Did Organized Crime Save The Banking System?
The head of the United Nations Office on Drugs and Crime has made the claim that organized crime took advantage of the financial crisis last year to effectively launder their money–thereby preventing banks from collapsing.
Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organised crime were “the only liquid investment capital” available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result.
This will raise questions about crime’s influence on the economic system at times of crisis. It will also prompt further examination of the banking sector as world leaders, including Barack Obama and Gordon Brown, call for new International Monetary Fund regulations. Speaking from his office in Vienna, Costa said evidence that illegal money was being absorbed into the financial system was first drawn to his attention by intelligence agencies and prosecutors around 18 months ago. “In many instances, the money from drugs was the only liquid investment capital. In the second half of 2008, liquidity was the banking system’s main problem and hence liquid capital became an important factor,” he said.
Some of the evidence put before his office indicated that gang money was used to save some banks from collapse when lending seized up, he said.
“Inter-bank loans were funded by money that originated from the drugs trade and other illegal activities… There were signs that some banks were rescued that way.” Costa declined to identify countries or banks that may have received any drugs money, saying that would be inappropriate because his office is supposed to address the problem, not apportion blame. But he said the money is now a part of the official system and had been effectively laundered.
Insofar as I can tell, the banking industry denies this claim. Of course, that’s what you’d expect whether the claim was true or false. It’ll be interesting to see if there’s any follow-up investigation to these allegations.
In the meantime, I’ll just sit back and enjoy the recipe books that the local banks have been putting out lately, recipes like this one:
“You see, you start out with a little bit of oil. Then you fry some garlic. Then you throw in some tomatoes, tomato paste, you fry it; ya make sure it doesn’t stick. You get it to a boil; you shove in all your sausage and your meatballs. And a little bit o’ wine. An’ a little bit o’ sugar, and that’s my trick.”
Sounds good to me.