Apr 6, 2012 01:05

http://arabnews.com/opinion/editorial/article605774.ece

One of the biggest challenges facing organized crime, in which must be included international terrorism, is the movement of funds around the world. This includes a process called “money laundering” which it is by no means as simple as it sounds.

In essence sums of money gained from crimes such as drug-dealing, prostitution, extortion and robbery have to be made to look as if they come from legitimate sources. Thus criminals and terrorists need to organize a complex network of companies and individuals that can make payments to each other, which show up in their banking records as being innocuous transactions.  The aim is always to make the money seem “clean” because it has apparently come from legitimate sources.

It is entirely right that this week the Cabinet, chaired by Custodian of the Two Holy Mosques King Abdullah, decided to toughen the existing rules against this laundering of illegal funds. It is part of an international move to make it still harder for international mafias and terrorist networks  to benefit from their crimes.

The problem is that the authorities around the world are constantly discovering that organized crime is coming up with ever more sophisticated ways to evade the checks that have been put in place by the financial authorities. That is why the Saudi initiative is so important.

There was, however, a time when evil men were pushing against an open door. Even 20 years ago, banks were under no obligation to monitor the activity of their account holders for suspicious dealings. Now there is effectively a worldwide watch kept for funds that criminals are trying to launder. At its simplest, the checks involve the flagging up of sudden large deposits — in Europe a  relatively  small sum of €10,000 will trigger an alert, if the account has no record of large transactions.

Not all banking jurisdictions have embraced the checking system vigorously.  There are still a few countries where the presence of offshore companies and banks — classic vehicles for the laundering of illegal gains — has become an economic mainstay. However, this is not the problem it might seem, since the fact that financial watchdogs around the world are fully aware of the exploitation of these jurisdictions by criminals means that any funds moving from them into the mainstream financial network are automatically subjected to greater scrutiny. This is indeed ever more the case as countries such as the United States clamp down on tag dodges, generally by the super-rich.

This has seen Switzerland revise its banking secrecy laws to allow the once covert parking of money away from the taxmen of other countries to become unmasked. Avoiding taxation is itself a crime. Worse, the system of legal loopholes and financial bolt holes, originally established to aid the international wealthy, has itself been exploited by terrorists and other criminal mafias.

It is a further indictment of the banking system, particularly in the Western world, that bankers were for so long prepared to take funds from anyone and turn a blind eye as to their origin. It ought not to have needed tough new laws to oblige them to look more closely at their depositors. It was never a defense that banks might have opened themselves up to legal action. When was Al-Qaeda or the Italian Mafia ever going to take a bank to court ?

The moral imperative to ensure that the immense profits of crime could not pass through their books should always have been far greater than their responsibility to shareholders. Indeed shareholders themselves should have insisted that the banks they owned behaved with the greatest probity. They did not. It is governments that had had to do it, including the Saudi government.

The proceeds of evil must not be allowed to be washed “clean”.