draining development.pdf - Khazar University

396 Draining Development?majority. To accomplish this, it allegedly began paying certain legislatorsan amount that eventually reached around US$12,000 per month. Tofinance some of these payments, senior Workers Party leaders allegedlycontacted Marcos Valerio, a wealthy Brazilian businessman, to assist inmaking the payments. In exchange for a sham contract from the Braziliangovernment for his advertising firm, SMP&B, Valerio was asked toguarantee a loan made to the Workers Party by Bank BMG. The WorkersParty defaulted on this loan, and Valerio paid the loan with funds fromSMP&B, creating a kickback payment from Valerio to the Workers Party.Cash payments were then made from the party directly to legislators.Comments on the cases. These cases illustrate the variety of ways thatregimes generate corrupt moneys and use them internally, including—in Estrada’s case and in other cases about which the risk of suit for defamationinduces caution—local property, suggesting that the perceiveddanger of subsequent sequestration was low. Leaders and extended familyor clan members may also enjoy and want to be seen to enjoy a higherstandard of living within their own countries (though this does notemerge in the case studies above). Also, though infrequently, the casesshow the drip-feed of funds for local patronage. Wrong’s account (2000)of the Mobutu regime and the ever-increasing number of grands légumeswhom Mobutu found expedient to buy off and neutralize expresses thisparticularly vividly. Given the investigations and prosecutions in Francerelating to deal making in recent decades, it would be a mistake to viewpatron-client relationships and their corrupt manifestations as a featurerestricted to developing countries; nor is a developing country necessarilyprone to heavy corruption and such relationships. It is important toanalyze carefully what an AML regime would require in developing anddeveloped countries (including parallel cross-country investigations) toidentify such activities and engage in appropriate preventive or criminalenforcement actions. It must be emphasized that the integrity and confidentialityof national FIUs, though important, is not sufficient for asystem to work. There must also be confidence among potential SARwritersthat information will not leak to those on whom they are reportingor to their allies. The risk of the use of personal violence by kleptocraticregimes is real both against those who submit SARs and anyinvestigators and prosecutors who are not corrupt.