Friday, September 28, 2012

Martin Wheatley just handed the banksters and their capos a get out of jail card!

While being interviewed on the Today Programme this morning, Martin Wheatley proved that he was going to be no more effectual as a lead regulator than any of his spineless predecessors.

He was being quizzed about the new regime for supervising the LIBOR market (about which see below), but at the very end of the piece, he was asked whether he would like to see banksters who engage in antics such as the mis-selling of PPI insurance, prosecuted and sent to jail. His answer was that such people were made to pay the money back, but he demurred when it was pointed out that thieves in other sectors who stole money were not only required to pay it back but went to prison as well.

His answer was that the word 'thieves' was a strong term, and that in their (FCA's view) misselling was, and I quote;  '...inappropriate conduct which was a long way short of fraud...'

How can we possibly have any faith in a man to regulate one of the most criminogenic markets in the world, when he manifestly demonstrates that he understands so little about the criminal law, or the public attitude towards the organised criminal cess-pit that is the UK financial sector?

This is exactly the same kind of twitchy, lily-livered, fearful attitude towards penalising city crime that has bedevilled the regulation of our financial markets in the past; and which has made the Square Mile a byword for every kind of skulduggery, thievery, fraud, money laundering, institutionalised tax evasion, and general cut-purse activity.

It is exactly this kind of pathetic approach towards financial wrong-doing that is ensuring that the American regulators do not trust us, and who are increasingly being forced back on their own resources to go after the global criminals who find such an easy home in London.

For the record, Mr Wheatley, any mis-selling activity is nothing less than institutionalised fraud at its widest scale. That is why this kind of inflated criminality had to be called 'mis-selling' in the first place because the Government just did not have the moral courage to call it by its real name, 'criminal fraud', for fear of what such a description would do the future of the London market.

When an industry sector is forced to set aside in excess of £10 billion to recompense victims of such crimes, you can hardly call this simply 'inappropriate conduct'! In these few short words, Wheatley, you sent a loud message this morning to every bankster, con-man, huckster and snake-oil salesman that under your regime, it's business as usual. You gave every single one of them a 'get out of jail card free' and none of them will have any illusions but that they are free to carry on defrauding ordinary people out of money they can ill afford to lose on some frolic dreamt up by the organised mafias and criminals who run Britain's banks.

The whole interview this morning with Wheatley was an exercise in the 'same old, same old'!  It contained all the tried and trusted shibboleths, it talked about the need for new processes and procedures to help regulate the LIBOR market. It talked about the importance of the LIBOR structure and what needed to happen to make sure it was never abused again.

The interviewer repeatedly tried to get Wheatley to focus on the question of using the criminal law to bring pressure on the bad guys, and to contemplate using prison as a real deterrent.

Wheatley squirmed, he wriggled, he demurred and he obfuscated. He tried to avoid answering the questions about prison sentences. Eventually, grudgingly, he agreed that prison might be a suitable option for sentencing, but a long way after fining and banning from the industry, and then only in the cases of what he called 'extreme fraud'!

Quite what this man thinks manipulating the LIBOR market is and has been for so many years is, if it isn't extreme fraud, I am not certain. How much more extreme does it have to become?  He admits that LIBOR is very important as a price setting mechanism, he admits its outcomes have impacts on many areas of financial standards, but for some reason, he is not prepared to see that this activity might fall within the area of 'extreme fraud'

Then why does he think the SFO are conducting an investigation if such activity is not extreme fraud?

He clearly does not understand that the only way to regulate a financial market in a way that the hucksters and lob-lolly men who abuse it really fear, is to make them understand that if they break the criminal law, they will be arrested, charged and tried at the Central Criminal Court.

On one issue, Wheatley is quite clear. He doesn't want to have any responsibility at all for supervising the control of the new LIBOR regime. Oh that doesn't mean he hasn't got all kinds of plans and schemes for it, lots of good bureaucratic plans are afoot. This is what Wheatley himself has said about it;

"...Firstly, reforming the current framework for setting and governing Libor. This will include how banks submit data, and whether actual trade data can be used to set the reference rate; the governance of Libor; and whether the setting of Libor should be brought into statutory regulation.

We will also look at alternative rate-setting processes and the financial stability consequences of a move to a new regime and, how a transition might be appropriately managed.
The second area we’ll look at how we work out the best way to tackle abuse.  This will consider the scope of the UK authorities’ civil and criminal sanctioning powers to deal with the type of misconduct we’ve seen.  We'll also look at whether individual persons in banks with a role in Libor setting should be subject to prior approval by the regulator.  

And finally, we’ll look at other areas where price-setting mechanisms are used in financial markets and whether we need to make policy changes. We’ll make provisional recommendations designed to inform the work on benchmark reform being considered globally..."

Well, that's alright then! Lots of good processes and procedures there to get teeth into. But who is going to oversee it all? Not the BBA that's for sure, and this is probably a good thing. The BBA in recent years has been little more than the talking shop for the various banks' interests, a lobbying group, bought and paid for by its members.

On Radio 4 this morning, Wheatly said he hoped that someone would step forward to want to oversee the new LIBOR structure. Asked why the FCA was not the right agency, and you could almost feel his anxiety to dispel that suggestion right away.

No, he said, we are regulators, not market practitioners. He wants to oversee the actions of others, but just as with his predecessors in title, he doesn't want to have any responsibility for ensuring that the new structure works properly. He will say how it should work but he doesn't want to be placed in direct charge of it.

Of course not, that way he might end up being judged on his effectiveness as a regulator and that would never do, because the public might think he wasn't up to the job if he failed in some way!

Just like the SIB and the FSA, the new FCA doesn't want to be given any responsibilities by which it can be measured by empirical standards. This is the prerogative of the whore, power, but without any responsibiity!

Listening to Wheatley this morning, I experienced the same sinking feeling that I used to experience when I heard Hector Sants telling the financial markets to be very afraid of him, or when I heard Adair Turner turning a simple explanation into three paragraphs of complex gobbledegook!

The fact is that we are back to square one again, with a regulator that has no desire to be held responsible for its actions; which cannot understand why stealing people's hard-earned money is not a crime when it is done by a bank; which has no stomach for using criminal sanctions to put errant executives behind bars; and which wants to do a lot of talking and liaising and exchanging information, and travelling to foreign conferences, but absolutely sweet fuck all about putting the bad bastards who have given the London market the cess-pit reputation it has acquired, in jail. God help us all!

Thursday, September 20, 2012

Whatever happened to anti-money laundering transaction software?

New York regulators are investigating whether several major U.S. banks failed to monitor transactions properly, allowing criminals to launder money, according to a New York Times story. The newspaper cited officials who it said spoke on the condition of anonymity. The Office of the Comptroller of the Currency, the federal agency that oversees the biggest banks, is leading the money-laundering investigation, according to the Times. The report said the OCC could soon take action against JPMorgan Chase & Co. and that it is also investigating Bank of America Corp. 
When the money laundering regulations first started to make themselves felt in the global banking sphere, the first thing the banks did was to set up a howl of protest (par for the course), whingeing about how impossible it would be to monitor their client accounts for the purposes of identifying suspicious financial transactions.

Lest there be any doubt about it, the requirement to monitor financial transactions in order to be able to identify suspicious payments was something that no bank wanted to do. Banks don't make money by playing at being adjunct agents of the law enforcement community, they make profits by attracting as much money as they can get their dirty hands on, from what ever source, and providing discreet and confidential banking services to the beneficial owner.

Bankers are morally blind when it comes to the provenance of money, because like Bernie Cornfeld once said, ' has no smell...' Well, alright Bernie didn't say it originally, the Roman Emperor Vespasian did, but it has the same meaning whoever said it!

Banks are adept at ignoring those rules and regulations which either damage their ability to make money or which get in the way of profit. When it doesn't suit them, they will ignore a rule, and it requires a very strong regulator to make them toe the line. Sadly we have not been blessed with such an agency in the UK for too many years.

There has been a considerable volume of technology available for many years to enable banks to apply strong measures to identify suspicious financial transactions.

One of the biggest mistakes that the makers of this software made when developing its capability was that the banks would actually want to use it. Nothing could have been further from the truth. However, they were faced with a problem. Once the regulators were aware of the existence of anti-money laundering transaction software, they started factoring that into their inspection checklists.

There should be no reason why, in theory, that transaction monitoring software should not be a significant support mechanism for the compliance function.
Most systems rely on the development of complex algorithms to determine the likelihood of a transaction being suspicious or otherwise.

I do not necessarily think that these systems are as helpful as the systems that examine a bank's accounts as a whole on a daily basis and analyse changes in account values, volumes and transaction velocities, to determine potential suspicious transactions.

Such systems work by being closely mapped to the individual institution's risk-based policy, (this always assumes that the bank has bothered to calculate such a document), and by tailoring the sensitivity of the different risk rules as closely to the risk policy, to ensure the minimisation of too many false positives, which are the bug-bear of any monitoring system.

Part of the problem was that banks simply were not prepared to spend any money on hiring staff who could or would take the time and the trouble to analyse the transaction alerts properly. Some banks merely disclosed every alert the system identified, on the basis that by disclosing everything, they could not be accused of failing to comply, and that the sheer volume of alerts reported to the law enforcement authorities would so clog up their work-flows, that they would never have the time to get round to actually analysing much of the disclosed material.

So banks began by hiring lots of young kids to become transaction 'analysts', on the basis that by providing the appearance of compliance, would keep the regulators happy. It became a cost of doing business to install a transaction monitoring system, but once it was implemented, very few institutions bothered to take the trouble to make sure it worked efficiently.

Money laundering compliance works because regulators are prepared and willing to take the necessary steps to ensure that the underlying regulations are being complied with.

In the UK, the regulator has published two major reports in which it has reviewed the willingness of banks to comply with the Money Laundering Regulations. Its findings, on both occasions, demonstrated that banks were simply ignoring the letter and the spirit of the laws, in return for grabbing as big a chunk of the world's criminal money as possible.

The US authorities can not complain if they find that major US banks have been ignoring the money laundering regulations and failing to use transaction monitoring software properly, because why should US banks behave any differently from their UK counterparts?  

Now, with the findings against HSBC for the handling of billions of Mexican drug dollars, and the way in which other banks such as Standard Chartered were willing to flout the laws on US sanctions, thus laundering other criminal money, (other banks including RBS are in the pipeline for criminal sanctions for this offence), it is about time that the US regulators started to take a closer look at the level to which these regulations are being enforced, and where necessary, come down heavily on the banks who are playing fast and loose.
The only thing that will bring the world's banking community into line are criminal convictions aimed at the leading practitioners, chief executives, chief operating officers, chief financial directors and above all, the Chairmen of these criminal organisations. A few doses of strong porridge will have a salutary effect!

Sunday, September 09, 2012

Why the revolving door for all the executive jobs means we will never get any real change at the top of the banking manure heap!

I have been reviewing the way in which UK banking and those who regulate it all seem to be members of a private cosy private club, who are always available to be called upon to step up and take another lucrative role on each other's Boards when something nasty hits the air-conditioning! My friend Ian Fraser has commented on this phenomenon before and better than I can, but I think it is still worth repeating.

One of the most obvious and shameful outcomes of the Financial crisis has been the way the regulatory agencies have failed to deal with the evidence of greed, perfidy, and wholesale criminality which has marked out the conduct of business in our major financial institutions. It is only when we come to deconstruct the structure of these organised criminal enterprises, and they are very much a group of mafias, we can begin to understand the way in which they rely on each other for  support in times of adversity.

What we can begin to glimpse is the level of 'regulatory capture' which exists in this unholy alliance, a phenomenon defined as the process by which regulatory agencies eventually come to be dominated by the very industries they were charged with regulating. Regulatory capture happens when a regulatory agency, formed to act in the public's interest, eventually either acts in ways that benefit the industry it is supposed to be regulating, or it fails to act in order to protect the public.

Regulators when they step down from their roles, can virtually always rely on a soft landing and a lucrative sinecure waiting for them among either the institutions they have formerly been supervising, or within the Big 4 audit firms whose actions in so many cases have contributed to the wrong-doing of which their financial clients have later been accused.

With the Retail Distribution Review (RDR) and break-up of the Lead Regulator going on in the background, some big names decided it was the best time to move on, in most cases to more lucrative opportunities.

Peter Smith the Financial Services Authority’s (FSA) head of investment policy left his position at the FSA in June to take up a position with Dubai’s regulator, Dubai Financial Services Authority.

Dan Waters, the former director of conduct risk and asset management sector leader, announced his departure towards the end of 2010 after he decided he could not make the necessary long-term commitment through the set-up of the new regulatory regime. He had previously been head of retail policy and was therefore one of the masterminds of the RDR. He is now Managing Director of ICI Global, a trade body set up last year focusing on the Global Fund Industry

Jon Pain left as head of supervision in 2011 after he decided there would not be a suitable role for him in the restructured organisation. Having joined in September 2008, he was responsible for developing the new regulatory approach after the financial crisis. He moved on to KPMG in July as head of financial services within the risk consulting division.

Sally Dewar the former managing director of risk and board member left the FSA after three years in the role, having originally joined in 2002. Dewar had been responsible for all regulated markets, including the regulation of firms ranging from banks to asset managers, and she moved on to JPMorgan Chase as a managing director.

Katharine Leaman, was formerly the manager of the FSA's professional standards policy team, and left the regulator after more than a decade at the organisation. She became part of the 20-strong professionalism and RDR team in Canary Wharf in her last two years. A former Gerald Edelman director, a firm of chartered accountants,  she is now a senior manager at the Royal Bank of Scotland.

Margaret Cole, left at the end of March after almost seven years with the FSA, most recently as managing director. She had originally joined as director of enforcement in July 2005 and had led the move to a more aggressive approach, heralding a period of record fines and activity. As the first managing director within the financial conduct unit, she was already shaping the future regulation of financial advisers. She will join PwC in the autumn as an executive board member.

See what I mean! But the revolving door moves in both directions.

Take the appointment of KPMG chairman John Griffith-Jones who has been appointed non-executive chair designate of the Financial Conduct Authority (FCA), the body that will replace the Financial Services Authority (FSA).

Griffith-Jones joined the FSA board on 1 September as a non-executive director and deputy chair. He will work with FCA chief executive-designate Martin Wheatley to oversee the creation of the new regulator. Adair (Lord) Turner will remain FSA executive chairman until the move to the new regulatory structure has been completed.

Financial secretary to the Treasury Mark Hoban said Griffith-Jones would play a key role in financial services regulation. 'He understands the challenges facing the financial services sector and this, together with his experience in both chairman and CEO roles, will be very valuable as we move towards the creation of the FCA.'
Griffith-Jones said he wanted to help rebuild consumers' trust in financial services in his new role. 'Having worked in the financial world throughout my professional career, I know how important it is that consumers, investors and businesses have trust in the integrity of the UK's financial services industry and markets,' he said.
He should know, having been in an executive position at KPMG for many years. Just look at the first page of any search engine using the search terms '...KPMG and Scandal...' and see what comes up. Among the entries I found were the following;
'...KPMG accounting scandal...Corporate scandals exposed...'
'...KPMG tax shelter fraud...'
'...K{MG charged with fraud...'
'...KPMG obstructed US tax enquiry...'
You get the gist. Many of the scandals took place in the US and he well may say quite reasonably he was not directly involved. but he was still part of an executive power within the world-wide entity, and these scandals took place on his watch! No doubt his Eton and Cambridge education will have given him a wide insight into the views and concerns of the ordinary man in the street. still smarting from being mis-sold a PPI insurance contract, or having had his private pension scheme raped by his provider!
We should be grateful perhaps that he will be joined by Martin Wheatley. Head of the Financial Conduct Authority, Martin Wheatley has every reason to be committed to the regulator’s more intensive style of supervision.
Wheatley worked for the London Stock Exchange for 18 years, including six years on its board. He rose to the position of deputy chief executive, and was closely involved with the failed merger with Deutsche Borse.. 
Later, Wheatley's tenure at the helm of Hong Kong’s financial regulator the Hong Kong Securities and Futures Commission saw thousands of investors take to the streets in protest, brandishing pictures of Wheatley with devil horns and burning effigies of him outside his office after they were mis-sold complex structured products linked to Lehman Brothers.
Wheatley was later criticised by the Hong Kong legislative council in summer 2012 for not having demonstrated sufficient sensitivity to the needs and perceptions of general investors. The report went on, '...the Committee is greatly disappointed that Mr Wheatley had not secured the enactment of the relevant amendment legislation in a timely manner...'
Sounds like he is ideal for the new regulator, of which Adair (Lord) Turner is still at the helm, of course. Now this man is a real revolving door product!

In a hard-hitting article in the Daily Telegraph in August 2012, Damian Reece declared; 

'...It’s not just the bankers that need changing but the regulators too...' 

In reviewing the findings of the Tyrie Committee he pointed out that '...what we’re also left with, yet again, is a story of regulatory failure. Since 1997 the UK has been plagued by porous rules that have allowed unalloyed avarice to seep into every nook and cranny of City life.

The Tyrie committee's investigation has quite rightly used its findings into the Libor scandal as ammunition in its attempts to get urgent changes made to the legislation passing through Parliament that will merge two failing institutions (the Financial Services Authority and the Bank of England) into one, even larger, failing institution. If we don’t get the future of regulation right, we’ll never get the future of banking right.

Tyrie’s report also reveals how Lord Turner and his counterpart at the Bank of England, Sir Mervyn King, were unable to exercise judgment-based regulation properly when it came to the removal of Bob Diamond. The fact that Lord Turner tried and failed to secure Diamond’s resignation and subsequently had to get Sir Mervyn involved also exposes him as a weak operator. Put this together with the fact that the FSA, along with the Bank, failed to spot Libor manipulation in the first place and that “doesn’t look good” to quote Tyrie once again. It doesn’t look good for the FSA but neither does it look good for Lord Turner’s candidacy to be the next Governor of the Bank of England, with supreme power over all financial regulation.

On 8th September 2012, Lord Turner authored an article in the Daily Telegraph entitled '... Regulators must shine a light on 'shadow banking... in which he is quoted as saying '... Shadow banking thus played a crucial role in the 2008 crisis in both the US and Europe. We need to ensure it cannot do so in future...'

Frankly, the problem for Lord Turner is that he is far too clever for his own good, and his articles read like some detailed briefings prepared for an IMF summit meeting of Central Bank Heads.  At one stage he posits: 

'...Maturity transformation is also a key driver of banking system risk: but at least when it is performed within bank balance sheets it is reasonably well measured and liquidity regulation can constrain it. Equivalent maturity transformation achieved via a multi-step chain of intermediation is equally risky, but more difficult to spot and it escapes liquidity regulation...' 

Of course, how silly of me not to have appreciated that, and I imagine that when small investors meet to wonder why their returns are so pathetic, they talk of little else!

These Telegraph articles invite readers to respond with comments. One reader posted as follows:

'... What he's trying to say, but has failed miserably by dressing it up in incomprehensible long-winded gobbledegook, is the too big to fail, (and soon too big to bail), [ I would have added too big to jail ] banks, aided and abetted by insurance dealers like AIG, have fucked up big time by overleveraging themselves in the totally unregulated OTC derivatives market and are relying on taxpayers to fund their very real potential losses should the tangible asset prices bubble be allowed to burst and find its true level. 

The Bank for International Settlements estimates this underworld derivative market to be in the order $600 trillion - others estimate $1.4 quadrillion.  Nobody knows because it is not regulated.  I would have expected this Turner fellow to know this much at least. 

In essence what the taxpayer is being asked to do is to live with artificially high house prices and negative interest rates in order to prevent the triggering of credit default insurance which would almost certainly bring the entire edifice of crap down around their ankles.  Don't even ask about Interest Rate Swaps...'

Well, I think you can see his point, now why couldn't Lord Turner have put it like that?
Another pointed up Turner's revolving door credentials;

'... Pity really that Turner did not know about all this before the event and warn us of the dangers. He was in a position to know and could have warned us, as he worked for Chase Bank (now part of J P Morgan), Mc Kinsey and Merrill Lynch, all involved in setting up and running vital parts of the shadow banking food chain.  

Maybe he was too busy when the threats became obvious to say anything - by then he was involved in helping to rob £ billions from people who were promised state pension benefits which will not now be paid.  This despite them paying contributions into the system for decades. Would you trust a person like this... ?'

And finally, what about Barclays, the leading organised mafia enterprise for banking criminality. Well, the bank has surpassed itself by appointing two insiders to the most important roles to clean up after the passing of the Diamond geezer!

Anthony Jenkins, who ran Barclays Retail and Business Banking and has been a member of the group's executive committee since 2009 has been given the top job as CEO. The announcement came a day after Barclays said the Serious Fraud Office was investigating the bank regarding certain payments between the bank and Qatar Holding, during an exercise to raise more investment capital. The inquiry relates to events in 2008, when Barclays was raising money from Middle East investors during the banking crisis.
In June, it was fined £290m by UK and US regulators for manipulating Libor, an interbank lending rate which affects mortgages and loans.
Jenkins said he was "very proud to have been asked to lead Barclays", where he began his career nearly 30 years ago, but he admitted: "...We have made serious mistakes in recent years and clearly failed to keep pace with our stakeholders' expectations..."
Well, again, he should know. It was on his watch that Barclays was fined £7.7 million for failures in relation to the sale of two funds.
Between July 2006 and November 2008 Barclays sold Aviva’s Global Balanced Income Fund (the Balanced Fund) and Global Cautious Income Fund (the Cautious Fund) to 12,331 people with investments totalling £692 million. Barclays promised to contact customers and pay redress where appropriate.
They were also required to repay thousands of customers who had been damaged in the PPI mis-selling scandal, and have been under investigation for the mis-selling of swap derivative products to hapless customers. So no doubt Mr Jenkins will know where the other bodies are buried.
But he will be helped by a man who has undertaken more turns of the revolving door than most, as it was announced that Barclays chairman Marcus Agius would be be replaced by Sir David Walker. Among some of the earlier roles, Sir David has been engaged in are;
 HM Treasury, 1961;
Private Secretary to Joint Permanent Secretary, 1964–66;
Staff of International Monetary Fund, Washington, 1970–73;
Asst Secretary, HM Treasury, 1973–77;
Bank of England as Chief Adviser, then Chief of Economic Intelligence Dept, 1977; a Director, 1981–93 (non-executive, 1988–93);
Chairman: Johnson Matthey Bankers, later Minories Finance, 1985–88;
SIB, 1988–92;
Deputy Chairman, Lloyds Bank plc, 1992–94;
Director, Morgan Stanley Inc., 1994–97;
Executive Chairman, Morgan Stanley Group (Europe) plc, subsequently Morgan Stanley Dean Witter (Europe) Ltd, 1994–2000;
Chairman, Morgan Stanley International Inc., 1995–2000;
Member, Management Board, Morgan Stanley Dean Witter, 1997–2000. 
None of this permits me to hope that there will be any realistic review of the British banking sector. The Great and Good have been drafted in to try and patch up the leaking hulk that is Barclays bank, while other former regulators who were in post at the time of the 'light touch approach' to banking regulation have scuttled off the sinking ship to find themselves lucrative sinecures.
I do not believe that any of these reforms and putative changes will ever have any realistic effect on cementing belief in the banking system any more. We have all been screwed royally and the guilty are now sunning themselves and enjoying their vast pension funds, given to them as a bribe to keep their mouths very tightly shut about what really went on.
But that is always the way with the British, nothing will or must change! The bank and finance sector exists to serve the interests of a very special few insiders, it does not and never has existed to really serve the interests of GB plc, that is just a convenient fiction they put about to stop Government enquiring too closely into what really goes on inside the Square Mile or up in Edinburgh.  
But in order for the money-go-round to keep on producing the goods for the insiders, they have to keep a lid on the rotten edifice, so that no-one can really tell what is going on and that is where the revolving door comes in. And as long as the revolving door continues to turn, spinning out the good chaps with the safe pairs of hands to fill the important posts when they are most needed, then those on the inside track will always get the plum jobs and fill the juicy posts, secure in the knowledge that they will do the job they are called upon to perform which is to maintain the status quo, while all the rest of us can merely do is to lick our wounds, and wait humbly until it is our turn to get fucked over again!

Friday, September 07, 2012

Why I want the Government to commission an independent evidence-led review on the effectiveness of present drug interdiction policy

The present Government policies on the use and possession of illicit drugs have failed utterly.

As a former detective in the Metropolitan Police, I saw at first-hand how the policies of criminalising people for possessing and using proscribed drugs resulted in wholly discriminatory and socially-excluding enforcement, whereby the young, the marginalised and black communities were targeted, while the white middle-class users of illicit but socially-accepted narcotics were ignored and allowed to continue virtually unmolested.

More to the point, as an active detective focusing on financial crime and money laundering, I realised that by insisting on enforcing the policy, drug criminalisation was helping to pour a torrent of raw cash into the pockets of organised criminals.  The more we criminalised the problem, the more money the drug pushers made, while the resultant costs of crime escalated.

It was the most futile and ridiculous policy, but no-one had the courage to challenge it publicly, because politicians on both sides of the House of Commons were scared to engage in a real debate, for fear of alienating the opinion forming leader writers in the scaremongering media.

CLEAR, an independent organisation which calls for Cannabis law reform published an article on 27th July 2012 discussing the kind of writing being published by the Daily Mail, one of the most vociferous opponents of drug reform. They stated;

"...Kathy Gyngell is an ex-producer of downmarket daytime TV.  She now styles herself with the pretentious and misleading title of  ”Research Fellow” at the Centre for Policy Studies. She has no qualification or basis for any authority or expertise on cannabis except for a shameful record of publishing article after article in that epitome of inaccurate and misleading journalism, The Daily Mail. The nonsense she writes is based on prejudice and a deliberate intent to mislead. She publishes lies about cannabis and about scientific research concerning cannabis on a regular basis..."

The Home Office too had set its mind against any form of debate, and indeed, any informed person in a position of public authority who has dared to challenge the status-quo, finds themselves being marginalised. Professor David Nutt was a classic example.

Professor David Nutt, head of the Advisory Council on the Misuse of Drugs, criticised the decision to reclassify cannabis to Class B from C.
He accused ministers of devaluing and distorting evidence and said drugs classification was being politicised. Following his sacking, Prof Nutt told the BBC he stood by his claim that Cannabis should not be a Class B drug based on its effects.

He described his sacking as a "serious challenge to the value of science in relation to the government". He went on to say;

"We can help them. We can give them very good advice, and it would be much more simpler if they took that advice rather than getting tangled up in other sorts of messages which frankly really do confuse the public."

Prof Nutt said he was not prepared to "mislead" the public about the effects of drugs in order to convey a moral "message" on the government's behalf. ..If scientists are not allowed to engage in the debate at this interface then you devalue their contribution to policy making and undermine a major source of carefully considered and evidence-based advice."

My conversion to the belief that the prohibition of drugs was simply not working was when I became actively involved in the issue of interdicting money laundering, and seeking to prevent the profit flows from the narco-trade. Trying to stop banks handling the obscene profits from the drug trade made me begin to realise the real truth. The anti-money laundering laws were routinely flouted by the banks, because the flow of drug money was so important to their bottom line. Frankly, without the drug trade, many medium-sized banks around the globe would have gone out of business years ago.

David Malone on his 'Golem' blog outlines some very important facts about the drug business.
 "...The retail end of the global drug trade is by far the largest, at an estimated $332 billion.   All of it has to be banked one way or another. It get’s washed in London and New York, and the people who do it are criminals. They are also very wealthy, very arrogant, and they have friends in government , the police and the judiciary.
A report published by the Home Office in 2006 estimated the UK drugs market to be worth £4.645bn in 2003/4. Most of that £4.6 billion had to have been banked. Not just in one year, but that amount annually. That bit does not get talked about so much. £4.6 Billion a year is more than a rogue teller or two. When we get to retail in the West we are not just talking about banking a fist full of tenners from a dirty looking user  or pusher. We are talking about the people the pushers work for, the people they in turn work for and the businesses that they ‘work for’ or own, which then use that money for ‘legit’ investments, such as buying luxury property in London.

The reality is that drugs are a massive banking business. And it is also a fact that the bulk of that business is done in the industrial nations in their banks, the Drugs business is mostly a western business. It’s a banking business.

We, the rich West, use it, we finance it, we provide the laundering services for it, and we then use the money it generates to feed the financial system. That money keeps our banks going, especially in ‘hard times. That money is what is used by the financial industry to speculate with, to buy up sovereign assets with, to speculate on food with. That money helps create their bonuses and pays off our politicians in ‘soft donations’ and ‘access to decision makers’.

The drug money laundering business is a staple and important part of global banking. Money laundering is one of the things bankers do well. They should do, they practice it every day. It is not a one off rogue clerk or rogue office. It is not something the bank does once and never again. Amex has done it many times. HSBC has a long history. It has most recently set aside $700 million to pay fines for laundering drug money from Mexico.
Dig deep enough and you’ll find the names of politicians, senior ones and find yourself meeting some of the people who make sure the truth of such matters does not come out and whose job it is to protect the guilty and do their dirty work.
Drug money, criminal at the start, is criminal and dirty no matter how many times it is laundered. The bankers know this better than anyone. Yet they do it every day, every week, every year and every decade in every major financial centre and everyone knows it. It could reasonably be said that the global banking business has become truly drug dependent.
In the UK drug cash is more recently generally calculated by HMRC to be now in the region of £6.5 billion, annually. It is only when you appreciate the size of the narco-cash flows that you begin to get a handle on just how big and how widely extended illicit drug taking is.

Yet, most children at our schools have experienced drug sales taking place in their grounds. Many of them have taken drugs during school time. At university, it is almost a sine-qua-non that drugs are routinely available in every hall of residence, depending on your narcotic of choice. Many young people prefer to drop Ecstasy prior to going out because pills are cheaper than the alcohol they would have to buy at the club.

This is one of many reasons why the so-called war on drugs is an abject failure and continuing along this road of criminalisation is a hugely expensive waste of valuable police time and resources, the estimated costs in 2007 alone being in excess of £14 billion a year!

That is one of the many reasons why we urgently need an evidence based, health focussed approach to drug policy and for the decriminalisation of drug possession, and why I am proud to be associated with the efforts being made by Law Enforcement Against Prohibition (LEAP) to promote this outcome.

Sunday, September 02, 2012

No-one can say we didn't try! - Celebrating the 30th anniversary of the Cambridge International Symposium on Economic Crime

On Monday 3rd September I am attending the 30th Anniversary of the Cambridge International Symposium on Economic Crime.

I have been fortunate to have been associated with the Symposium for 29 years and I have been invited  to present many papers and chair a number of breakout sessions.

The brainchild of a brilliant Cambridge law Don, Dr Barry Rider, the Symposium has been the best possible sounding board for international law enforcers and financial and economic crime policy makers to meet in the delightful surroundings of Jesus College, Cambridge, and to discuss issues of mutual concern.

I want to quote from the invitation letter written by Dr Rider to explain the significance of this important, indeed unique event.

"...The annual Cambridge International Symposium on Economic Crime is not just another conference!

It would not be celebrating its thirtieth year if it were! Over the years, the Cambridge Symposium has established itself as a unique vehicle for promoting, at a truly international level, greater understanding of the real and practical issues involved in preventing and controlling economic crime, corruption and abuse, and thereby facilitating meaningful co-operation...It seeks to involve speakers and panellists with practical knowledge and experience from around the world who can not only share their expertise, but also act as catalysts in promoting awareness and discussion at all levels within the Symposium.

The primary theme of the Conference addresses some of the myths and realities in terms of risk and its management, of the consequences – both direct and indirect, of the international financial crisis and the near collapse in confidence as to the integrity of many of our financial institutions. At a time when many agencies that have been criticized for failing to act sufficiently robustly are being restructured or replaced, there are profound uncertainties not only for those in the regulatory and enforcement sectors, but also for those in the regulated communities.

We are not, however, concerned only with the identification of such risks, but also their management and containment. During the week we will address a host of issues that threaten stability and integrity and in particular the insidious threats presented by organized crime, fraud, corruption and money laundering...Consequently the programme is of very real relevance not only to those involved in law enforcement and supervision, but all those who are concerned to maintain integrity and protect business whether in the public or private sector.

For me, it is a matter of some considerable concern that Dr Rider has opened the doors of Jesus College for 30 years, and the great and the good, as well as a lot of rough-hewn and hardened cops have walked through to debate the phenomenon of international economic crime.

When we started, Financial Crime was not an issue for debate in the UK, there were no financial regulations to speak of, the City was regulated by the City, subject always to the dubious effectiveness of the Prevention of Fraud Act 1953, implemented largely by the ineffectual Department of Trade and Industry (DTI). 

The rest of the Fraud regime was largely investigated and prosecuted by Police from the Fraud Squad. There were certain frauds in the VAT and Tax sector which were investigated by Customs and Excise or the Inland Revenue, but the vast majority of fraud prosecutions were brought by Police.

The City of London would have been deeply affronted to have been invited to come and discuss the issue of crime within their hallowed walls. It was not an issue it wished to discuss and the whole place was governed by an arcane set of rules imposed by the City fathers, and overseen by the rebuke of last resort, the height of the Governor of the Bank of England's eyebrow! If any activities needed the attention of the Police, the City fathers used to rely on the services of their own fraud officers, who, while theoretically being a part of the joint unit of the Metropolitan and City Police Company Fraud Department, tended largely to look after things inside the City walls without overly bothering their Met colleagues!

The major issue for debate in those early years was the difficulty we Fraud Squad officers faced in acquiring evidence from certain unwilling persons who did not want to cooperate in our enquiries.

We desperately wanted to be given powers similar to those possessed by the DTI to demand access to the books and records of a company under investigation, and to require them to answer questions about their accounting methods.

Some of us even gave evidence before the Roskill Commission which enquired into the way that Fraud Trials were conducted and how improvements could be made in 1986.

From those early days, and following the proposed reforms in the Roskill Report, the investigation and the management of Fraud has now proliferated into a rash of initials and departments, among whom it is hard to determine any meaningful cooperative activity.

Among the many agencies which now exist to deal with fraud in the UK and in Europe are the following;

An analysis of reported fraud in Government Departments together with anti-fraud guidance produced by the Treasury.

The Fraud Advisory Panel is an independent body of volunteers drawn from the public and private sectors. Members include representatives from the law and accountancy professions, industry associations, financial institutions, government agencies, law enforcement, regulatory authorities and academia.

SOCA was created by the British government in April 2006. It has taken over the functions of the National Crime Squad (NCS), the National Criminal Intelligence Service (NCIS), the role of HMRC in investigating drug trafficking and related criminal finance and some of the functions of the UK Immigration Service (UKIS) in dealing with organised immigration crime. In addition it now includes the function of asset recovery.

The aim of the SFO is to investigate and prosecute serious and complex fraud and so deter fraud and maintain confidence in the probity of business and financial services in the United Kingdom.

This website is published by the National Working Group on Fraud on behalf of the UK Association of Chief Police Officers (ACPO). The website deals primarily with commercial fraud in a policing context.

The Committee on Standards in Public Life was set up in October, 1994. Its terms of reference are: To examine current concerns about standards of conduct of all holders of public office, including arrangements relating to financial and commercial activities, and make recommendations as to any changes in present arrangements which might be required to ensure the highest standards of propriety in public life.

IBAS is an organisation for helping people in disputes with British banks.

Describes the functions of the British banking ombudsman and gives information on how to submit complaints. Various publications including the annual reviews are available online.

Among its many services the BBA provides information about the prevention of fraud and money laundering.

The FSA regulates the financial services industry and has four objectives: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

A website produced by the British Government in cooperation with HSBC, Microsoft, the Serious Organised Crime Agency and other organisations to give advice on problems ranging from computer viruses and spam to online rip-offs and identity fraud.

A website produced by the Home Office Identity Fraud Steering Committee, a collaboration between UK financial bodies, government and the police to combat the threat of identity theft.

Advice on how to recognise and avoid scams, from Consumer Direct, a telephone and online consumer advice service, supported by the (UK) Department of Trade and Industry.

Press releases and reports from OLAF, the European Commission's anti-fraud office.

It describes itself as "the financial conscience of the European Union.

The Metropolitan Police Fraud Squad.

The City Police Fraud Squad.

The various Fraud and Commercial departments of the other police constabularies in the British Isles.

Her Majesty's Revenue and Customs.

The Office of Fair Trading.
I am certain there may be others whom I have overlooked, but my point is this.

In the attempts to reduce the incidence of fraud, financial crime and money laundering, have we not been guilty of creating a massive 'talk shop' in which more time is spent debating and discussing the relative merits of individual agencies in dealing with crime, as opposed to getting on with the job of dealing with it?

The Cambridge Symposium on Economic Crime cannot be blamed for the development of this cat's cradle of competing agencies. Repeatedly the  Symposium has called for a greater degree of clarity and cooperation in the interdiction and prosecution of major fraud.

Sadly, these eminently sensible requests have not been heeded, and we have now ended up with an edifice which has become more convoluted than a Mandarin Chinese Court.

But no-one can say we didn't try!