European Parliament: Loretta Napoleoni


Parlamento Europeo - Loretta Napoleoni (1 aprile 2009)
(21:08)
napoleoni1.jpg



In the absence of cocaine, the GDPs of many western countries would collapse totally. The organised crime syndicates invest hundreds of billions of Euro of cocaine revenues each year into real estate, shares and companies. Cocaine is a driving force for the economy, but equally the economy is a driving force for cocaine. The cash crisis has had no effect on the Mafia groups, who are now able to go on a global shopping spree at bargain-basement prices thanks to the current financial crisis. He who controls the capital controls society. But who controls the controller of the capital? Financial systems and terrorism expert Loretta Napoleoni appeared alongside me as speaker at the European Parliament in Brussels on the first of April this year.

Text of the address
Financial Fools' Day

Il Patriot Act and money laundering

The alliance between the Columbian drug traffickers and the "ndrangheta"

A gang of delinquents

Financial Fools' Day

"Let me begin by saying that if you were feeling a little depressed up to now, after my address you will be feeling totally flat!
Today is a special day, because in London, where anti-capitalism demonstrations have been going on all day, and The City in particular, where the majority of the demonstrations have been well attended, today has been named Financial Fools' Day, or the April Fool’s day of the Financial World.
I think that this is quite an amusing way to describe the people’s anger and desperation regarding an economic crisis that was created by the banks, not only the Italian banks unfortunately, but also by other banks around the world, an epic crisis that no one seems to be able to handle in the first place. The members of the G20 will be meeting tomorrow in the hope that, in those few hours during which they will meet and take lots of photographs, they will be able to resolve all of the world’s problems, something that is highly unlikely to happen, and somehow these demonstrations in London are telling us that people are sick and tired of all these stories and no longer believe them.
I am an economist by profession and I can assure you that this is not a good time to be in this profession. When I deliver these addresses, many people expect me to haul out a turban and a crystal ball, because the truth is that economics and predicting the future are seen as one and the same. So today I thought that, instead of talking about the future, I would rather tell you a story about the past because I believe that in some way history must be our guide. This is something that we often forget and we have, in fact, completely lost our historic memory.
I would like to tell you about the phenomenon of economic interdependence, about how a piece of legislation introduced in one particular Country, and here we are talking specifically about the Patriot Act, which was a piece of legislation aimed at blocking the funding to terrorist organisations, eventually created a terrible and detrimental situation in other Countries, in this case Europe as a whole, turning Europe into the money laundering capital of the world, all of this between September 11 and now. This has occurred under our own eyes without us even realising what was going on.
The story begins with so-called deregulation, which the world leaders will be discussing tomorrow in the hope of reducing the damage done by deregulation. Many of the problems that you have heard about regarding the banks are precisely linked to deregulation, to the lack of legislation and to the fact that the banks were granted high levels of freedom with very little control by the State.
What happens with deregulation? In essence, it amounts to the removal of financial barriers and the removal of financial legislation and the controls between two countries. But who has benefited from this? As a matter of fact, it is not only organised crime that has benefited, but also the entire underground economy and the militant groups.
And so, the period between the early nineties and 2001 saw the establishment of a new economic system, which serves the interests of these groups, resulting in the establishment of joint ventures, such as the relationship that existed between the Columbian FARC movement and the drug traffickers, and associations are even formed by various militant groups and criminal organisations in order to exploit a number of financial channels in order to launder dirty money.
Prior to 11 September, the total value, the turnover, the GDP, or the cash production if you will, of this economic system amounted to some 1,500 billion Dollars, in other words approximately 5% of the global economy, almost all of it in Dollars, in fact about 90% of this cash production was in the form of Dollars. The Dollar was the currency of choice, specifically the 100 Dollar bill. Much of this flow of dirty money was laundered in the United States, in Dollars, via the financial havens in the Caribbean Islands.
In actual fact, this money laundering activity was beneficial for the American economy because it acted like a cash injection, which we discover when we analyse the data relating to the supply and demand for the American currency. From the mid-sixties through to 2001, a certain amount of new money, namely the bills printed annually by the Federal Reserve, was illegally taken out of circulation in America in suitcases or cardboard boxes that left the country in the form of boxes required for removals, etc, illegally in other words, and this money went towards satisfying the demand for cash, not only from criminal elements, but also from terrorist organisations and various other sectors of the underground economy.
In 2001, two thirds of the new supply of American currency, in other words the money printed in 2001, left the United States in this manner, a cash supply equivalent to 500 billion Dollars, which means that cash growth in the United States was lower, thereby increasing the internal demand for American currency and thus increasing the demand for money from outside the borders, which was satisfied by the currency provided by the criminals, the terrorists and the underground economy. However, there is yet another very interesting aspect of this inter-relationship, namely the fact that the Dollar is the global reserve currency, which means that the American Treasury can take out loans against the total number of Dollars in circulation worldwide, so the American national debt is equivalent to the number of Dollars in circulation in the entire world.

The Patriot Act and money laundering

Clearly then, if the underground economy demands an increasing number of Dollars every year, then the United States can get increasingly deeper in debt, but this only holds true for the United States because it is part of the so-called "seignorage".
This does not occur in Europe, because, for example, the European Central Bank cannot issue bonds for any sums in excess of the number of Euro in circulation in the EU member Countries, even though there may well be a large amount of Euros in circulation in the United States or even in Asia, Africa, etc, so the United States are in an ideal position, or rather they were in an ideal position until September 11, but why is this? Because the situation changed radically after September 11.
As you are all well aware, the Patriot Act, which is a piece of anti-terrorist legislation, was introduced in November 2001 and it is the financial implications of the Patriot Act that is of interest to us. The objective of the Patriot Act was to limit the amount of funding destined for terrorist groups, however, clearly this objective was never actually achieved because, in fact, it is legislation against money laundering, as proven by the following two basic elements of the Patriot Act: 1) it prohibits American banks and foreign banks registered in the United States from having any business dealings with any banking institutions based in the Caribbean tax havens.
The second interesting element is that the Patriot Act allows the financial authorities to monitor all Dollar transactions worldwide and if any American bank or foreign bank operating in the United States fails to notify the authorities about any suspicious transaction, said bank is deemed to be criminally liable and we know of some very interesting cases including not only "Lloyds Bank", which was one of the latest banks to be penalised and was forced to pay some significant fines, but also USB, etc. So what is actually going on? What is happening is that the Patriot Act was only introduced in the United States and is only applicable to the Dollar, so it has totally revolutionised the cash flows of the legal economy and the underground economy alike.
Let us firstly look at the legal cash flows. Clearly the international banks did not like this piece of legislation because, as we heard a little while ago, back in 2001, no one wanted any Patriot Act introduced in another country that would enable outsiders to scrutinise any dealings between a bank and its customers, so what happened next? What happened next was that the international banks advised their customers to abandon the Dollar Zone and switch to the Euro. The Euro was the new European currency that had just recently come into circulation, so it offered numerous opportunities and, above all, Europe did not have any legislation similar to the Patriot Act and indeed there were tax havens in existence in Europe that worked very well, with no one checking up on anything. Thus we see a flow of money away from the Dollar and into the Euro and it is very interesting to examine the correlation between the introduction of the Patriot Act, the start of the fall in the value of the Dollar and the beginning of a renaissance in the level of interest in Europe. A group of OECD economists did some research, looking for some correlation between the various data, which in essence revealed the following: the introduction of the Euro coincided with the end of era of the Dollar, but this does not relate solely to legal monetary flows and an important aspect of the switch to the Euro is also seen in the underground economy, where the criminal world found itself in a rather complex situation and began wondering where to go next. Money laundering was no longer possible in the United States and it was becoming increasingly difficult to repatriate their money, because the problem of money laundering is a twofold problem, namely, not only how to launder the money in the first place, but also how to get the proceeds of the criminal activities back into your hands. There were a number of potential schemes available, for example the “black pesos money exchange” scheme run by the Columbians, where the drug traffickers acted as veritable currency exchange agencies. How did the scheme actually work? Perhaps there was a Columbian businessman who wanted to go to the United States, without alerting the financial authorities that he would be taking money abroad and thereby having to pay taxes as well as having to convert the money at the official rate of exchange. He would go to one of these currency exchange agencies, hand over his Pesos and then, once he arrived in New York, someone would deliver a briefcase full of Dollars, which Dollars obviously originated from cocaine sales by the drug traffickers.

The alliance between the Columbian drug traffickers and the "ndrangheta"

The basic problem was actually a totally different one, namely that during the 90’s, thanks to globalisation, revenues from the sale of drugs had increased exponentially and the drug traffickers had to find new ways to launder these revenues on an industrial scale since the sums involved were enormous and I’m telling you that 80% of all money laundering is done by means of cash, so the “black pesos money exchange” scheme was physically unable to cope with this amount of money. It was at this point that an Italian emigrant to Columbia, a man by the name of Salvatore Mancuso, who had become the commander of the paramilitary unit of the AUC, had a brilliant idea and decided that the best thing to do would be to put his buddies in the “ndrangheta” in contact with the Columbian drug traffickers, and thus a fantastic alliance was born, in the sense that it represented a new start for the Columbians, and this is the truth!
Why a new start, you ask? Because it provided them with an opportunity to export cocaine to another continent, instead of simply a neighbouring continent that was rather limited in the sense that the cocaine simply moved from South to North into the United States. Now there was this new opportunity to bypass the restrictions imposed by the Patriot Act since Europe is a place where it is easy to launder money, as there is no legislation in place to control and punish these types of business activities.
So what happened next? A proper business is established to sell cocaine, where the cocaine exported from Columbia would initially arrive in Calabria and, from Calabria, the “ndrangheta” would proceed to distribute it via its own network, a network that it had built up for itself in Europe. Here we must pause for a moment to point out that all of this was only possible because the “ndrangheta” already had an existing European network, the only organisation with such a network at its disposal since neither the “Cosa nostra” nor the “Camorra” had any similar network in place. So the “ndragheta” had this widespread network, not only extending throughout Europe, but essentially worldwide, a network created by the dispersion of millions upon millions of people from Calabria who had moved abroad over the past 30/40 years as foreign immigrants, so the “ndrangheta” was not only in the right place at the right time, but also used its brains in that, instead of offering high-ticket services, they did the exact opposite, offering the drug traffickers a low-cost importation, sale and money laundering service through the network, because the network also included a number of attorneys, accountants and real estate agents who collected the money as soon as it came in and, thanks to the existence of the Euro, moved the funds from one Country to another, investing it in real estate because this network, working in conjunction with various real estate agencies, in essence launders money and generates profits, which are then legitimately repatriated to Columbia via the formal banking system.
The “ndrangheta” handles all of this for a 30% cut. In the United States, following the introduction of the Patriot Act, the laundering of drug revenues costs the drug traffickers around 60%, so the “ndragheta” offers a fantastic service. Furthermore, according to the available intelligence, the organisation is able to market the cocaine on the European market by selling it at a very low price, thereby competing with the so-called lighter drugs rather than with the more expensive drugs, and so we see that between 2001 and now there has been an exponential increase in the use of cocaine as the preferred recreational drug of the middle classes, so you see how easy it is? It is therefore true that all anyone needs is a brain and an established network. This is the current reality, namely, there are no laws and there are no controls in place. Just think that this money laundering is occurring via the real estate sector and it is thus very difficult to control because, for example, the Deeds Registry Office on the Costa del Sol has no way of communicating with the Deeds Registry Office in London, so they will never know whether the same company is busy making purchases in various locations in Europe, either simultaneously or at different times and, furthermore, there is no system in place to monitor the financial and cash transactions in Euro that may be taking place across European borders, there is no such thing!

A gang of delinquents

Therefore, the situation in Europe is currently ideal for the criminal element and that is why Europe has become the money laundering capital of the world. Now let’s examine the latest development before we all go home. The latest developments began in 2005. Demand for cocaine was increasing exponentially because the drug was cheap and fun, the “ndragheta” had done a marvellous job of marketing the drug and it was becoming increasingly difficult to keep up with the speed required in transporting the drugs, so what was decided? They decided to utilise Guinea Bissau as a trans-shipment point, the latter being a final destination point from where the drugs generally distributed. A smart idea because Guinea Bissau is easily reached within 3 to 4 hours by means of light aircraft and or tourist aircraft from Columbia or from Venezuela, because a lot of these drugs come through Venezuela. And so Guinea Bissau becomes a drug trafficking country and is promptly colonised by the drug traffickers, who then organise warehouses where the incoming drugs arrive, are stored and where the European buyers arrive the same day, buy the drugs and take it back with them to Europe either by means of light aircraft or small boats.
The truth is that currently, all it takes is one week for the drugs to get from the Columbian producer to the consumer in the European disco, and the majority of this trade is controlled by criminal organisations linked to none other than the Italian “ndrangheta”.
So what is lesson to be learned from this story? I can see that you are looking very dejected. The fact is that we need to accept that there is an economic interdependence between the official economy and the underground economy and it is useless for us to attempt to deny this. Many of the products that you buy inevitably contribute to making some or other delinquent very wealthy, not only drugs, and that is a fact. So if we truly want to do something about it, if we want to block this trade and if we want to resolve the current economic crisis, because in reality this crisis was created by the gang of delinquents that are the bankers that have caused the problems we are currently facing, we must firstly accept the fact that this interdependence exists and that we can only get ahead by preventing further cross-contamination of our legal economy by the criminal and underground economy, otherwise the situation I have described will only deteriorate and we will increasingly become the victims!" Loretta Napoleoni

> Loretta Napoleoni’s latest book, entitled: "La Morsa".

Posted by Beppe Grillo at 11:03 AM in | Comments (1) | Comments in Italian (translated) Post a comment | Sign up | Send to a friend | | GrilloNews | listen_it_it.gifListen |
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I know you write in paragraphs, but when they appear in your blog they're not double spaced and so the article looks like one enormous paragraph.

I just delete the message, my eyes won't handle it.


Please double space your paragraphs.


David

Posted by: David B. Monier-Williams | April 25, 2009 03:37 PM


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