Cleaning the laundry: States and the monitoring of the financial system

Millenium

Volumn 29, Issue 1, 2000, Pages 47-72

  Sica, Vincent ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0242478589     PISSN: 03058298     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (147)

1. In this respect, the argument runs against the grain of much of the literature on transnational crime, most of which supports the demise of the regulatory state thesis. See, for example, Susan Strange, The Retreat of the State: The Diffusion of Power in the World Economy (Cambridge: Cambridge University Press, 1996),
2. see also chapter eight in collaboration with Letizia Paoli, 'Organized Crime: The Mafias', 110-22, and
3. Louise I. Shelley, 'Crime and Corruption in the Digital Age', Journal of International Affairs 51, no. 2 (1998): 605-20.
4. Susan Strange, States and Markets (London: Pinter, 1988), 88.
5. For an overview of some of the literature see David M. Andrews and Thomas D. Willett, 'Financial Interdependence and the State: International Monetary Relations at Century's End', International Relations 51, no. 3 (1997): 479-511;
6. Benjamin J. Cohen, 'Phoenix Risen: The Resurrection of Global Finance', World Politics 48, no. 2 (1996): 268-96;
7. Peter Dombrowski, 'Haute Finance and High Theory: Recent Scholarship on Global Financial Relations', International Studies Review 42, Supplement 1 (1998): 1-29; and
8. Peter Evans, 'The Eclipse of the State? Reflections on Stateness in an Era of Globalization', World Politics 50, no. 1 (1997): 62-88.
9. See Geoffrey Ingham, 'States and Markets in the Production of World Money: Sterling and the Dollar', 45 and
10. Susan Strange, 'From Bretton Woods to the Casino Economy', 59 in Money, Power, and Space, eds. Stuart Corbridge, Ron Martin, and Nigel Thrift (Oxford: Basil Blackwell, 1994);
11. Eric Helleiner, 'From Bretton Woods to Global Finance: A World Turned Upside Down', in Political Economy and the Changing Global Order, eds. Richard Stubbs and Geoffrey R.D. Underhill, (Toronto: McClelland and Stewert, 1994) and
12. States and the Reemergence of Global Finance: From Bretton Woods to the 1990s (New York: Cornell University Press, 1994).
13. Geoffrey R.D. Underhill, 'Keeping Governments Out of Politics: Transnational Securities Markets, Regulatory Cooperation, and Political Legitimacy', Review of International Studies 21, no. 3 (1995): 255.
14. David M. Andrews, 'Capital Mobility and State Autonomy: Toward a Structural Theory of International Relations', International Studies Quarterly 38, no. 2 (1994): 193-218;
15. Stephen R. Gill and David Law, 'Global Hegemony and the Structural Power of Capital', International Studies Quarterly 33, no. 4 (1989): 475-99;
16. Philip G. Cerny, 'The Infrastructure of the Infrastructure? Toward "Embedded Financial Orthodoxy" in the International Political Economy', in Transcending the State-Global Divide: The Neostructuralist Agenda in International Relations, eds. Barry Gills and Ronen Palan (Boulder, CO: Lynne Reinner, 1993); and
17. John Gerard Ruggie, 'Territoriality and Beyond: Problematizing Modernity in International Relations', International Organization 47, no. 1 (1993): 139-74.
18. See Walter Wriston, 'The Eclipse of the State? Reflections on Stateness in an Era of Globalization (New York: Macmillan, 1991) and
19. Stephen J. Kobrin, 'Electronic Cash and the End of National Markets', Foreign Policy, no. 107 (1997): 65-77.
20. See Marcello De Cecco, 'Origins of the Post-War Payments System', Cambridge Journal of Economics 3, no. 1 (1979): 49-61;
21. John B. Goodman and Louis Pauly, 'The Obsolescence of Capital Controls? Economic Management in an Age of Global Markets', World Politics 46, no. 1 (1993): 50-82, and
22. Louis W. Pauly, 'Capital Mobility, State Autonomy and Political Legitimacy', Journal of International Affairs 48, no. 2 (1995): 369-88.
23. Jagdish Bhagwati, 'The Capital Myth', Foreign Affairs 77, no. 3 (1998): 7-13,
24. Stephen Gill, 'Globalization, Market Civilization, and Disciplinary Neo-Liberalism', Millennium: Journal of International Studies 24, no. 3 (1995): 399-423, and
25. American Hegemony and the Trilateral Commission (Cambridge: Cambridge University Press, 1990).
26. Michael C. Webb, 'Capital Mobility and the Possibilities for International Policy Coordination', Policy Sciences 27, no. 4 (1994): 399.
27. Janice E. Thomson, 'State Sovereignty in International Relations: Bridging the Gap Between Theory and Empirical Research', International Studies Quarterly 39, no. 2 (1995): 214.
28. Janice E. Thomson, International Studies Quarterly Ibid., 223.
29. Margaret E. Beare and Stephen Schneider, Tracing of Illicit Funds: Money Laundering in Canada (Ottawa: Solicitor General of Canada, 1990), x n. 1. This is a synthesis of Article 1, Paragraph 6 of the Vienna convention, which provides a widely accepted definition of money laundering.
30. A UN Secretary General briefing note states that 'the strategy of criminal organizations is to manipulate their illicit proceeds, usually, but not always, through the legitimate sector...', see United Nations, Money laundering and Associated Issues: The Need for International Cooperation, Report S/1992/4/Add.5, 23 March 1992,
31. cited in Rowan Bosworth Davies and Graham Saltmarsh, Money Laundering: A Practical Guide to the New Legislation (London: Chapman and Hall, 1994), 195.
32. United Nations Economic and Social Council, E/RES/1989/13, 22 May 1989. Opened for signature in Vienna on 20 December 1988 and entered into force in November 1990.
33. M. Cherif Bassiouni and David S. Gualtieri, 'International and National Responses to the Globalization of Money Laundering', in Responding to Money Laundering: International Perspectives, ed. Ernest U. Savona (Amsterdam: Harwood Academic Publishers, 1997), 123.
34. United Nations Economic and Social Council, E/RES/1989/13, 22 May 1989, Article 3(1)(b).
35. Ibid., Article 5.
36. Reprinted in William. C. Gilmore, ed., International Efforts to Combat Money Laundering (Cambridge: Grotius Publications Limited, 1992), 273-77.
37. The G-10 members are Belgium, Canada, France, Germany, Great Britain, Italy, Japan, Luxembourg, Netherlands, Sweden, United States.
38. Council of Europe, Convention on Laundering, Search, Seizure, and Confiscation of the Proceeds from Crime. Stasbourg, 8 November 1990.
39. For the Council Directive, see the Official Journal of the European Communities, OJ L166, 10 June 1991, 77.
40. Duncan E. Alford, 'Anti-Money Laundering Regulations: A Burden on Financial Institutions', North Carolina Journal of International Law and Commercial Regulation 19 (1993-1994): 451.
41. Konstantin D. Magliaveras, 'Defeating the Money Launderer-The International and European Framework', in The Journal of Business Law 1992, ed. Robert M. Merkin (London: Sweet and Maxwell, 1992), 169.
42. The members of the FATF are Australia, Austria, Belgium, Canada, Denmark, European Commission, Finland, France, Germany, Greece, Gulf Cooperation Council, Hong Kong, Iceland, Ireland, Italy, Japan, Luxembourg, the Kingdom of the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, Turkey, United Kingdom, and the United States.
43. The recommendations of the Financial Action Task Force on Money Laundering are reprinted in Gilmore, International Efforts to Combat Money Laundering, 4-24.
44. The following synopsis is taken from the FATF Annual Report 1995-1996 where the forty recommendations were supplemented with interpretive notes. These documents are available on line at [http://www.oecd.org/fatf/reports.htm] (24 February 2000), Rec. 1-3.
45. Ibid., Rec. 4-7.
46. Ibid., Rec. 8-19.
47. Ibid., Rec. 20-40.
48. Ibid., Rec. 13, 22.
49. See Rainer S. Masera, 'Single Market, Exchange Rates and Monetary Unification', The World Economy 17, no. 3 (1994): 249-79.
50. Andrews, 'Capital Mobility and State Autonomy', 197.
51. See also David M. Andrews, 'Capital Mobility and Monetary Adjustment in Western Europe 1973-1991', Policy Sciences 27, no. 4 (1994): 425-45.
52. Andrews, 'Capital Mobility and State Autonomy', 198.
53. Cerny, quoted in ibid., 199.
54. Gill and Law, 'Global Hegemony', 491-92.
55. Eric Helleiner, 'State Power and the Regulation of Illicit Activity in Global Finance', in The Illicit Global Economy and State Power, eds. H. Richard Friman and Peter Andreas (Lanham, MD: Rowman and Littlefield, 1999).
56. R.T. Naylor, Hot Money and the Politics of Debt (Toronto: McClelland and Stewart, 1987), 15.
57. Ingo Walter, Secret Money: The World of International Financial Secrecy (Lexington, MA: Lexington Books, 1985), 45.
58. Michael Levi, 'Money Laundering and Regulatory Policies', in Responding to Money Laundering, 259.
59. Eric Helleiner, 'Sovereignty, Territoriality and the Globalization of Finance', in States and Sovereignty in the Global Economy, eds. David A. Smith, Dorothy J. Solinger, and Steven Topik (London: Routledge, 1999).
60. Stephen A. Bercu, 'Toward Universal Surveillance in an Information Age Economy: Can We Handle Treasury's New Police Technology', Jurimetrics Journal 34, no. 4 (1994): 390.
61. See Michael Feiler, 'Money Laundering - A Challenge for International Politics', Aussenpolitik, no. 11 (1997): 177-86.
62. A tax haven can be defined as a country that either does not tax , or imposes less tax than where the profits originated, has financial secrecy provisions, and most importantly 'extend[s] protection against inquiries from foreign governments and includes civil or criminal sanctions for bank employees who violate the regulations'. See Kurt A. Wagner, 'U.S. Taxation of Foreign Income: The Use of Tax Havens in a Changing Environment', Southern Illinois University Law Journal 18 (1994): 619-20.
63. Nigel Holloway, 'The Money Washers', Far Eastern Economic Review, 21 May 1992, 49.
64. Husain Haqqani, 'Good Drives Out Bad: Pakistan "Whitens" Black Money Through Bond Issues', Far Eastern Economic Review, 19 September 1998, 64.
65. These advertisements were printed in the The Wall Street Journal, 17 March 1992, C18, and 18 March 1992, C1, C20.
66. Scott B. MacDonald, 'Frontiers for International Monetary Regulation After BCCI: International Cooperation or Fragmentation?' (paper presented at the annual meeting of the American Society for International Law, Washington, D.C., April 1992), 195.
67. Scott B. MacDonald, Frontiers for International Monetary Regulation After BCCI: International Cooperation or Fragmentation? Annual meeting of the American Society for International Law, 1992, 195. Ibid.
68. OECD News Release, 19 September 1996 [http://www.oecd.org/fatf] (14 March 2000).
69. OECD News Release, 12 December 1996 [http://www.oecd.org/fatf] (14 March 2000).
70. A.J. Hughes Hallet, 'Money Laundering and Measuring Illegal Activity: An Economic Analysis', 78,
71. and Vito Tanzi, 'Giobalization and Money Laundering', in Responding to Money Laundering, 92.
72. Vito Tanzi, 'Giobalization and Money Laundering', Responding to Money Laundering, 92. Ibid.
73. The FATF's attempt to sanction the Seychelles has yet to produce positive results.
74. Andrews, 'Capital Mobility and State Autonomy', 212-13.
75. Andrews, Capital Mobility and State Autonomy Ibid., 199.
76. See also Gill and Law, 'Global Hegemony', 491.
77. Gerard Wyrsch, 'Treasury Regulation of International Wire Transfer and Money Laundering: A Case for a Permanent Moratorium', Denver Journal of International Law and Policy 20, no. 3 (1992): 530-31.
78. Gerard Wyrsch, Denver Journal of International Law and Policy Ibid., 532.
79. US Senate Subcommittee on Consumer and Regulatory Affairs of the Committee On Banking, Housing, and Urban Affairs, Drug Money Laundering Control Efforts, prepared statement of Senator Alfonse D'Amato (Washington, DC: US Government Printing Office, 1990), 9.
80. Geoffrey W. Smith, 'Competition in the European Financial Services Industry: The Free Movement of Money Versus the Regulation of Money Laundering', University of Pennsylvania Journal of International Business Law 13, no. 1 (1992): 139.
81. Magliaveras, 'Defeating the Money Launderer', 170.
82. Gill and Law, 'Global Hegemony', 490.
83. See John J. Byrne, Douglas W. Densmore, and Jeffrey M. Sharp, 'Examining the Increase in Regulatory Requirements and Penalties: Is Banking Facing Another Troubled Decade?', Capital University Law Review 24, no. 5 (1995): 1-66.
84. Gill and Law, 'Global Hegemony', 495.
85. Jeanne Bickford, 'Filthy Lucre: A Socio-Legal Study of the Criminization of Money Laundering' (Ph.D. diss., University of California, Irvine, 1996), 171.
86. Stephen Gill, 'The Global Panopticon? The Neoliberal State, Economic Life, and Democratic Surveillance', Alternatives 20, no. 1 (1995): 11.
87. As has been documented by Mahvash Alerassool, Freezing Assets: The USA and the Most Effective Economic Sanction (New York: St. Martin's Press, 1993). Alerassool's conclusion that 'the cooperation of the British, French, German, and other US allies in supporting the actions taken by the United States against Iran played a crucial role in the success of the freeze', 184, is also indicative of the West's ability to exercise political control over financial actors.
88. In 'Capital Mobility and State Autonomy', Andrews defines monetary autonomy as 'policies believed to maximize desired outcomes independent of external constraints' and monetary independence as 'a choice set rather than the realization of a specific policy objective', 204.
89. Gill and Law, 'Global Hegemony', 496.
90. Walter B. Wriston, 'Technology and Sovereignty', Foreign Affairs 67, no. 2 (1988): 68.
91. See Wriston, The Twilight of Sovereignty.
92. Walter B. Wriston, 'Bits, Bytes, and Diplomacy', Foreign Affairs 76, no. 5 (1997): 188.
93. Thomas A. Bass, 'The Future of Money', Wired, October 1996 [http://www.wired.com/wired/archive/4.10/wriston.html] (9 May 2000).
94. Kobrin, 'Electronic Cash', 74.
95. Kobrin, Electronic Cash Ibid., 75.
96. John Kenneth Galbraith, Money: Whence It Came, Where It Went (Boston: Houhgton Mifflin Company, 1975), 22-27.
97. Janice E. Thomson and Stephen D. Krasner, 'Global Transactions and the Consolidation of Sovereignty', in Global Change and Theoretical Challenges, eds. Ernst Otto Czempiel and James N. Roseneau (Toronto: Lexington Books, 1989).
98. US Congress Office of Technology Assessment, Information Technologies for the Control of Money Laundering (Washington, DC: US Government Printing Office, 1995).
99. US House Committee on Banking and Financial Services, Money Laundering: A Framework for Understanding U.S. Efforts Overseas (Washington, DC: US General Accounting Office, 1996), 35.
100. Neil J. Jensen, 'International Funds Transfer Instructions: Australia at the Leading Edge of Financial Transaction Reporting', Journal of Law and Information Science 4, no. 2 (1993): 322.
101. Neil J. Jensen, Journal of Law and Information Science Ibid., 323.
102. Alessandro Crocetta, 'Notes on European Money Laundering', [www.alternatives.com/crime/menu.html] (14 March 2000).
103. Bank for International Settlements, Report by the Committee and Settlement and the Group of Computer Experts of the Central Banks of the Group of Ten Countries, Security of Electronic Money. Basle, 1996, 19.
104. Security of Electronic Money Ibid., 25.
105. Bank for International Settlements, Implications for Central Banks of the Development of Money Laundering. Basle, 1996, 6.
106. Cerny, 'The Infrastructure of the Infrastructure?', 226.
107. Philip G. Cerny, 'The Dynamics of Financial Globalization: Technology, Market Structure, and Policy Response', Policy Sciences 27, no. 4 (1994): 337.
108. Cerny, 'The Infrastructure of the Infrastructure?', 244.
109. Cerny, 'The Dynamics of Financial Globalization', 326.
110. Cerny, The Dynamics of Financial Globalization Ibid., 328.
111. Cerny, 'The Infrastructure of the Infrastructure?', 241.
112. Cerny, The Infrastructure of the Infrastructure? Ibid., 241.
113. Cerny, The Infrastructure of the Infrastructure? Ibid., 242. The CAS is administered through the Basle Committee on Banking Supervision which is based at the Bank for International Settlements in Basle, Switzerland.
114. Cerny, The Infrastructure of the Infrastructure? Ibid., 243.
115. Ruggie, 'Territoriality and Beyond', 148.
116. Ruggie, Territoriality and Beyond Ibid., 173.
117. Ruggie, Territoriality and Beyond Ibid., 171.
118. Ruggie, Territoriality and Beyond Ibid., 171.
119. Ruggie, Territoriality and Beyond Ibid., 155.
120. According to Michael Levi, 'unless the action for laundering were very severe (or the capital base of the bank were particularly vulnerable), I personally would feel more insecure if my banker had been a victim of a huge fraud that if he had been warned by the regulators for laundering money (thereby improving the banks profits)'. See 'Money Laundering and Regulatory Policies', 263.
121. See Jeffrey Owens, 'Curbing Harmful Tax Practices', OECD Observer, no. 215 (January 1999) and
122. Helleiner, 'State Power and the Regulation of Illicit Activity' .
123. This conclusion is consistent with the historical development of prohibition regimes designed to prevent piracy, slavery, and drug trafficking. See Ethan A. Nadelmann, 'Global Prohibition Regimes: The Evolution of Norms in International Society', International Organization 44, no. 4 (1990): 479-526.
124. Cerny, 'The Infrastructure of the Infrastructure?', 243.
125. Thomas Oatley and Robert Nabors, 'Redistributive Cooperation: Market Failure, Wealth Transfers, and the Basle Accord', International Organization 52, no. 1 (1988): 35-54., and
126. Ethan B. Kapstein, 'Resolving the Regulator's Dilemma: International Coordination of Banking Regulations', International Organization 43, no. 2 (1989): 323-47.
127. Ethan Barnaby Kapstein, 'Between Power and Purpose: Central Bankers and the Politics of Regulatory Convergence', International Organization 46, no. 1 (1992): 265-85.
128. Ethan B. Kapstein, Governing the Global Economy: International Finance and the State (Cambridge, MA: Harvard University Press, 1994), 122-23.
129. Daniel Ben-Ami, 'Government U-Turn on Aid', Banking World, 10 October 1992, 13.
130. See Joseph M. Grieco, 'The Masstricht Treaty, Economic and Monetary Union and the Neorealist Research Program', Review of International Studies 21, no. 1 (1995): 21-40. In this respect, the CAS negotiations mirror Grieco's elaboration of the 'voice opportunities' thesis, where the weaker join in order to ameliorate the rule making capacity of the stronger.
131. Alford, 'Anti-Money Laundering Regulations', 447.
132. 'In Europe, Some Don't Want to Halt the Flow', Barron's, 26 June 1989, 33.
133. Ruggie, 'Territoriality and Beyond', 141.
134. Phil Williams and Ernesto Savona, 'Conclusions and Recommendations of the International Conference of Preventing and Controlling Money Laundering and the Use of the Proceeds of Crime: A Global Approach', in The United Nations and Transnational Organized Crime, eds. Phil Williams and Ernesto Savona (London: Frank Cass, 1996)
135. House Committee, Money Laundering, 11.
136. US Congress Office of Technology Assessment, Information Technologies for the Control of Money Laundering, 19-33.
137. Information Technologies for the Control of Money Laundering, Ibid., 24.
138. Ruggie, 'Territoriality and Beyond', 172.
139. Thompson, 'State Sovereignty in International Relations', 223.
140. Tony Porter, 'Public Authority, Private Authority and Democracy in Global Finance' (paper presented at the International Studies Association Annual Meeting, Minneapolis, March 1998), 23.
141. Tony Porter, 'Public Authority, Private Authority and Democracy in Global Finance' International Studies Association Annual Meeting, 1998, 23. Ibid.
142. Duncan Wood, 'The Catalyst of Cooperation: Evaluating the Impact of the 1988 Basle Accord on Capital Adequacy' (paper presented at the International Studies Association Annual Meeting, Minneapolis, March 1998), 19.
143. Duncan Wood, International Studies Association Annual Meeting, Ibid., 20-21. The thirteen countries are Australia, Belgium, Canada, France, Germany, Italy, Japan, Netherlands, Spain, Sweden, Switzerland, United Kingdom, and the United States with the EU as an observer.
144. Duncan Wood, International Studies Association Annual Meeting, Ibid., 21.
145. Statement made by the UK treasury on 9 May 1998 [http://www.hm-treasury.gov.uk/press/1998/p71_98.html] (14 March 2000).
146. US Department of State, Bureau for International Narcotics and Law Enforcement Affairs, International Narcotics Control Strategy Report (Washington, DC: US Government Printing Office, 1997).
147. Ruggie, 'Territoriality and Beyond', 143.