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Drug money saved banks in global crisis, claims UN advisor

December 15, 2009

Drugs and crime chief says $352bn in criminal proceeds was effectively laundered by financial institutions

Drugs money worth billions of dollars kept the financial system afloat at the height of the global crisis, the United Nations‘ drugs and crime tsar has told the Observer.  Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organised crime were “the only liquid investment capital” available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result.

This will raise questions about crime’s influence on the economic system at times of crisis. It will also prompt further examination of the banking sector as world leaders, including Barack Obama and Gordon Brown, call for new International Monetary Fund regulations. Speaking from his office in Vienna, Costa said evidence that illegal money was being absorbed into the financial system was first drawn to his attention by intelligence agencies and prosecutors around 18 months ago. “In many instances, the money from drugs was the only liquid investment capital. In the second half of 2008, liquidity was the banking system’s main problem and hence liquid capital became an important factor,” he said.

Some of the evidence put before his office indicated that gang money was used to save some banks from collapse when lending seized up, he said.

“Inter-bank loans were funded by money that originated from the drugs trade and other illegal activities… There were signs that some banks were rescued that way.” Costa declined to identify countries or banks that may have received any drugs money, saying that would be inappropriate because his office is supposed to address the problem, not apportion blame. But he said the money is now a part of the official system and had been effectively laundered.

“That was the moment [last year] when the system was basically paralysed because of the unwillingness of banks to lend money to one another. The progressive liquidisation to the system and the progressive improvement by some banks of their share values [has meant that] the problem [of illegal money] has become much less serious than it was,” he said.

The IMF estimated that large US and European banks lost more than $1tn on toxic assets and from bad loans from January 2007 to September 2009 and more than 200 mortgage lenders went bankrupt. Many major institutions either failed, were acquired under duress, or were subject to government takeover.

http://www.readersupportednews.org/off-site-news-section/81-economy/525-un-advisor-drug-money-saved-banks-in-global-crisis

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3 comments

  1. This reminds me of BCCI.Money laundering is still continuing in the west and will never end bcause western financial sytem cannot control it.

    Agha Hassan Abidi should not be forgotten.He helped in nuke program,gave Rs.5 Billion for Gulam Ishaque Khan Institute and left a Fund for needy students.

    May God Shower Mercy on him.


  2. All banks are corrupt but bcci was deliberately targetted by the west becoz of the role it played in helping Pakistan… the bank may be no more, but the nukes are a part of its legacy….


  3. BCCI was targeted because it became the 7th largest bank in the world. Can you imagine that? A Pakistani bank competing with the bigwigs in London, NY, Paris, HK, Toronto, Tokyo etc. If you dont believe this, you can read more online. Everything is available for you to view.

    Inshallah we will rise & rule again soon. We will make a system based on equity, faith, rules, transparency, morals etc and not something which claims to be very holy but is a den of deceit and lies.



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