claims UN advisor
Drugs and crime chief says $352bn in criminal proceeds was effectively laundered by
• Rajeev Syal
• The Observer, Sunday 13 December 2009
• Article history
Drugs money worth billions of dollars kept the financial system afloati at the heightii
United Nations of the
global crisis, the ' drugs andcrime tsariii
Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence
has told the Observer.
that the proceedsv of organised crime were "the only liquid investment capital" available to
some banks on the brink ofvi collapse last year. He said that a majorityvii of the $352bn
(£216bn) of drugs profits was absorbed into the economic system as aresult.
This will raise questions about crime's influence on the economic system at times of crisis. It
will also promptviii further examinationix of the banking sector as world leaders, including
Barack Obama and Gordon Brown, call forx new International Monetary Fund regulations.
Speaking from his office in Vienna, Costa said evidence that illegal money was being
absorbed into thefinancial system was first drawn to his attentionxi by intelligence agencies
and prosecutorsxii around 18 months ago. "In many instancesxiii, the money from drugs was
the only liquid investment capital. In the second half of 2008, liquidityxiv was the banking
system's main problem and hencexv
Some of the evidence put before
liquid capital became an important factor," he said.
xvihis office indicatedxvii that gang money was used to save
some banks from collapse when lending seized
up, he said.
were funded by money that originated from the and other
illegal activities... There were signs that some banks were rescued
that way." Costa
declinedxxi to identify countries or banks that may have received anydrugs money, saying
that would be inappropriatexxii because his office is supposed to address the problem, not
apportionxxiv blamexxv. But he said the money is now a part of the official system and had
been effectively launderedxxvi.
"That was the moment [last year] when the system was basically paralysedxxvii
xxviii because of the
unwillingness of banks to lend money to oneanother. The progressive liquidisation to the
system and the progressivexxix improvement by some banks of their share valuesxxx[has
meant that] the problem [of illegal money] has become much less serious than it was," he
The IMF estimated
that large US and European banks lost more than $1tn on toxic
assets and from bad loans from January 2007 toSeptember 2009 and more than 200
under duress xxxvi
lenders went bankrupt. Many major institutions either failed, were acquired
, or were subject to government takeover.
Gangs are now believed to make most of their profits from the drugs trade and are estimated
to be worth £352bn, the UN says. They have traditionally kept proceeds in cash or moved it
offshorexxxviiBritish bankers would want to see any evidence that Costa has to back his claims. A British
Bankers' Association spokesmanxxxviii xxxix
to hide it from the authorities. It is understood that evidence that drug money
has flowed into banks came from officials in Britain, Switzerland, Italy and the US.
said: "We have not been party to any regulatoryxl
dialogue that would support atheory of this kind. There was clearly a lackxli of liquidity in the
system and to a large degreexlii of this was filled by the intervention
of central banks."
floating on water
She spent seven days afloat on a raft.
He managed to keep/stay afloat by holding on to the side of the boat.