draining development.pdf - Khazar University

How Well Do Anti–Money Laundering Controls Work in Developing Countries? 389by prosecutors because of offenses connected with the OECD Anti-Bribery Convention—and the corrupt PEP need to (1) hide the ownershipand control of the assets, (2) disguise the fact that the assets areillegitimate, or (3) do both. One of the most effective ways of accomplishingthis is to interpose accounts under different names or separatelegal persons or other secrecy vehicles or between the origin of the illegalfunds and the ultimate control by the corrupt PEP. Alternativelyexpressed, the successful corruptor simply utilizes the benefit granted tohim (for example, contract, franchise, license, permit, and so on) in alegal way, including tax payments that lawful tax planning requires,while the corrupted official (or bribe-demander) may receive benefitsthe legitimacy of which will appear dubious if a serious, high-qualityinvestigation occurs and must therefore launder the benefits or havethem prelaundered. Of course, if the corrupted (or extorting) official isbypassed because the briber pays the official’s associates or political supporterson the official’s behalf, then the connection with the corruptbenefit may be difficult to prove.We now consider case studies of grand corruption, irrespective ofwhether or not the AML framework might have made a significant contributionto the prevention, investigation, prosecution, or recovery ofthe proceeds. To the extent that the AML framework lacks utility, ourunderstanding of the conditions under which the framework is or is noteffective may need to be nuanced.Case studiesThe Montesinos case offers an unusual amount of insight because of thevideo recordings systematically made by Montesinos and recaptured(and retransmitted on television to a fascinated public). A valuable studyon Peru by Dumas (2007, 3) notes as follows:It was estimated that during Fujimori’s administration more than US$2billion were stolen from the state, a figure equal to nearly 9 percent ofPeru’s current stock of external public debt. A total of US$1 billion isbelieved to have been sent overseas, while Montesinos alone is suspectedto have amassed a fortune worth US$800 million.Dumas focuses on the US$1 billion believed to have been sent overseas,of which US$184 million had been repatriated at that time (mostly