draining development.pdf - Khazar University

How Well Do Anti–Money Laundering Controls Work in Developing Countries? 403Developing-country reporting bodies and FIUs might theoreticallyhave an effect in any area except external sources and external accountdeposits. Yet, developed countries almost never receive requests fromdeveloping countries on their own domestic PEPs unless PEPs havefallen from political favor. 33 There are few economies similar to Botswanaand Hong Kong SAR, China, where the anticorruption regimes arewidely claimed to have been a success and where international jurisdictionalreputation is high. However, the political conditions of autonomyare rarely appropriate for pursuing elites while they are in power; noteven in Hong Kong SAR, China, before (or after) its absorption intoChina as a special administrative region, where police and administrativecorruption were undoubtedly endemic at the time of the formationof the Independent Commission against Corruption, were business andpolitical elites the targets of the enforcement and prevention efforts.Financial investigation powers were probably used against the commission’stargets, but the proactive volunteering of suspicions by regulatedbodies characteristic of the ideal-typical AML regime was rare at thatearly period. Rather than being triggered by suspicious activity reports,investigations relied on classic intelligence-led policing operations andthe application of financial investigation tools.There are plausible fears that government knowledge about the wealthand bank holdings of prominent individuals will increase the risk of kidnappingand the levels of extortion in some countries. Banks have madereports to FIUs on leading national politicians, and the information hasleaked back to the politicians. Part of the political capital of leaders suchas Fujimori of Peru, Mobutu of Zaire, and Suharto of Indonesia was thattheir intelligence apparatus was omnipresent, and, whatever the formalconstitutional status of FIUs, beliefs about the penetration of officialbodies are bound to have a chilling effect on AML reporting (and on theaudit of institutions within the country), as, indeed, it is intended tohave. The need to finance this internal intelligence apparatus and to buysubservience, if not loyalty, demonstrates why not all the proceeds andfinancing of corruption flow from poor to rich countries: substantialsums may be needed internally to retain power. One expert source hasobserved that, whereas President Estrada gave contracts and other benefitsto a modest number of his media circle, President Marcos, lacking