mutual society to a public limited company..." or a "...significant deficiency in information..." gave the reader a clue! Other paragraphs read; "...Misleading, biased, inconsistent, partial and facile..."

It got worse. The report continued to state that the Abbey National had made "...Misstatements which repeatedly failed to give its saving and borrowing members a fair and balanced assessment of the consequences of the proposals..."  The Transfer document was said to "...fall far short of the balanced assessment of the consequences of conversion which members of a society can reasonably expect from a board..."

Of course, nothing was done, and the Abbey National went on to become, well it has now been taken over by Santander.

This report should have struck a huge chord in the mind of the regulators at the SIB, as the lead regulator was then, but as with its successor, the FSA, they did nothing about what was clearly a shoddy and botched-up conversion, because it was all happening at the time that the whole financial sector was reinventing itself.

Then, as now, there was going to be no political support for any regulator who got in the way of that process, and the same will be true again, in the future!

Wednesday, May 22, 2013

Why organised criminal money has become the banks' best friend!

At a time of significant financial crisis, banks are always looking for ways to maintain their profit margins and encourage inward deposit-taking.

Despite stringent anti-money laundering laws, in the UK, but also elsewhere in Europe and the USA, banks still manage to attract and process billions of dollars worth of criminal money in the UK, without being subjected to any meaningful intervention from the regulatory agencies.

I can only conclude from this that the UK Government is content to allow banks in the UK to use criminal money as a means of bolstering their capital adequacy requirements, but without asking any awkward questions.

I know this is a scandalous thing to assert, but it is the only conclusion that I can genuinely reach, based on the evidence before me.

We have had anti-money laundering legislation since 1994 in the UK. The penalties for failing to comply with the requisite proscriptions are significant and severe, yet not one senior banker has had cause to regret not providing better compliance with the law since that time. Years ago, a main board Barclays Bank director told me that he and his class would never be prosecuted for money laundering because they were a 'protected species'. Today, despite significant evidence of wholesale money laundering, he has been proven right because  not one banker has been sent to prison for these criminal activities.

I have finally but reluctantly come to the realisation that the banks have become far more powerful than the Government, indeed, one could argue that they are the de facto government, but are merely content to allow the puppet politicians to run things, as long as they carry forward policies which will permit the banks to continue their business, regardless of its obvious blatant criminality.

How else can one explain the many financial scandals, the appalling frauds, the criminal market manipulation, the wholesale tax evasion and other less-enlightening elements of banking behaviour which have proliferated in recent times, but without any of their senior members being required to spend time as a guest of her Majesty.

That they have been breaking the law is not in doubt!

When a bank like HSBC can openly and lewdly run a Mexican drug cartel laundering operation with the kind of impunity that they indulged in, one can only assume that they did so as part of a confirmed business plan which had been nodded through.

Global banks simply don't operate at this level of granularity without someone in the highest level of Government, whether it be in the Security Services or the Secret Intelligence Services knowing about it and providing some form of imprimatur for the activities. I can easily imagine some spook sidling up alongside and offering a green light in return for a sight of the client base!

I think this is one of the most important factors, these institutions are no longer national institutions, Barclays, Lloyds, HSBC, RBS, whatever, these are not British banks any longer, they are global banks and they play in the global market. They play the game of regulatory arbitrage, seeking the most benign jurisdiction from which to operate (happily for them still the UK), while playing fiscal arbitrage with their profits, seeking the most beneficial tax regime in which to post their earnings.

This feature alone presents huge problems to national regulators and tax gatherers, while opening up significant gateways for more profitable business for the banks.

Once you move your place of business into the realm of cyberspace, you no longer need to fear the regulators in your original home town, because, frankly, they cannot touch you!

As long ago as 2001, I wrote a book in which I sought to argue that the global laws on money laundering were really intended to deal with the attempts by citizens and corporations to hide their revenues and personal wealth from the grasping hands of rapacious Chancellors. The book was never published because the sponsor described it as being too fanciful, and a theoretical rant! Let me quote to you from the introduction and you decide who was right! 

Talking about what I believed was the inevitable business move into cyberspace and the offshore sector I said:

"...This is the region where the world’s wealth will migrate and continue to migrate in the foreseeable future. This is where the new economy of the information age will be most understood, and this is where the technology and the means to drive the new thinking behind the new ways of doing business will be developed. The old wealthy from the former post-industrial economies who choose to hide their money in these emerging wealth-generating democracies will find themselves increasingly under threat from their country of origin. They in turn will seek to do everything in their power to prevent this money from escaping to these safe havens, and they will use all the powers at their disposal.

This is why governments in the old post-industrial democracies are busily passing more and more laws and regulations dealing with the flows of money around the world. This is why they are seeking to introduce even more legislation dealing with charities and other not-for-profit organisations, and why they are seeking to engage ever wider groups of players within the regulatory net. They need the information of where the money is going and where it is being held and who is holding it. This is the area which I predict, will become the leading area of conflict for governments and its citizens in the future as more and more citizens will retreat from their continued willingness to have their own assets confiscated by government, to support a growing number of otherwise unfunded citizens. This is where the battle lines for control of the remaining wealth possessed by a shrinking number of citizens will be drawn, and where the myriad laws and regulations regarding money laundering and criminal confiscation will come into their own..."

This is the reason why HMRC are doing sweetheart deals with the big global companies; this is why they don't chase Starbucks and Amazon for more taxes, they may not pay much Corporation tax but they provide jobs; this is why Boris Johnson and the Tory Government welcome every Russian Godfather, Crook, and Oligarch, they have huge amounts of money to hide and launder, and far better that British banks get the business; and this is why the FSA or the SFO never went after any of the major banks for their criminal activities, because our political masters are too afraid that if they press too hard, these companies will simply relocate in cyberspace, and go elsewhere, with a concomitant loss of employment opportunities!

The UK is literally being forced to dance to the tune of global organised crime, and the Government is too scared to do anything about it, for fear that there simply will not  be sufficient tribute paid by the crooks, thieves, wiseguys and banksters, to keep them in power! The UN Office of Drugs and Crime has reported that organised crime has now grown to the level of a transnational superpower, but that nation states have been guilty of a level of 'benign neglect' in their dealings with it, because it contributes too much to their balance sheets.

Oh, and Cameron and Osborne will continue to pay lip service to the concept of requiring companies to pay the taxes that are owed, but sending begging letters to the British protectorates and overseas territories, asking them to share information, isn't going to cut the mustard. The UK has jurisdiction over 10 tax haven countries, such as the Cayman Islands, which make up a fifth of world’s tax havens. Those entities will look to see where their best interests lie, and it ain't going to be sharing client information with the old mother country too fast!

Of course, most of the Tory party hopes they won't be too anxious to contribute that information at all, because they are the party of the City and the banksters and they have too many vested interests to be too vociferous in enforcing that pipe-dream, hence one of their reasons for hating the EU so much!

In any event, the City of London is far too busy getting very rich indeed from moving the dirty money generated by so many organised criminal entities around the world. The real world economy is now a largely criminal economy, and it operates offshore and in cyberspace for the most part, and the British national interest demands that the UK continue to provide the lion's share of professional services to the new money!

In Europe, particularly along the Southern Spanish shoreline, the property boom may have stalled, but that hasn't altered the vast number of Russian and former Eastern European gangsters who wallow there, from continuing to generate vast sums of criminal proceeds from drug trafficking, arms smuggling, the sex trade, as well as operating some of the most efficient money laundering entry points in the EU region.

Gibraltar, with its British status and British banks is only a few kilometres away and is a very convenient gateway to the global banking system. The money has to be smuggled across the border, but the Spanish authorities are notoriously corrupt and routinely corrupted, and very little gets interdicted. In Southern Europe, the official culture does not share the same degree of anxiety about corruption entertained by the Anglo Saxon community, and anyway, Spain is suffering from a dire austerity regime. Who can blame an official for looking the other way when the backhand payoffs can easily exceed his monthly take home pay!

Elsewhere, dirty money, much of it generated from the Afghan drug trade, flows out of Pakistan using the country's notoriously flaky lack of money laundering controls, much of it to be reinvested in the UK in huge swathes of property purchase in the West Midlands and the North West. Bounced through British banks in Dubai, the money quickly finds its way into the global economy before resurfacing in Birmingham or Manchester. I once sat next to a British/Pakistani businessman, while flying from Peshawar to Karachi, who explained the entire process to me, and particularly how many Pakistani travel agencies were engaged in the process. He told me that the British authorities did nothing to enquire where the huge sums of money being washed through the travel agencies came from or who was its beneficial owner. 

In the upper-world economy, particularly in Europe, we are suffering from a recession which is lowly strangling us to death, because the Government has run out of money. Wages have stalled, and are in decline, unemployment is a very real issue, standards of living are falling, and the policies of austerity mean there is not enough money available to maintain those services we have for so long learned to live with as an important integral part of our lives, health, education, policing, transport, it is all in decline. Growth has stalled, savings have failed, and the ordinary tax payer is being bled white.

Meanwhile in the underworld economy, business has never been better, there is so much dirty and criminal money being moved around the system and requiring specialist professional services, that the City of London and its occupants are never idle. The big corporates pay as little tax as they can, and put the rest into further offshore accounts. The Stock market index is booming, the index is standing at its highest level since the 1990's, and yet there is no obvious evidence to explain why? 

The financtial editor of the Financial Times believes that Quantitative Easing has had an influence, but I believe the answer is much more mundane. The wiseguys who are awash with cash are playing the stock markets because it is one of the easiest ways to launder dirty money and explain sudden accruals of wealth, and in a bull market, if you have got a lot of cash to play with, and you don't mind taking a risk, it is like taking candy from a baby!

Suddenly, brokers are cracking open the Champagne again, and there is a general feel of 'happy days are here again' in the air. I walked past a broker's wine bar in the City yesterday, and it was packed with the suits pouring bubbly down!

Who knows where this investment money is coming from? Who gives a flying fuck, just let it keep on flowing, do the trade, take the commission, don't ask, don't tell!

So, this is my take on the reasons why the Government has done and is doing nothing about money laundering through the banking system. They are truly scared that if they start getting tough on the banks, then the banksters will move out of London and relocate with a significant loss of jobs and revenue.

I believe we are now operating as a country entirely at the whim of the City of London who have now taken over the control of the agenda. When you have the means of controlling the money supply and holding the economy to ransom, then you are the Government, no matter what the politicians may say, and they will dance to your tune, on the basis of 'he who pays the piper'!

I predict we will see continued growth in the offshore sector, increasing evidence of wholesale tax evoision by increasing numbers of corporate entities and the growth of criminal money being used to fund the balance sheets of our banks. The offshore sector is now the real economy, the collateral is provided by organised crime, and Governments will have to put up with it if they want to stay in power.

I am not expecting to see any prosecutions of any ,major bank executives in the near future!