Eric Le Boucher
Le Monde
Saturday, June 30, 2007
Originally published in French

One of the biggest foreign investors in India is… the Mauritius Island. Greater than France, Great Britain, or the United States. Kannan Privanisavan, professor at Melbourne in Australia, tells of this strange phenomenon. “The maharajahs invested their fortune in London, as they have always done,” he explains. “The nouveaux riches and many of the firms continue to place, either legally or illegally, their profits in the banks of the City. From there, the money sets off again on a long circuit which arrives at Mauritius, the little paradise. Then, under falsified identities of their true owners, the money re-enters India without being taxed.”

The non-governmental organization Global Witness has revealed on Tuesday [June 26] that Denis Christel Sassou Nguesso, the son of the president of the Republic of Congo, would have spent, in August 2006, “$35,000, the product of petroleum sales from his country, for extravagant purchases in Paris, Marbella and Dubai.” The organization set out photocopies of a long series of checks for Louis Vuitton bags [and other luxury goods], and another, more unexpected [expenditure] of €2,500 spent at Decathlon, on what must have made for an impressive quantity of running shoes. The problem is that the Congo made promises, in the past year, when the agreements for debt forgiveness [were] concluded, to restrain itself from “all conflicts of interest in the commercialization of petroleum.” Sassou Ngesso junior is the director of Cotrade [Congolaise de Trading], a subsidiary of the crude. We do not know the response of the Congolese presidency [to these accusations] at the time of writing this article.

According to the economist Gerald Epstein, the total amount of money illegally leaving Africa since 1995 would have reached a total of $274 million, that is to say 145% of the continent’s debt. Like elsewhere, fiscal optimization is a national sport in the United States. According to Senator Carl Levin (D-MI), the Internal Revenue Service could be deprived of $100 million in revenue [which] hav[e] escaped to the Caiman Islands and other fiscal paradises [i.e. secret jurisdictions].

Embezzlement, corruption, fiscal evasion, but also illicit trade [in] contrabands [and] drugs, prostitution, and counterfeiting: dirty money would have taken such proportion to represent “a threat for global stability and prosperity,” according to Raymond Baker, director at CSIS (Center for International Policy) in Washington. This underdevelopment for the purpose of corruption, which has eaten away at so many of the African countries, tends to spread elsewhere to become “the Achilles’ heel” of capitalism (Capitalism Achilles Heel, Wiley edition).

At a conference that he organized Thursday in the American capital, Raymond Baker explained that the structures of the financial world, tax havens, bank secrecy, trustee or nominee subsidiaries, false foundations, money-laundering and innumerable tax niches, have installed global circuits immensely favorable to the proliferation of trafficking and embezzlement. It was discovered, after September 11, that the terrorists utilized these same networks. “The illicit economy is set in the licit economy,” added Moises Naim, diector of Foreign Policy magazine and author of The Black Book of the World Economy (Grasset).

This stolen, diverted, escaped money would represent 2 to 5 percent of the world GDP. Drugs between 120 and 200, counterfeiting between 80 and 120, racketeering between 50 and 100, of total crime money evaluated between 300 and 550 billion dollars. The largest portion remains the practice of internal pricing of multinationals, who exchange the by-products between their various subsidiaries at prices calculated to best escape the tax department. Between 700 and 1,000 billions of dollars per year, according to Raymond Baker.

“The World Bank was hardly preoccupied with these subjects before the 1990s,” explained Daniel Kaufmann, director of Global Programs at this institution. “Then we realized that corruption notably ruins our development missions. September 11 brought it to the attention of the financial circuits, then the Enron affair led to stricter surveillance. But there remains much to do.” With a priority on money-laundering, according to Daniel Kaufmann, who preaches, “in rich countries, to require an enforcement of the rules in financial centers and, in poor countries, to pet pressure on administrative transparency.”

Eva Joly, the former examining magistrate of the Elf business, wished for the creation of an international agency to fight against corruption and dirty money and worried about the arrival of China, which will complicate an already difficult struggle. She got Norway, her country of origin, to announce, at the conference, “to take that lead” in the fight against tax havens and, in the immediate future, decide to finance a study and the collection of data, in agreement with the World Bank and with American senators, Republicans as well as Democrats. Mme Joly regretted that Europen speaks “a double language” on all these questions.

“Crime like everything else is becoming global, all except the response of the law, our only defense against the Darwinian world of murder and money,” wrote, ten years ago, senator John Kerry, former unhappy White House candidate (The New War, Simon & Shuster). Lord Daniel Brennan summarized the issue: “One moved from laissez-faire capitalism to a capitalism of brutality. It is necessary, in the 21st century, to install a capitalism of responsibility.”

Original Article