draining development.pdf - Khazar University

386 Draining Development?held. 19 Whereas, in other cases, bribes, shares, or charitable donationsmay be given in return for permission to engage unmolested in illegalenterprises such as drug trafficking, and these bribes may sometimes,ultimately, help finance terrorism, as in Afghanistan (U.S. Senate 2009),the privileges assigned to family members as in the cases described abovemay, at the other ideological extreme, merely finance conspicuous consumption,private education (schools and universities), and health careoverseas. How and in what countries and currencies are the latter paidfor? A typology is proposed by the Eastern and Southern Africa Anti–Money Laundering Group (see table 12.1).This typology leaves out the fact that financial institutions may simplybe afraid of or feel loyal to the national leadership—who may belongto the same ethnic group—and may benefit from the trickle down symbolizedby the first part of the title of Wrong’s book (2009) It’s Our Turnto Eat: The Story of a Kenyan Whistle-Blower. Therefore, the bank maycontinue to launder money for its friends or may avoid doing so out of afear of capricious closure or other economic detriment caused by thosein power.This typology also assumes that the financial institution has detectedthe laundering (or is in a position to do so with modest effort). If theTable 12.1. Vulnerabilities in Financial IntermediationCategoryABCDCharacteristics of afinancial intermediation institutionThe institution involved is corrupt frominception.The institution is corrupted by subsequentchanges in ownership or management orin the operating environment.The institution has corrupt employees whoprovide money laundering on an ad hocand noninstitutionalized basis.The institution unwittingly facilitates moneylaundering because it has no mechanismsto detect money laundering.CommentThe institution is primed to be a vehicle formoney laundering; its use to launder theproceeds of crime is thus inevitable.Although not at first intended to be avehicle for money laundering, it eventuallydrifts in that direction.The institution could be separated from thecorrupt employees.Although the institution may not benefitfrom money laundering, it sabotages theAML system.Source: Goredema and Madzima 2009.