The dominant narrative of the drugs war divides the conflict quite simply into ‘good guys and bad guys’ – murderous drug cartels on the one hand: police, customs and drug enforcement officers on the other. But there is a third actor here, an eminence grise without whose collaboration and collusion, the power of international drug trafficking and organised crime in general would be much diminished – the world banking system.
The role of financial institutions in either actively engaging in money-laundering or at least turning a blind eye and failing to have the systems in place to stop it, is well documented. One of the most spectacular single examples was the collapse of the Bank of Commerce and Credit International (BCCI) in 1991 with debts of £10bn amid allegations of fraud and money-laundering. The bank had lost money hand-over-fist from its lending operations, its foreign currency dealings, and its deposit accounts. It was also the bank of choice for money-launderers and terrorists. Drug money from Colombia and Panama and funding for the Mujahideen in Pakistan flowed through it coffers. So the recent revelations about alleged financial irregularities emanating from Panama should come as no surprise. In his 1987 book, Hot Money and the politics of debt, Professor R.T. Naylor called Panama, ‘a country of convenience’. The result of US crackdown on profligate laundering taking place through Florida-based banks in the early 1980s and subsequent pressure being applied to the Cayman Islands and the Bahamas, “was to reinforce Panama’s position as probably the most important regional centre for financing drug trafficking, depositing the profits and laundering the take”.
Victims of the drug war are now trying to bring the conflict right to the door of the banks. BBC News reported that “the families of US citizens murdered by Mexican drug cartels are suing HSBC, accusing the bank of allowing crime lords to launder billions of dollars. The legal complaint, which was filed in a federal court in Texas, says HSBC’s material support of Mexican drug gangs led to the destruction of multiple lives, including those of the plaintiffs. The legal complaint also argues that by participating in Mexican cartels’ money laundering schemes, HSBC contributed directly to the international drugs trade and the brutality that encompasses it.”
But perhaps the most shocking revelation of all is not the complicity of individual banks or even individual countries, but the claim that the whole of world’s financial system might not be able to operate effectively without the liquidity offered by drug money. This assertion came in December 2009 from none other than Antonio Maria Costa then Head of the UN Office of Drugs and Crime. Quoted in Robert Saviano’s book on the cocaine trade, Zero, zero, zero, the author reports that Costa said “he had been able to ascertain that criminal organisations’ earnings were the only liquid investment capital some banks had to keep from failing”. Moreover without it, the financial crash of 2008 could have been much worse because the system was paralysed, the banks wouldn’t lend to each other, and so drug and other criminal earnings were the only source of substantial liquid cash flowing through the global system keeping it afloat.
Civil society has expressed many justified disappointments over the wording of the outcome document prepared by member states for the UN General Assembly Special Session on drugs later this month. But little if anything has been said about the virtual absence of any genuine commitment to hold the world’s financial institutions to account. There are a few mentions of money-laundering, but expressed as if this is exclusively part of a cartel’s criminal activities like manufacturing and supply and not, as is the case, wholly reliant on the mechanisms and processes of global financial institutions.
To paraphrase The Wire, if you follow the drugs, all you get is drugs. If you follow the money, who knows where it will lead? But given the implications of the so-called ‘Panama Papers’, is there any real political will to go down that road?