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How US & multilateral agencies can help root out corruption & money laundering from poor States


Corruption and the money launderings are the non-biological parasites in the 3rd world and the developing countries and are as lethal as the cancer is of the modern era. With the emergence of the digital technology, corruption and the money laundering has become pandemic and pestilent to the wellbeing of the nations. Currently available banking tools (online banking) facilitates transfer of millions of dollars by the click of a button from the public accounts into the personal accounts by the corrupt leaders, officials, politicians, and the ruling elites of these nations.
This behavior and practice of robing the national troves by the corrupt officials, leaders and the ruling elites hampers nations’ resilience and sustainability for progress, advancement, and wellbeing of the society. In many instances, these are the same people who come to power on the slogans of eliminating the corruption and protecting & safeguarding the national funds and the precious national assets of the countries. Corruption not only depletes the revenues but also undermines governments’ capacities for carrying out their civic duties of maintaining law & order, providing education, improving healthcare, building infrastructure, reducing poverty, and so on. In other words, corruption depletes the funds needed for the economic stability, social programs, and sustainable developments. As some wiseman once said, the corruption not only takes the wealth out of the nation, but it also demoralizes & humiliates its citizens!
According to the World Economic Forum, the global cost of corruption has reached to about 2.6 trillion dollars that relates to roughly 5 per cent (pre COVID-19) of the global gross domestic product (GDP). According to the World Bankand donor agencies, every year the corrupt officials from the 3rd world and developing countries transfer about 1 trillion dollars to the western banks and the offshore personal accounts. In 2006 alone, the cross-border funds transfer was estimated to be about 40 billion dollars. Since then, it has skyrocketed and has reached into trillion of dollars as reported by the global institutions!
In the first-ever formal address on corruption to the UN during the 2018 Security Council meeting, the Secretary General, Antonio Guterres, said the “corruption breeds dissolution with government and governance and is often at the root of political dysfunction and social disunity.”
With the disappearance of the public funds from the nations’ accounts, not enough money is left even to service the debt obligations to the donors, not to mention to spend on the public programs. With the time, the scope of the corruption and the participants increases, thereby bringing the countries on their knees to default. Thus, in order to survive, these countries have no choice but to ask for the financial assistance again and again from the IMF, World Bank, Asian Development Bank, and other multilateral & bilateral agencies. As part of the conditions, the donors ask (the receiving countries) to curtail spending on the public works programs and to reduce the subsidies (on the basic items) to the citizens. All these actions in turn make the lives of the citizens more miserable. This vicious cycle creates unemployment, inflation, economic meltdowns, failure of the institutions, political instability, and law & order problems in the societies.
Through the Panama papers publication, it has been very well documented that how the corrupt leaders, officials and the ruling elites of these countries transfer national money to their Swiss, and the offshore safe heaven accounts. Even after these discoveries and proofs, the robed countries cannot have access to their looted money. In many cases, the privacy laws and the banking rules protect their account holders which makes it impossible to the victim countries to go after the accounts for their repatriations. Additionally, the cost of litigations by hiring expert lawyers and the time it takes to see the daylight makes the process worthless and as such not financially sound for pursuing.
The US, Europe, the UN, and the donor agencies can very easily help to eliminate the corruption from these countries. The United States’ anti-money laundering laws are so outreaching, forceful, and vicious that the corrupt people tremble when they are exposed to them. Thus, if the UN committee on the corruption adopts the US’s anti-money laundering laws, it will be a great justice to the people of the 3rd world and the developing countries. Also, this will greatly help the multilateral and bi-lateral donor agencies to use their funds for the real wellbeing, improving quality of life, and building of the infrastructure of the nations. In other words, all the money given to any of these countries will be used for the developments of education, healthcare, malnutrition reduction, reliable power supply, institutions strengthening, and infrastructure constructions. But the most paramount importance will be to getting people out of the poverty, a real miracle that is so outreach under the current deep-rooted corruption that it exists only in the dreams!
The SWIFT banking mechanism that was created by Belgium and is headquartered in Brussels is used worldwide for the clearance of the inter-banking transactions (denominated in the international currencies). This tool is often used by the US to punish the hostile individuals and terrorist elements by freezing their bank accounts & assets and are put on the economic sanction lists. Since the US dollar is the Global Reserve Currency, accounts activities across the globe are monitored in the real time as the transaction completions must pass through the US financial institutions.
The UN, USA, and the other world institutions should take the lead in implementing & reinforcing of the anti-money laundering laws universally, alike, including the financial institutions of the developed & developing nations and the tax heaven countries. The US has been doing an excellent job in monitoring and seizing the money laundered accounts of the drug lords, politicians, the ruling elite, the hostile rulers, including the countries who harbor or promote terrorism activities, within and beyond of their own borders. Additionally, through the Treasury Department, the US has been enforcing the laws by going after the violators (local and foreign banks and financial institutions) and punishing them by levying hefty fines and imprisonment of the bank officials, if found in violation of the US money laundering laws. The US in cooperation with the multi & bilateral donors and the United Nations concerned agency can very easily extend the scope of the well proven US laws to stop the corruption and the money laundering by the corrupt politicians, fugitive leaders, and the self-exiled ruling elites of the developing countries.Here is a great example about the US outreach in prosecuting and punishing multinational actors involved in the famous corruption scandal of the recent past. As part of the anticorruption and money laundering investigations related to Malaysia, the US authorities charged Goldman Sachs’ Group, one of the major US investment banks for violating the anticorruption laws in handling Malaysian Sovereign fund, known as 1MDB. This is the same fund that brought the downfall of the then Malaysian Prime Minister, Najib Razak.Just last week (October 22, 2020), the bank has agreed the violations settlement of more than $5 billion with the US Justice department and other agencies. According to the US prosecutor, this is the largest penalty in the US history for a violation of the Foreign Corrupt Practices Act initiated by a foreign government. Goldman Sachs’ current CEO will get a hefty pay cut along with several executives, even though they were not directly involved with the fund. Also, bank’s former CEO and other executives will claw back their compensation for the violations happened under their watch.
This case also shows that the developing countries can also devise a mechanism within their own banking system to monitor the accounts and their activities to alert for the corruption and money laundering suspicions. For example, if any transaction (opening of the US dollars based accounts, withdrawing, transferring , etc.) is conducted beyond a pre-defined amount limit in the US dollar denomination(e.g. if more than $100,000), the banks must inform the transaction immediately to the, Central Bank, Foreign Exchange Authorities, Anticorruption Agencies, etc. of the nation. This will not only expose the corruption in a timely fashion but will also bring shame and humiliation to the corrupt elements of the society. Additionally, the corrupt elements must be prosecuted swiftly and not only the stolen funds must be recovered but also punished harshly and never allowed to leave their own country for any reason. No one should be considered above the law, including the banks, its management and their relevant staff associated with the US dollar banking infrastructure. If any of its staff did not follow the banking rules and let the dollar denominated transaction went through by violating its limits, the individuals must be punished, along with the executives and the bank with hefty fines and even jail time, without any provisions of bail.
Prime Minister Imran Khan came into power with the premise of prosecuting and recovering the looted money from the former corrupt leaders and their cronieswho had accumulated their domestic and foreign assets through the embezzlements and money laundering. Now, it is more than two years since the current government has been in power but there has been no recovery of the funds except talking about the NROs while the absconders are staging more challenges to the government by creating artificial shortages of the essentialcommodities, price escalations and black-marketing. If the PM really wants to leave his legacy as one the greatest leaders of Pakistan, he needs to use his political will &capital in making dramatic amendments in the existingcorruption & money laundering laws (that are the reflection of the colonial period), enforcing them without any exception, including his own party members,cabinet and the entourage of the advisors.Now is the time for the PM Imran Khan to show his strong leadership and unwavering drive for making Pakistan a safer and prosperous country by building stronger economy, public health, first class education to complement with the digital era, improved infrastructure, and an independent judiciary. All these foundational changes will not only make Pakistan a great nation, as was dreamed up by the founders of the country,but it could also beused as arole model for the other developing countries to follow.