In 1972, a British national of Pakistani origin, Agha Hasan Abedi, founded what he called a “Third World bank” in London. The Bank of Credit and Commerce International (BCCI) became a runaway success, expanding from 19 to 108 branches in three years and its assets jumping from $200 million to $1.6 billion. In less than two decades, it had $23 billion in assets and was operating in 73 countries, with offshoots in Luxembourg and Grand Cayman. It became the first foreign bank to open an office in China.
Through its Third World Foundation BCCI handed out awards to luminaries like Prime Minister Zhao Ziyang of China, Nelson and Winnie Mandela, and President Julius Nyerere of Tanzania (with Indira Gandhi making the presentation). As the bank’s senior staff hobnobbed with presidents and prime ministers and the governments of many developing countries gave it their official business, tens of thousands of small depositors in developing countries trusted it with their life savings.
What only a few people knew was that BCCI also held the accounts of Abu Nidal the terrorist, members of the Medellin drug cartel in Colombia, and Lieutenant-General Fazle Haq, the governor of Pakistan’s North-West Frontier Province, who had set up hundreds of heroin processing plants close to the Afghan border and trucked their output to Karachi in military vehicles.
Among those who did know of that side of its operations were other spy agencies. Saudi Arabia’s Intelligence Chief was a BCCI shareholder. Oliver North used the bank to circumvent a ban imposed by the US Congress on funding the Nicaraguan “Contras.” The CIA channeled money to the Mujaheddin in Afghanistan through BCCI.
Despite making use of its facilities the CIA obviously did not trust BCCI, for it sent out an alert to United States bank regulators when Abedi was acquiring two American banks in the early 1980s. No one in the US government took any action then, but towards the end of the decade, as the Cold War began to wind down, Robert Mazur of the US Customs Department began keeping tabs on a number of BCCI’s Latin American clients, and after a two-year investigation, arrested them and their personal bankers at a fake wedding reception in Miami.
During the six-month trial that followed cooperating witnesses made startling revelations. TIME magazine reported that BCCI had “a clandestine division ... called the 'black network,' which” functioned “as a global intelligence operation and a Mafia-like enforcement squad.” Operating “primarily out of the bank's offices in Karachi, the 1,500-member ‘black network’ used sophisticated spy equipment and techniques, along with bribery, extortion, kidnapping and even, by some accounts, murder.
Senator John Kerry tried to get a full picture of the bank’s high-level skulduggery by convening a panel and holding hearings but it got nowhere: a day after the Bank of England received a letter from him asking for information it closed down BCCI and sealed its records. When ruined depositors sued the BoE for negligence in its regulatory functions it invoked sovereign immunity to dodge responsibility – and disclosure.
The information that did become public showed a nexus of corruption involving drug traffickers, gun runners, organized crime figures and intelligence operatives running “black ops” in support of terrorism, all held together in a money laundering web of “tax havens” that had developed as the British Empire declined in the second half of the 20th Century. BCCI was, in fact, a microcosm of the empire of crime and corruption that people commonly refer to as the global black market.
The Pakistani complaint at the time that BCCI was taken down only because it was stepping on the toes of larger Western banks was generally dismissed but that is impossible in the wake of the $1.9 billion fine US authorities imposed on HSBC in December 2012 -- for laundering drug money.
The fine was the largest in history but it was clearly peanuts for HSBC, considering its admission of failure to adequately monitor over $200 trillion in wire transfers between 2006 and 2009, including over $670 billion in wire transfers from HSBC Mexico. In the same period, its branches in Mexico had also sold $9.4 billion in physical US dollars.
HSBC signed an agreement to mend its ways, but as it claimed that the problem was not criminal intent but managerial shortcomings, it is safe to say that nothing will change. Its shareholders seemed unperturbed at all this, for the company’s share price registered not a blip. That was not surprising, for the Hong Kong and Shanghai Banking Corporation, as HSBC was originally named, had been founded by opium traders in the early19th Century and it had been midwife to the birth of drug trafficking and its conjoint twin, money laundering.
The Drug Trade and Money Laundering
Cleansing “tainted money” has always been part of banking, but until a century ago it was only an occasional ad hoc task. It became an extremely profitable and steady line of business in 1912 because the International Opium Convention declared illicit the most valuable commodity in world trade. In one fell swoop, the ban transformed the opium trade into criminal drug trafficking, and those processing payments became money launderers. HSBC, set up to service the drug industry in its zestful early 19th Century stage, became without any special effort a central player in the new scenario.How the 1912 Convention came to be adopted is a saga of unintended consequences rich in historic ironies.
Opium was a minor item in intra-Asian commerce before the colonial era. Asians traditionally mixed the drug in small quantities with food or drink on festive occasions; the diarrhea that resulted from larger doses restricted overuse. To avoid that side-effect, Dutch sailors began smoking opium in their pipes, and in the 18th Century, the practice caught on among dock workers in Canton. The hunger-dampening effect of the drug quickly made it popular among the poor in China.
As Chinese opium use increased the East India Company saw an opportunity to end the growing drain of bullion imposed on it by Europe’s booming demand for oriental silks, handicrafts and tea. It began exporting opium grown in India to China to finance the European trade. Sales increased from 280 tons in 1779 to 6,700 tons in 1879 and stayed high. There were exports also to Europe, South East Asia and the United States. (In India itself the drug had limited use because of the traditional attitude that addicts are the most unfortunate of people, condemned to descend into the lower order of animals in successive births.)
Those profiting from the trade were the cream of European and American society. The British Crown acquired much of its current vast wealth from its one-third interest in the East India Company, which had a monopoly of Indian opium exports from 1757 to 1834. Other shareholders were all members of Britain’s social and business elite, and the government itself got significant revenues from the Company. In the United States, the “China trade” accounted for many fortunes, including that of John Jacob Astor, who at his death in 1848 was the wealthiest man in the country.
As the debilitating and deadly effects of opium smoking became widely apparent in Chinese society, the Manchu court banned the trade and then prohibited use of the drug; but its edicts proved useless, for traders paid off everyone who tried to enforce them.
When an incorruptible administrator in Canton confiscated and burned the opium stocks in European warehouses, the British went to war (1839-1841). Peking was forced not only to lift the ban but also to open ports other than Canton to foreign trade. A second war (1856-1860) led to more of what the Chinese now remember as “unequal treaties,” requiring Peking to open up the whole country to the drug trade, extend immunity from Chinese law to Europeans, lease Hong Kong to the British, and lift the ban on the outflow of indentured labour.
The demand for free flow of indentured workers reflected the acute need for cheap labour in the rapidly industrializing economy of the United States, and it had the most fateful consequences. Surging Chinese migration in the next few decades created “Chinatowns” in urban America – and their “opium dens” became a matter of raging public controversy.
Opium itself was not a major concern to Americans, for it was widely available in the country, peddled by snake-oil salesmen and sold by pharmacies under various brand names, including Heroin, the Bayer Corporation’s patented remedy for feminine discomforts and colic in babies. But vividly racist allegations by a California newspaper that White women were being sexually debauched in opium dens created a sensation and led in 1905 to the United States Congress banning the drug.
Meanwhile Baptist missionaries in China and the Philippines had begun, on purely humanitarian grounds, a campaign to ban the drug trade. The United States made that a political project as it maneuvered to distance itself from European Powers in China, and the result was the 1912 Convention.
The ban proved as ineffective as 19th century Manchu edicts, and for the same reason: drug traffickers bought off all enforcement officials. However, the outcome was not just social devastation in China. In yet another unforseen consequence, the criminals enlisted by the “respectable” companies to smuggle and peddle the drug soon became their partners. They became eminently “deniable” imperial enforces, instruments of murder and riot on demand.
Also unforeseen was the effect of the ban on the street price of opium: it went through the roof as pushers discovered that desperate addicts would pay extortionate amounts. As the income from drug trafficking boomed, competition for turf became murderous and those who commanded lucrative markets survived by wholesale corruption of the police and civil administration.
The empowerment of criminals became a global phenomenon during the Cold War, with various ethnic mafias becoming, in effect, the criminal arms of governments. In the United States, the flood of drug money strengthened the unconstitutional nexus of power created by the Ismay-Churchill coup of 1946. Congress found its traditional "power of the purse" undermined as drug money financed all kinds of unauthorized and indeed, blatantly criminal activities, including violent “black-ops” and even “secret wars.”
By the end of the 1950s it was amply clear that the prohibitionist approach to drug control had turned out to be completely counterproductive, but by then its criminal/political supporters had grown too strong to allow a change in policy. Instead, there was a deeply cynical move in 1961 to widen the prohibitions to cannabis and cocaine, and a new treaty was adopted in 1971 to ban amphetamines and other psychotropic drugs. Richard Nixon declared a “war on drugs” that over the next two decades resulted in the United States having a larger percentage of its population in prison than any other country. Around the world, brutal drug warriors trampled on human rights and democratic freedoms with virtually complete impunity.
A Global Criminal Empire
The “war on drugs” set the scene for the expansion of the British money-laundering system into the Americas to support the entry of cocaine into the big leagues. The trafficking arrangements were taken in hand by Carlos Lehder, a Colombian with a German father and transatlantic links. In 1979 he bought a 165-acre property in the Bahamas – which had become a tax haven with close links with London – and made it a refueling point for small planes smuggling cocaine from Colombia to the United States.In very short order cocaine use in the United States went from being a high-society indulgence – described by Newsweek in 1977 as “de rigueur at dinners” of the smart set, passed around “like Dom Perignon and Beluga caviar” – to a street drug in America’s decaying inner cities.
Cocaine replaced coffee as Colombia’s main export crop during the 1980s, with production concentrated in areas controlled by the “Leftist” FARQ guerrillas. The use of false flag terrorist forces to protect the drug trade had begun with ethnic armies in the “Golden Triangle” of Burma, Laos and Cambodia in the 1960s, and it has continued in Afghanistan with the Mujaheddin/al Qaeda/Taliban.
The end of the Cold War did not bring relief to Afghanistan for two reasons. One is that the opium trade – now valued at $61 billion annually – needs lawless badlands to produce and process its crops. The second reason is that the “Islamic terrorism” generated by the Taliban-al Qaeda-ISI combination has proved too useful a tool for the political manipulation of diverse societies to be abandoned. It has been called into play along all the routes of opium/heroin exports from Afghanistan: north into Central Asia and Russia, south into Pakistan and India, east into China, and west into the Middle East, North Africa and Europe. In all these places “Islamist” movements have destabilized governments and facilitated not only drug trafficking but every kind of organized crime that generates revenues for the global black market.
As with Asian opium/heroin, the flow of cocaine from Latin America to the United States and Europe has devastated producer and transit countries. Central America and Mexico now have the highest murder rates in the world. North Africa has seen surging rates of “Islamist” organized crime ranging from political coups to slavery, smuggling and car theft; the negative effects have washed all the way down to South Africa.
Drug money now supplements the funding for every terrorist group on the continent, including the “Lord’s Resistance Army” in East Africa, Boko Haram in Nigeria, and the various groups involved in the unending “commercial war” of the Congo. It is also a factor in the piracy that infests both East and West African seaboards.
This global empire of crime did not just happen. Its central reality is the money laundering system Britain developed as its first Empire declined. That system consists of some 70 “tax havens” spread around the world, the most active of them in small former colonies; The City (financial centre) of London is its strategic central hub. Millions of “shell” (benami) corporations operate secret accounts within that structure to manage the trillion dollar proceeds of crime. London not only directs investment flows and propaganda, it helps maximize profits by organizing everything from civil unrest and false-flag operations to military coups, terrorist attacks and wars.
The primary source of funds flowing into the global black market has been the drug trade which – opium, heroin, cocaine, cannabis and amphetamines combined – now generates estimated revenues of some $500 billion annually. Other major revenue streams come from organized crime groups of every description, fat cat tax cheats, rich scumbags seeking to avoid legal responsibilities, and corporations dodging taxes.
Evidence of elite British involvement in managing this system is not too hard to find if we follow the exploits of such “private” security consultants as Aegis Defense Services or Executive Outcomes.
The former, founded by a former Scots Guards officer, Tim Spicer, came to international attention for breaking a UN arms embargo on Sierra Leone with the help of a contact in the British Foreign Office. It next grabbed headlines in Iraq, where it marshaled a network of British Intelligence operatives into what was then the largest private army in the world. In August 2010, the Basler Zeitung reported that Aegis Defense Services had moved its office to Switzerland. The Directors of the firm were, in addition to Tim Spicer and Mark Bullough (a Scots Guards alum who was posted to Mumbai as a “banker” during the 1980s), former British Chief of Army Staff Peter Inge, the former British head of the UN Mission in southern Sudan James Ellery, and John Birch, a retired British diplomat.
However, as part of an unexplained deal he pleaded guilty in January 2005 and was given a suspended prison sentence and fined $500,000. Whether or not the deal required it is not clear, but British Home Secretary Jack Straw said in parliament that the government had known of the coup plot “in late January 2004.” Subsequently, Mann’s penalty was dramatically reduced. He was sentenced to seven years imprisonment in Zimbabwe (where the plot had been uncovered), but served only four; and though given a 34 year spell behind bars at a subsequent 2008 trial in Equatorial Guinea, he was let go after a year.
Why would the British government plot to take power in Equatorial Guniea?
Two reasons: the country is now the main African portal for the flow of cocaine into Europe; and in the last few years it has become the continent’s third largest oil producer.
The more recent case of Bo Xi-lai in China illustrates that the British elite continue to have a decidedly hands-on role in managing their new Empire.
They have been well rewarded.
The cumulative total of wealth stolen from 33 sub-Saharan countries between 1970 and 2010 is an astounding $1.06 trillion. While that was happening, those countries, the poorest in the world, were under all sorts of pressure from international lenders regarding their external debt, which in 2010 amounted to $189 billion [Boyce and Ndikumana (2012)].
Between 2001 and 2010, developing countries as a group lost some $9.1 trillion in illicit transfers from their economies. [Global Financial Integrity (2013)]. More than a quarter of all Latin American household wealth and almost a third of all Middle Eastern and African wealth is estimated to be held in offshore accounts. [Boston Consulting Group’s Global Wealth 2011: Shaping a New Tomorrow]
The total stock of assets managed through the global black market has been valued at $30 trillion, twice the size of the American economy. That massive body of wealth is “underground” only in the sense that it generates no taxes and is not reflected in national accounts; in all other ways it is part of the “overground” economy, a huge corrupting force in world affairs that leaves no country untouched.
Anti-Imperialism Circa 2013
Two developments over the last year have opened the door to coordinated international action that could end this malefic situation. One is the move by African States to set as an international "development goal" the ending of illicit transfers of wealth from their economies. The other is an initiative by Latin American States to put on the international agenda the need to change the prohibitionist approach to drugs. A massive study by the OAS Secretariat has made a detailed case for that, and there is solid empirical evidence supporting a public health approach.
In short, the ground has been prepared for the Group of 77 (developing countries) to package the two issues into a demand for action to end the global black market. This could be done by three specific actions aimed at:
- Ending the prohibitionist drug regime;
- Banning "secrecy jurisdictions" (tax havens); and
- Requiring all corporations to list the real names of their owners and publish their accounts on a national basis.
Part 9 will look into what India must do to get its own house in order.
Read Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, Part 7.
1 comment:
Oh dear, I did not realise that we are still doing it.
Tim
A Briton
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