Today fight against corruption and fraud in the financial area is one of the main issues of the international agenda. But efforts of the civilization aimed at solving this problem often meet lack of not only cooperation but elementary mutual understanding between authorities of leading economic powers.
According to estimates of international organization Tax Justice Network during the last 15 years business swindlers in tow with high-ranked corrupted officials all over the world have embezzled and laundered about 25 trillion US dollars. This amount on which global financial oligarchy (investment banks, lawyers, nominee directors, offshore centers, etc.) is parasitizing is about 50 per cent of the GDP of our planet. The most symbolic crimes in this area in the West brought to justice are: corporate frauds of Enron and Parmalat, complicated financial swindles similar to the ones of Bernie Madoff and Allen Stanford, Kerviel dealer of Societe General and Kweku Adoboli of UBS, subprime debt, HSBC, Standard Chartered Bank, Goldman Sachs, Credit Suisse, manipulations with LIBOR by RBS, Barclays, etc.
For the whole year already the European Commission and European Parliament have been discussing the draft Directive on Freezing and Confiscation of Proceeds of Crime. This document was approved by the European Parliament Committee for Civil Rights, Justice and Internal Affairs; soon adoption of the Directive is expected at the session of the European Parliament. According to the explanatory materials to the law in draft only in 2011 in the territory of the European Union countries 1.2 trillion “dirty” Euros were legalized (150 billion – in Italy).
Similar heinous cases in Russia – theft of funds from Bank of Moscow (over $5 billion), BTA Bank and AMT Bank ($4 billion), Mezhprombank ($3 billion), Globex and Sviaz Bank (about $3 billion), VEFK Bank Group (over $1 billion), Conversebank (over $0.7 billion), Universal Savings Bank (about $1 billion), Urin’s banks (over $0.5 billion), Financial and Leasing Company (about $0.5 billion), Elektronika Bank ($0.4 billion), Rosukrenergo (about $4 billion), Russian Agricultural Bank (over $2 billion), Oboronservice (about $0.4 billion), Rosagroleasing (about $1 billion), Russian Capital Bank (about $0.3 billion), etc. According to above TJN for the last 10 years up to 700 billion US dollars have been pulled from Russia. In total it is about 3% of world “dirty capitals”.
Attempts of mass media, general public and law enforcement agencies of the whole world to suppress unlawful activities and to return stolen assets are setting back: corrupt officials and frauds pull stolen funds into foreign jurisdictions, after that these people move abroad where often they declare themselves no less than political refugees (like Andrei Borodin, former CEO of Bank of Moscow, who recently has received political asylum in England). At their hand – “krysha” of leading lawyers, offshore jurisdictions and investment banks clout. Courts against them cost at least 15 per cent of stolen property and require many years of proceedings and their results are not guaranteed. Frauds declares that in their home country they are persecuted for their political views though previously nothing was known about their views and as a rule they provided complete support to the course of the authorities in power. Owner of falsely bankrupted Mezhprombank Sergei Pugachev, former mayor of Alma Ata Viktor Khrapunov, wife of former mayor of Moscow Yuri Luzhkov reside in the territory of the European Union countries and Switzerland. Owner of the abovementioned VEFK Bank Alexander Gitelson was arrested in Austria, and head BTA Bank Mukhtar Ablyazov who misappropriated billions of dollars was arrested in France. Frauds and swindlers hiding in Europe are uniting into self-proclaimed “corruption combating committees” acting in accordance with the banal principle “The thief shouts: “Stop thief!”.
Beside Europe the United Stated of America may also become the “serene harbor”. Alexei Kuznetsov, former minister of finance of Moscow region, organizer of theft of multi-billion budgetary funds assigned for construction of social infrastructure projects including schools and kindergartens (this case includes also homicides) was hiding here from justice. This corrupt official was arrested only after moving to Europe and now he is expecting the decision of French court about extradition to Russia. Another example is Ashot Egiazaryan, former deputy of the State Duma, now residing in the USA. This citizen headed an organized criminal group engaged in blackmail, racket and theft in banks and later organized frauds in the construction market. Today he resides in California and is trying to receive the status of a political refugee. Request for his extradition was denied. RICO, the Racketeer Influenced and Corrupt Organizations Act, is not applied to him. Some time ago I was “lucky” to become a victim of his criminal activity but nobody hurries to invite me to an American court for testimony.
For long time large global corporations are positioning themselves above tax laws avoiding taxation of multi-billion profit. This happens due to use of offshore schemes including European jurisdictions. Recently a scandal has broken around technological giant Apple, company, which through its subsidiary in Ireland “optimized” its tax base for $44 billion. The New York Times investigation (Pulitzer Prize winner David Kocieniewski) relating to tax tricks of General Electric in the USA demonstrated that after receipt of $10 billion in 2010 instead of 35% tax GE obtained… tax deduction of $3.4 billion. This global (meaning offshore) corporation, US business icon, has multiple subsidiaries and affiliates in Luxemburg, Ireland, Switzerland, British Virgin islands, etc. This is a part of criminal financial oligarchy. No surprise, the US budget is in huge deficit and small businesses are sacrificed.
International-scale corruption and fraud would not be possible without the whole industry for pulling out, hiding and laundering of “dirty money” operating for the interests of criminals. At their service – multiple offshore jurisdictions, “harbors”, special investment banks, dozens of thousands of best lawyers, nominee directors. Recently the world press has written about this industry. If a person steals over $1 billion and then leaves for such “harbor”, it is practically impossible to institute criminal proceedings against him. There works the principle: “The more you steal, the less are chances for inevitability of punishment”.
Imagine that in due time founder of Italian Parmalat Calisto Tanzi or American fraud mastermind Bernie Madoff paid attention to a fall-back position, pulled money stolen from investors into offshore in Kalmykia or Russkiy Island and at the moment of bankruptcy fled to a country unfriendly to EU and USA (Iran, North Korea?), where declared themselves political refugees and “regime opponents”. Do you have any doubts that in case of such developments they would not be imprisoned but lives in grand style denying themselves nothing, similar to former head of Kirghizia Bakiev (Byelorussia), former owner of Mezhprombank Pugachev (Monaco-UK), former CEO of Bank of Moscow Borodin (UK), famous “property developer” Polonsky (Switzerland-Luxemburg-Israel-Cambodia)?
“Dirty money” is a non-delayed-action for the world financial system. Financial oligarchy is a threat to stability of world economy. Possibly it is one of the reasons for the world financial crisis of 2008-2009. It shields global corruption which, similar to apartheid, deprives entire peoples of Asia, Europe and America of their future. Not long ago this comparison was borrowed from Novaya Gazeta by former US Secretary of State Hillary Clinton for her speech in one of universities. But no actions have followed these words so far.
It is my belief that opposition to this global apartheid is possible only through joint efforts leading states, part of which unfortunately, has become the promised land for corrupt officials and fraud from all over the world. It is necessary to stop the practice of providing shelter for dirty money and to clean offshore Augean stables making the practice of nominee ownership illegal. There is no danger in it, actual liquidation of “laundry” for dirty money in Cyprus did not destabilize world economy. Actually this is the activity for the global corruption commission formed at G20 summit in Seoul, but it has proved itself yet. There is not due effect either from the UN Convention against Corruption or OECD efforts in this area.
It is necessary to initiate, at the intergovernmental level, formation of an organization with wide powers in the area of corruption and fraud connected with cross-border movement of involved persons and their capitals. This, unlike UN or EBRD, does not require huge international budgets, but mostly political will and vision. It is necessary to decrease and reduce the cost of return of stolen and laundered money, to speed up adoption of the EU Directive about which I wrote in the beginning of this letter. I believe these proposals may be discussed at G20 summit in St. Petersburg. The main thing is that efforts in fighting corruption and international financial oligarchy become actually international and, which is the most important, efficient and practical. It is necessary to return to peoples riches stolen from them and to strike corruption from the unexpected side – ultimate beneficiary ownership in offshore jurisdictions.
Doctor of Economics, publisher of independent newspapers
September 5, 2013