Dirty money and its effects

Illegal or dirty money has played a big role in stirring up speculations and increasing prices to astronomical levels in international markets, including the prices of some strategic commodities. This has led to an increase in inflation rates and contributed to the emergence of the global economic crisis.

According to a statement made by Victor Ivanov, head of the Russian Federal Narcotics Control Service, the size of the illegal narcotics' market in the world is close to the size of the weapons or oil markets. He also added that the UN estimates the trade volume of drugs around the world at about $500 billion.

The damage inflicted by this money included the economies of different countries around the world, indicating the existence of gaps in financial regulations and laws. Through these gaps, money laundering operations of billions of dollars are conducted.

Review

This has led the US to carry out a comprehensive review of its financial legislation, with the aim of filling any gaps that allow the flow of dirty money into the US economy.

There are funds generated through suspicious deals and illegal exports, especially those that are carried out in African developing countries. These funds are transferred to American and European banks through isolated markets that lack transparency and legal systems, such as those present in remote islands.

In such places, money transfers and management of bogus accounts without regulations are possible, in addition to the system of secret accounts that the European Union is demanding to be cancelled.

The strange thing is that a large portion of the funds that agitated the financial crisis, entered the US with the assistance of lawyers and bankers who exploited the same gaps suffered by the US financial legislation system.

These activities included major markets around the world that enjoy high liquidity, and their financial and banking structure allow the flow of funds through various means.

These financial crimes did not spare some Arab markets, especially as these markets' legislations and financial systems need to be developed to close gaps as in American and European markets.

Similarly, as an important establishment collapsed in the West as a result of dirty money, a leading Arab country officially accused the head of a collapsed group with money laundering. Tens of banks and financial establishments were harmed in the region as a result of its collapse. The group's work expanded quickly, reaching very important markets around the globe.

Efforts

The US efforts are a part of several other efforts aiming at easing the financial crisis that was on the verge of destroying the international economy as a whole.

Treating the aftermath of the crisis cannot be restricted to offering hundreds of billions of dollars to collapsing banks, nor encouraging investments to limit unemployment. Hence, the gaps that will allow a crisis recurrence have to be filled in, to avoid the emergence of another crisis in the future.

Despite the fact that US financial legislations were considered ideal, they suffered dangerous gaps; hence there are also gaps in the European and developing countries' financial systems, which need to be fixed to avoid additional implications of the crisis, which greatly damaged the international economy.

In principle, these legislative shortcomings cannot be entirely avoided, because dirty money can always infiltrate international banking systems, especially as the profits are huge.

However, minimising these operations will no doubt reduce the damage inflicted upon international markets, especially at times of crises.

Coordination between countries around the world to complete their financial legislations and exchanging expertise in this field is highly demanded to activate the procedures aiming at fixing the international economic crisis repercussions.

Dr. Mohammad Al Asoomi is a UAE economic expert.