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!