Disclosure rules won’t slow Hong Kong’s money-laundering wheels
Effective immediately, [HSBC] retail customers must disclose how their accounts are used, in addition to providing their address, contact details, employment and income history, to qualify for an HSBC account ...
Global banks ... have been stepping up their financial control systems to comply with US and European regulations in a bid to prevent money laundering and terrorist financing as well as enforce financial sanctions against rogue nations.
SCMP, April 3
Let’s start this one back to front. Just what is a rogue nation? The term was coined in the United States and it lacks formal definition. The United Nations certainly has never declared any country a rogue nation.
So what we are left with here is that if a certain blustering New York developer, which has lucked into the US presidency, takes it into his head that some country has offended him, you might find any assets that you have in that country suddenly frozen and any business arrangements cancelled.
Hmmm ... shall we think about this again?
Similarly, terrorist financing is a thing that does not really exist except at a very basic, primitive level. You take a torn piece of paper to a man in Peshawar, he matches it with a piece of paper he has and he gives you a few rupees to buy a locally made Russian gun or some bomb chemicals. Where does that transaction ever touch a global bank?
But government agencies always like to link the terms “money laundering” and “terrorist finance”. It makes money laundering look all the more evil.
At a more sophisticated level, much more sophisticated, we have the drug lords. I see little indication that the sorts of controls HSBC imposes have had much effect on these people. They just switch to smaller banks and pay a bit more. Money greases the wheels. Europe and the US continue awash in drugs.
It was a problem European politicians never faced hundreds of years ago when they chose to base their fiscal revenues on income taxes. They could have chosen land taxes but then they would have hit themselves as the landowners. So they didn’t.
But land taxes would work in the modern context while income taxes have proven a growing nightmare to calculate and collect.
In my view, this noise about money laundering is mostly a scream of frustration by the governments in developed countries that can’t restrain their spending and find their wellspring of revenue drying up when they drink from it too much.
But they don’t dare tell you so because then you might not think money laundering such a heinous crime. They want to make you think it’s all the same as terrorist finance.
And now to the Hong Kong angle. You and I are to be hit with an ever-growing and ever-more irritating stream of niggling little questions about our private lives. None of them will have anything to do with financial security. They are only for a show that our financial system is tough on money laundering.
Meanwhile, the big time money laundering, on which our financial system relies, will continue unhindered. Let me describe it from the chart.
The blue line represents our foreign investment abroad as a percentage of gross domestic product. The red line represents the investment that foreigners make here. They are perfectly matched and three times over the past decade exceeded 100 per cent of GDP.
What flows in, flows right out again, and in big time. I mean BIG.
The green line represents these trends for a normal Asian economy, in this case Thailand’s foreign investment outflows.
Oh, how clean we launder in this town.