Let's raise hell about money laundering but we can't really stop it
'The $15 billion initial public offering of Stanley Ho Hung-sun's Sociedade de Jogos de Macau [SJM] has run into concerns over money laundering within the Securities and Futures Commission, sources said.'
WHAT? HAS THE rot spread that far? Money laundering within the SFC itself? What is the world coming to? Goodness knows how we'll stop it now.
Leaving aside the misplacement of words within a sentence, however, this seems a good occasion to stir the pot on common perceptions about the enormous evil of money laundering.
I don't think it is such an enormous evil. What is more, I don't think it can be stopped and any attempts to stop it will only drive it further underground. Law should know its boundaries. What it cannot do it should not try to do.
Let us consider the traditional sources of laundered money - prostitution, gambling and drugs. I have the solution. Stop making these things crimes and they will no longer involve laundered money. The money will be clean from the start.
Most people would probably agree with me about prostitution. Register the prostitutes and pimps, delineate where they may operate and enforce health checks. Pardon me if you don't agree but my native country is the Netherlands and I think it works.
Gambling we have already made legal but we tax it too heavily and thus we encourage non-legal gambling. Modern technology, however, has made it increasingly easy to place non-legal bets. Let's face reality. It is time to end the Jockey Club monopoly, cut the betting duty rates and clean up the proceeds that way.
Drugs is a more difficult one and most people would disagree with me here. So be it. I abhor drug addiction but we have been unable to stop it by outlawing it and only encourage street crime by desperate addicts. Education is a better tool and I think we need to consider some measure of legalisation. OK, you disagree. I won't push this one too hard.
And now let us consider some other reasons that people may want to launder money.
Terrorist financing is the big one these days, largely because it so frightens the United States. It is not quite such a big thing for us in Hong Kong, however. The last time we had any terrorist threat was in 1967, an episode of our history still so abhorrent to us that we recently gave a bauhinia award to one of the chief culprits.
But, leaving this aside, when someone can give me a piece of paper in Hong Kong and say, 'Take this to my uncle in Peshawar and he's good for the money', we have no hope of finding, leave alone choking off, the narrow conduit that is all that terrorist finance requires.
All we do is make legal money transfer arrangements increasingly inconvenient to ourselves and drive underground any transfers to which American banks feel they must object. This does not stop money laundering. It only makes it more sophisticated and further serves to fund the underworld.
Next we get the laundered proceeds of copyright piracy. Much the same applies with the exception that I cannot even get myself worked up about the original crime. Copyright law around the world has swung much too far in favour of big copyright holders to the disadvantage of people who want to listen to some music.
Then we get tax evasion. We can be true hypocrites about this one. We have no real domestic problems with it in Hong Kong. Most of the population is not subject to salaries tax and we have in any case created huge legal loopholes by not taxing dividends, interest income, capital gains and inheritance.
Meanwhile, our economy's fortunes rely heavily on various dodges through which mainland corporations can evade taxes across the border. It is not just taxes, either. The proceeds of straight theft by corrupt officials can make its way through Hong Kong, too. We wash white.
But we can always treat this the Hong Kong way. It's China's problem, not ours, and, in any case, this corrupt money tends to make its way right back to the mainland. As it is then no longer subject to misallocation through state directive, it is invested on market principles and does much better than state-directed funds to help the Chinese economy grow. Beijing ought to thank us.
We must not say this too loudly, however.
Far better that we should make the proper righteous noises about money laundering right up to saying that Mr Ho's ventures in Macau may involve too many informal arrangements for listing in Hong Kong without special oversight.
Very well, let us make these righteous noises. I understand the need.
Nonetheless, I think of money laundering as a victimless crime that is crime only because it stems from other activities we call crime when we really should not call many of them such. And even if we should, there is little we can do about them through measures to stamp down on money laundering.
All that we do this way is seriously inconvenience our financial services, drive them offshore or underground and ignore that our own wealth is still heavily based on making ourselves available to financial misdeeds in the mainland.