Transnational Financial Crime

Nikos Passas, Nikos Passas

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351538503
• Edition: 1
• Topic: Geschichte
• Subtopic: Weltgeschichte

Financial crime affects virtually all areas of public policy and is increasingly transnational. The essays in this volume address both the theoretical and policy issues arising from financial crime and feature a wide variety of case studies, and cover topics such as state revenue collection, criminal enterprises, money laundering, the use of new technologies and methods in financial crime, corruption, terrorism, proliferation of WMD, sanctions, third-world debt, procurement, telecommunications, cyberspace, the defense industry and intellectual property. Taken together, these essays form a must-read collection for scholars and students in law, finance and criminology.

PART I
Theoretical Frameworks

1
Globalization, Criminogenic Asymmetries and Economic Crime

Nikos. Passas*

A. Introduction

We are inundated by press reports and official statements on the danger of transnational crimes, ranging from drug trafficking, terrorism and political corruption to car theft, the smuggling of aliens, nuclear materials and money laundering. The issue is high on the agenda whenever Heads of States meet. Topical as it has become, the problem is hardly new. Sophisticated criminals have always been able to transcend national borders. Governments, corporations, white-collar professionals, as well as illegal enterprises and professional crooks have been committing transnational offences for ages. There is a plethora of documented cross-border crimes, such as piracy, arms trafficking, genocide, environmental pollution and the ruthless exploitation of Third World countries by multinational corporations.¹

What is new in the 1990s, however, is the intense official concern about transnational crime. Just about every international and regional agency has been proposing and implementing policy initiatives and concrete measures. Some of these proposals are quite controversial and risky, as they involve the merging of law enforcement and intelligence services, a certain militarization of policing, privacy piercing methods and the use of undercover operations.² This begs the question: is the threat of transnational crime growing so fast that draconian measures are indispensable or are we overreacting? Is it possible that the proposed cures are as harmful as the problem they seek to solve? Some of these policies are quite drastic and carry risks to democratic principles and transition processes in many countries.

Unfortunately, discussions about the nature and extent of transnational crime are often based on speculation, exaggerations, soft data or false information. We do not have even a universally accepted definition of ‘transnational crime’. In the absence of reliable evidence, the task of policymakers and social scientists is to analyse current conditions and carefully outline what we might expect at least theoretically. This is the first and most essential step before taking policy measures we might later regret. In this paper, the author poses three interrelated questions:

1. What factors cause transnational crime?
2. How does the process of globalization affect such crime?
3. How does globalization affect crime control efforts?

It will be argued that cross-border crime is the product of ‘criminogenic asymmetries’: conflicts, mismatches and inequalities in the spheres of politics, culture, the economy and the law. Globalization multiplies and intensifies such asymmetries. At the same time, there is no widely accepted and effective transnational law making and law enforcement body or mechanism. While the international community becomes a global village, controllers are generally constrained by their divergent domestic rules and limited within their jurisdiction. Precisely when we need better controls, the world is characterized by dysnomie.

Yet, there is no need to panic. The problem appears to be neither new nor out of control. Despite a gradual loss of autonomy, states are still able to do something about transnational crime. The author concludes with policy implications and argues that the best strategy is to make full use of new formal and informal control opportunities, which are also produced by the process of globalization.

B. A Definition of Transnational Crime

While the public debate is ongoing, the definition of transnational crime remains relatively unclear. Some equate transnational crime to stereotyped ‘organized crime’, which crosses national borders. The problems with employing the term ‘organized crime’ or limiting it to Mafia type ethnic associations are well known from the study of domestic forms of criminal enterprises.³ Others distinguish between international crime and transnational crime. International crimes are those proscribed by international law and custom.⁴ Transnational crimes, on the other hand, are sometimes defined as acts prohibited by the penal laws of more than one country.⁵

In the past, only state actors were subject to international law or could refer to it for the resolution of their disputes. Recent developments, however, have completely changed the situation. Individuals can now bring action against state actors and can be prosecuted for breaches of international criminal laws. In this new context, the distinction between the above-mentioned two types of crime is not particularly helpful. More importantly, the reliance on national laws for the definition of transnational crime leads to an impasse. Powerful domestic or international actors can and do influence the laws of nation states. This means that what is a crime and what is not can be decided by corrupt legislators, dictators, ruthless corporations, resourceful lobbies, etc. Should such forces influence the scope of a social scientist’s object of study or a public policymaker’s actions? In addition, even if all legislative processes were well-intentioned and lawful, there is a substantial diversity of laws and standards in the global community. So, we need substantive criteria for the definition of the concept of transnational crime.

In the search for a definition, which avoids the use of one or a few nation states’ standards, one might be tempted to adopt completely non-legal criteria. Yet, this approach can easily lead to a subjective or relativist definition. So, the point is to define transnational crime in an inclusive manner, but without distancing ourselves too much from the law. As a first approximation, the following definition is proposed: transnational crime is cross-border misconduct, which entails avoidable and unnecessary harm to society, which is serious enough to warrant state intervention and similar to other kinds of acts criminalized in the countries concerned or by international law. Crime will be viewed as cross-border when the offenders or victims are located in or operate through more than one country.

C. Criminogenic Asymmetries and Economic Crime

This article focuses on economic crime, which includes state crime, corporate and individual white-collar crime, as well as illegal enterprises (popularly called ‘organized crime’). Most analyses of contemporary transnational economic crime concentrate on control issues, which reflect a certain anxiety on the part of (primarily Western) governments who realize that their ability to address even domestic forms of crime is diminishing. However, a complete explanation of any sort of crime requires adequate accounts with respect to illicit opportunities, motives to take advantage of such opportunities and wanting controls.

Students of global crimes have noted the influence and importance of wars, embargoes, protectionist policies, economic crises, political instability or oppression, supply shortages, differences in values and priorities among states, etc.⁶ These and many other forces contributing to economic crime can be examined under the umbrella concept of ‘criminogenic asymmetries’, which refers to structural discrepancies, mismatches and inequalities in the realms of the economy, law, politics, and culture. Asymmetries can cause crime:

1. by fuelling the demand for illegal goods and services;
2. by generating incentives for people and organizations to engage in illegal practices; and
3. by reducing the ability of authorities to control crime.

The cases illustrating the criminogenic effects of asymmetries are legion.

For example, regulatory discrepancies along with substantial economic and political asymmetries have given rise to an enormous illegal market for toxic waste. Many Third World countries either do not regulate toxic waste or do so much less rigorously than industrial states. This provides the opportunity for companies to get rid of their dangerous waste in areas where rules are lax or non-existent. Rich and ‘filthy’ countries ship their waste to other countries, less able to adequately deal with the ultimate disposal of such imported ‘goods’.⁷

The huge financial and competitive advantages that can be gained by regulatory and cost asymmetries are a strong incentive to profit from illicit opportunities. Additional companies join in because their competitors do it and their survival is at stake. Power and economic asymmetries lead recipient countries to allow all this to go on because of their dependence on foreign investment, the need for cash in order to service external debt and the desire to create jobs. Economic and knowledge asymmetries shape the motivation of local participants in this questionable trade, too. The decision to go along reflects their lack of understanding of the full extent or nature of the hazard, their desperate need for additional income, or corruption.

Asymmetries contribute in complex ways to the absence of adequate controls. In some cases there are simply no controls at all. Technological and knowledge asymmetries are again at play, as local expertise or resources necessary to recognize the risks and deal with the waste are in short supply. Political and power asymmetries play their role when people notice the negative effects, but oppressive regimes disallow protests and ensure that poisoning practices continue unimpeded.⁸ Bribes may be paid to ensure that officials’ eyes remain blind to the injustice and exploitation that takes place in their jurisdiction. Even when governments of affected countries seek redress and international instruments to remedy the situation, powerful Western governments undermine corrective actions.⁹

Many criminal practices are both the result and a cause of asymmetries in a vicious circle. Corruption, for example, is a conservative force that maintains or increases asymmetries. In the Third World, it has seriously hampered social, economic and political progress. Through the transfer of illicit payments to the West, corruption undermines economic development. This, in turn, leads to political instability as well as poor infrastructure and social services, lower education standards, and the non-completion of projects. Funds are allocated unfairly and inefficiently, which frustrates skilled and honest citizens, and increases the general population’s level of distrust. As a consequence, a lot of foreign aid disappears, productive capacity is weakened, administrative efficiency is reduced and the legitimacy of political order is undermined.¹⁰ Political violence and other conflicts are likely to spring up in such contexts, which then give rise to illegal weapons markets and possible connections with drug trafficking as a source to finance arms purchases.¹¹

Corruption is also a consequence of asymmetries. Companies operating in countries with slow and inefficient administrations are tempted to pay ‘speed money’, in order to ‘get the job done’. In other cases, a company may lose contracts, if it is squeamish about matching the bribes offered by other companies. The more non-meritocratic and unequal societies are, the higher is the preparedness of individuals to pay bribes in order to secure a job or other favours.

In that process, controls are weakened; widespread rationalizations of bribery as a necessary evil ease the minds of corporate managers. Diverse interpretations of the public interest may turn a corrupt practice into a patriotic act.¹² Economic asymmetries foster attitudes justifying corruption as functional to local economies and as a way of redistributing wealth.¹³ The more generalized a clientelist system is, the less participants feel that they are doing something objectionable. Moreover, legal asymmetries provide a shield against the discovery or sanctioning of corruption. The funds may end up in a secrecy jurisdiction with anonymous accounts. Additional protection is offered by the differential treatment of bribes to foreign officials. In some countries they are a serious offence, while in others they constitute tax deductible business expenses.

D. Globalization and Asymmetries

These problems increase significantly as a result of the dynamics of globalization, whereby asymmetries are multiplied, intensified and their criminogenic potential is activated. In a nutshell, globalization refers to a set of contradictory processes and dynamics resulting into the transformation of the world order through the multiplication and intensification of linkages and interconnectedness. Capital, goods, services, people and ideas cross borders with increasing speed, frequency and ease. Actions in one country have consequences and significance in distant places. Local events and destinies can hardly be interpreted and understood without looking beyond national boundaries. The world is being reconstituted as ‘one place’ with global communications and media, transnational corporations, supranational institutions, integrated markets and a finan...