draining development.pdf - Khazar University

How Well Do Anti–Money Laundering Controls Work in Developing Countries? 385are stored in American, British, and Swiss banks as a part of a strategy,presumably, to avoid confiscation should there be an unfriendly regimechange at home. However, because many regimes involve political clientelism,it seems likely that some of the funds, even if they originate inWestern financial institutions, are recycled domestically in developingcountries (Warutere 2006; Wrong 2000, 2009; ongoing allegations inNigeria). Although Mobutu (like other high-living suspect African,Asian, Caribbean, and Latin American leaders) undoubtedly required agreat deal of money to purchase and maintain properties overseas,Wrong (2000) makes a convincing case that he was more interested inpower than in money. Mobutu needed large amounts of cash in what isnow the Democratic Republic of Congo, as well as the ability to conferwell-remunerated government posts on the grands légumes (big vegetables:the elite) who sought to feed at his table without actually doinganything other than not opposing him. The redistributed bribes gaveMobutu the ability to defuse threats and monitor and act effectivelyagainst internal abuses by potentially rival rent seekers.It may be hypothesized that some institutional variables may affectthe relationship between financial institutions and the vulnerability tocorruption, though a report of the Eastern and Southern Africa Anti–Money Laundering Group discusses the variables as a static preordainedclassification rather than as a dynamic process that can change over timeand place. 18 It seems plausible that an additional cultural-personalityvariable is whether the bribe recipients are—in the typology of theKnapp Commission investigation into police corruption in New York in1973—meat-eaters (actively in search of rent-seeking opportunities) ormerely grass-eaters (passively accepting the bribes offered to them).Another important dimension of the visibility of the corruptionlaunderinglink is the origin of the corrupt funds. Large blocks of fundsfrom bribes in the awarding of large contracts to transnational corporationsmight be more visible than smaller, more frequent insider contractsto non–arm’s-length companies. Import monopolies or privilegesamong family members or party members might be one importantroute for rent seeking. There might, however, be nothing wrong, on thesurface at least, with the awarding of national or transnational contractsto the relatives of senior public officials directly or through companiesthat may be known to be associated with such officials or more obscurely