8/10/2019 Drug Money Saved Banks in Global Crisis, Claims UN Advisor

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Drugs money worth billions of dollars kept the financial system afloat at the height of

the global crisis, the United Nations' drugs and crime tsar has told the Observer.

Antonio Maria Costa, head of the UN ffice on Drugs and Crime, said he has seen

e!idence that the proceeds of organised crime were "the only li#uid in!estment capital"

a!ailable to some banks on the brink of collapse last year. $e said that a ma%ority of the

&()bn *+)-bn of drugs profits was absorbed into the economic system as a result.

/his will raise #uestions about crime's influence on the economic system at times of

crisis. 0t will also prompt further e1amination of the banking sector as world leaders,including 2arack bama and 3ordon 2rown, call for new 0nternational Monetary 4und

regulations. 5peaking from his office in 6ienna, Costa said e!idence that illegal money

was being absorbed into the financial system was first drawn to his attention by

intelligence agencies and prosecutors around 7 months ago. "0n many instances, the

money from drugs was the only li#uid in!estment capital. 0n the second half of )887,

li#uidity was the banking system's main problem and hence li#uid capital became an

important factor," he said.

5ome of the e!idence put before his office indicated that gang money was used to sa!e

some banks from collapse when lending sei9ed up, he said.

"0nter:bank loans were funded by money that originated from the drugs trade and other

illegal acti!ities... /here were signs that some banks were rescued that way." Costa

declined to identify countries or banks that may ha!e recei!ed any drugs money, saying

that would be inappropriate because his office is supposed to address the problem, not

apportion blame. 2ut he said the money is now a part of the official system and had

been effecti!ely laundered.

"/hat was the moment ;last year< when the system was basically paralysed because of

the unwillingness of banks to lend money to one another. /he progressi!e li#uidisation

Drug money sa!ed banks in global crisis,claims UN ad!isorDrugs and crime chief says $352bn in criminal proceeds was

effectively laundered by financial institutions

Rajeev Syal

/he bser!er, 5unday December )88=

g money saved banks in global crisis, claims UN advisor | World n... http://www.theguardian.com/global/2009/dec/13/drug-money-banks-s...

2 27/11/2014 14:54

8/10/2019 Drug Money Saved Banks in Global Crisis, Claims UN Advisor

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to the system and the progressi!e impro!ement by some banks of their share !alues ;has

meant that< the problem ;of illegal money< has become much less serious than it was,"

he said.

/he 0M4 estimated that large U5 and >uropean banks lost more than &tn on to1ic

assets and from bad loans from ?anuary )88@ to 5eptember )88= and more than )88

mortgage lenders went bankrupt. Many ma%or institutions either failed, were ac#uiredunder duress, or were sub%ect to go!ernment takeo!er.

3angs are now belie!ed to make most of their profits from the drugs trade and are

estimated to be worth +()bn, the UN says. /hey ha!e traditionally kept proceeds in

cash or mo!ed it offshore to hide it from the authorities. 0t is understood that e!idence

that drug money has flowed into banks came from officials in 2ritain, 5wit9erland, 0taly

and the U5.

2ritish bankers would want to see any e!idence that Costa has to back his claims. A

2ritish 2ankers' Association spokesman said "Be ha!e not been party to any regulatory

dialogue that would support a theory of this kind. /here was clearly a lack of li#uidity in

the system and to a large degree this was filled by the inter!ention of central banks."

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g money saved banks in global crisis, claims UN advisor | World n... http://www.theguardian.com/global/2009/dec/13/drug-money-banks-s...

2 27/11/2014 14:54