U.N. says drug money kept banks in business.
When we think of the international drug trade, we usually think of financial support being funneled to Columbian insurgents or Taliban fighters. Propping up the world banking system is not what usually comes to mind. However, the illicit drug trade may in fact be one of the world’s few growth industries at the moment, with little unemployment, maximum profits, and a plethora of cash-hungry banks ready to lend a hand.
The head of the United Nation’s Office on Drugs and Crime said that profits from the illicit drug trade were being used “to keep banks afloat in the global financial crisis,” Reuters reported last week. In an interview with Profil, an Austrian news magazine, UNODC Executive Director Antonio Maria Costa warned that “in many instances, drug money is currently the only liquid investment capital.” Costa’s Office on Drugs and Crime uncovered evidence that “interbank loans were funded by money that originated from drug trade and other illegal activities,” Costa said. “There were signs that some banks were rescued that way.”
Specifically, Costas said interbank credits have been financed by drug money. “It is naturally hard to prove this, but there are indications that a number of banks were rescued by this means.” While most banks have money laundering rules in place, “now criminals stash their funds in cash sums which can be up to hundreds of millions of dollars.”
Viewed from a macroeconomic perspective, drug money represents scarce investment capital for banks. “In many instances,” Costa said, “drug money is currently the only liquid investment capital to buy real estate, for example.”
Costa would not name any countries or banks which may have been involved. He did note that the current global financial crisis was a “golden opportunity” for crime groups needing to launder money, and that the laundering of illegal funds was “certainly happening across the board,” Veronika Oleksyn of AP reported. Costa said the information came from contacts with prosecutors and banking representatives in various countries.
Costa also told the BBC that South American drug trafficking threatens to economically destabilize Mexico, Central America, the Caribbean and West Africa. He estimated that the worldwide illegal drug economy was now worth about $323 billion per year. “If you look at agriculture markets, it is the most important,” according to the Drug War Chronicle account of the Profil article. “According to our calculations, the wholesale value of illegal drugs is more than $90 billion, in the range of world meat and grain trade. The street trade we access at a volume of over $320 million.”
Photo Credit: typicallyspanish.com
