Regulating money laundering for terrorism financing: EU–US transnational policy networks and the financial action task force

Through increased cooperation transatlantic policy networks have been able to sharpen the tools used to combat the laundering of funds used for illicit ends including terrorism finance. After the attacks on 11 September 2001, rules were adopted on both sides of the Atlantic to restrict the flow of funds for terrorist purposes. This article captures some of the recent trends in cooperation between the European Union (EU) and the USA in addressing the issue of money laundering for terrorism finance. It goes further to assess how the EU engages with the financial action task force whose mandate was modified after 11 September 2001 to also cater for money that is laundered to fund terrorist activities.     

PRIVACY AS ROGUERY: PERSONAL FINANCIAL INFORMATION IN AN AGE OF TRANSPARENCY

A fundamental shift has occurred in the relationship between the state and the individual regarding financial privacy. The onus is now on citizens to show why governments should not have access to their personal financial information, rather than governments having to show why they should. This article argues that this shift has come about in large part because of the activities of autonomous and influential transnational networks of regulators. These regulatory networks have systematically favoured administrative efficiency and transparency at the expense of privacy in designing responses to financial crimes. Evidence is drawn from an examination of recent policy developments in countering tax evasion, money laundering, and the financing of terrorism. Currently, the principle of financial transparency suggests that financial privacy inhibits the fight against criminals and terrorists; by extension, asserting a right to privacy indicates some kind of roguery afoot.     

The new international financial architecture and Caribbean ofcs: Confronting financial stability discourse

This article examines the role and force of international finance in contemporary capitalism and the norms being established by international financial governance structures. More than the matter of exclusion, the article argues that financial stability discourse girding issues related to the nature of capital market liberalisation, terrorist financing, money laundering and tax evasion attempts to suture over, erase and/or render illegitimate ideational resistance—particularly by offshore financial centres (ofcs) of the global South. The ongoing experience of the English-speaking Caribbean ofcs is discussed as local operatives have long been simultaneously framing as well as resisting Anglo-American insistence on a new configuration of market ethics, norms and sociality in the virtual world of ‘shores’ and high finance. This adds to the emerging body of work seeking to discursively unpack financialisation.     

Hizbullah Terrorism Finance: Fund-Raising and Money-Laundering

Hizbullah, which has been designated a terrorist entity in several international jurisdictions, depends upon a substantial mobilization of financial resources to support its complex, multi-faceted organizational apparatus, its domestic activities in Lebanon, and its far-reaching transnational operations. This study surveys Hizbullah's resourcing requirements, and examines the role of military assistance from Iran and Syria along with Hizbullah's own reliance on front organizations, clandestine networks, business enterprises, propaganda media, and local exactions to generate funding for operational activities. Particular attention is directed at the diversion of charitable contributions, the exploitation of non-governmental organizations (NGOs), involvement in criminal activities and contraband trade, and the money laundering mechanisms utilized to transfer funds to where they are required. It also reviews efforts by international authorities to staunch the flow of financial resources to terror groups, activities and operations, including their effect on Hizbullah terrorism finance.     

Political power in Puerto Rico: bankers,pharmaceuticals and the state

Puerto Rico is characterized by a high degree of structural economic interdependence between state, corporate, and financial actors. This article argues that the structural interdependence was engineered by United States and Puerto Rico government officials to bolster the island’s economy and the government’s creditworthiness, using U.S. corporate investments, both fixed and financial. Following a critique of the relevance of the literature on structural analyses of state, corporate and financial alliances to the Puerto Rican case, the article defines, identifies, and quantifies the major components of this structural economic interdependence in Puerto Rico. The article concludes that the depth of structural economic interdependence of state, corporate and financial actors has seriously constrained the possibilities of economic and political pluralism. The local government has become bound to a relatively limited range of policy options and, thus, a particular development path is forged. In this case, the policies have resulted in the marginalization of local industry, and the privileging of the financial sector to the detriment of domestic capital formation. Sara L. Grusky has taught at Howard University and Catholic University in Washington, D.C. She has recently contributed to21st Century Policy Review andThe Caribbean in the Global Political Economy (Lynne Rienner Publishers). Professor Grusky is currently undertaking two research projects in El Salvador. The first is focused on rural health policy and the second examines the Salvadoran political discourse onel estado de derecho.     

Russia’s Climate Policy: International Bargaining and Domestic Modernisation

This article accounts for the gap between Russia’s weak initial implementation of the Kyoto Protocol and its more active engagement in climate policy during the Medvedev presidency. We examine the intersection of climate policy and broader efforts to modernise Russia’s economy, drawing attention to synergies between domestic and international politics. We argue that international factors alone do not explain the change in climate policy as they have remained relatively constant. Instead, greater attention toward climate policy results from efforts to introduce new technologies and increase energy efficiency, spurred by the recent financial crisis and a shift in domestic policy priorities associated with the Medvedev presidency.     

The neoliberal discourse on corruption as a means of consent building: reflections from post-crisis Turkey

This article draws attention to the ideological role that the neoliberal discourse on corruption has fulfilled in the promotion of the second generation reforms in Southern countries since the 1997 East Asian financial crisis. This discourse is ahistoric insofar as it fails to recognise corruption as a problem of modernity; biased insofar as it associates corruption with Southern countries' historical and cultural specificities only; contradictory in terms of its counter-productive anti-corruption strategies; and politicised as it has redefined ‘corruption’ as ‘rent-seeking’. In the absence of alternative radical conceptualisations, this essentially competition-induced neoliberal orthodoxy on corruption has been easily articulated within morality-based popular concerns in domestic politics and hence acquired a hegemonic capability. The article substantiates these arguments by examining the trajectory of the neoliberal anti-corruption agenda in Turkey with a particular focus on the developments of the post-2001 financial crisis period.     

Savings,investment and foreign capital flows: Have capital markets become more integrated?

How mobile is capital across countries? Does the expansion of world financial markets in the 1970s and 1980s reflect a tendency towards one integrated world capital market, accessible for both industrialised and developing countries? Or, alternatively, are savings and investment rates for each economy closely tied because of international capital market imperfections? This article critically assesses recent studies that have tested these hypotheses empirically for industrialised countries, presents new evidence and expands data analysis to include the group of developing countries. Contrary to recent studies it is concluded that across industrialised countries domestic investment and savings are now much less closely linked than in the 1960s. But the larger capital market integration does not extend to the group of developing countries despite their increased use of funds from international financial markets to finance domestic investment. The exploratory nature of the data analysis only permits to draw some suggestive, though important, conclusions for economic theory and policy.     

Foreign direct investment,financial development and economic growth

This article argues that the development of the financial system of the recipient country is an important precondition for FDI to have a positive impact on economic growth. A more developed financial system positively contributes to the process of technological diffusion associated with FDI. The article empirically investigates the role the development of the financial system plays in enhancing the positive relationship between FDI and economic growth. The empirical investigation presented in the article strongly suggests that this is the case. Of the 67 countries in data set, 37 have a sufficiently developed financial system in order to let FDI contribute positively to economic growth. Most of these countries are in Latin America and Asia.     

Subnational Collective Action: The Varied Patterns of Mobilisation of Local Government Associations

This article assesses differences in the way local government associations organise to influence EU legislation in different countries. EU policy outcomes have an increasing financial and administrative impact on local government. This has been increasingly recognised by both EU institutions and many national governments, and recent reforms have sought to ensure greater involvement of local authorities in the preparation of EU proposals and domestic pre-negotiations, with an emphasis on the aggregation of local government interests via European and national local government associations. Research suggests that representative organisations need to be well resourced to be able to mobilise at both European and national level to influence EU proposals. This article empirically assesses these claims by examining attempts by local government associations in England, Denmark and Ireland to influence EU environmental directives. The findings suggest that financial, staffing, and informational resources, as well as structural issues, are important factors influencing how local government representative bodies respond to EU legislative proposals.     

Violent Narco-Cartels or US Hegemony? The political economy of the ‘war on drugs’ in Mexico

Mainstream analysis and commentary on drug trafficking and related violence in Mexico focuses overwhelmingly on the narco-cartels as sources of the problem and presents the US as a well intentioned player helping to conduct a ‘war on drugs’ out of concern for addiction, crime and violence. This article offers an alternative interpretation, grounded in critical political economy, showing that in addition to fuelling the narcotics industry in Mexico thanks to its large drug consumption and loose firearms regulations, the US shares much responsibility for its expansion thanks to its record of support for some of the main players in the drugs trade, such as the Mexican government and military, and by implementing neoliberal reforms that have increased the size of the narcotics industry. The war on drugs has served as a pretext to intervene in Mexican affairs and to protect US hegemonic projects such as nafta, rather than as a genuine attack on drug problems. In particular, the drugs war has been used repeatedly to repress dissent and popular opposition to neoliberal policies in Mexico. Finally, US banks have increased their profits by laundering drug money from Mexico and elsewhere; the failure to implement tighter regulations testifies to the power of the financial community in the US.     

The International Finance Corporation and the emerging market funds industry

Linking the world’s core equity markets with semi-peripheral and peripheral equity markets has been a fundamentally different process from linking core markets with each other. International financial institutions have played a larger role in core‐periphery equity market integration, and issues of corporate governance assume greater importance in the core‐periphery cases. Illustrating these differences, this article considers the creation of the Korea fund, one of the early country funds in an emerging market promoted by the International Finance Corporation (IFC). The case shows that increasingly sophisticated financial instruments, like country funds, alter the structure of the international financial system in such a way as to reposition governments in developing market economies with respect to their domestic financial systems; allow for some international capital inflows without loss of corporate control; and make diversification possible for a transnational class of investors. Moreover, the article proposes that international financial institutions like the IFC can alter the structural context of a particular market within which various financial actors later strike deals. In the light of the process of coalition building elaborated here, the article reserves a role for considerations of both multilateralism and a state’s position in the world system in a body of literature heavily concentrated on state-level political activity.     

Perhaps this time it's different: ideas and interests in shaping international responses to financial crises

The experience of the recent two decades of financial crises shows that donor countries and international financial institutions (IFIs) can respond to a crisis in a peripheral open economy by either of two crisis management strategies: either they can impose harsh conditionality to fix the domestic economy and prevent future moral hazard problems, or they can provide last-resort credit to restore market confidence. In some cases, the crisis management strategy changes as the crisis evolves. What are the factors that determine the choice of key donor countries and IFIs? This article traces the processes by which the USA and the International Monetary Fund designed the crisis management strategy in respect to the Asian crisis, and how Germany and the European Central Bank designed the response to the eurozone crisis, in order to understand how ideas regarding the causes and solutions of a financial crisis interact with the interests of key donor countries. The article argues that in both cases ideas and interests are mutually constituted, but in each case the mechanism that linked ideas and interests was different: whereas in the Asian case US interests led to policy innovation and experimentation and to a change in the crisis management strategy, in the European case ideas played a greater role in shaping German interests. The article explains this difference on the basis of the lessons learned by IFIs from the Asian crisis, which were then implemented in the eurozone case.     

The Kurdish Workers Party (PKK) as Criminal Syndicate: Funding Terrorism through Organized Crime,A Case Study

Scholars have long recognized that terrorist groups have engaged in transnational organized crime activities. But the question that comes up is, “When does a criminal enterprise become a terrorist group or vice versa?” Terrorist groups have used physical violence, participated in weapons and drug trafficking networks, immigrant smuggling, and money laundering. More recently a number of terrorist groups have established what Jonathan White has referred to as “illegal multinational criminal organizations.” This article will examine the convergence of terrorism and organized crime through the prism of the Kurdish Workers' Party (PKK).     

Exchange Rate Pass-Through in Developing and Emerging Markets: A Survey of Conceptual,Methodological and Policy Issues,and Selected Empirical Findings

Abstract

Global integration has increased the international linkages of financial markets for emerging market countries. A key channel for the international transmission of inflation and economic cycles is from exchange rate movements to domestic prices, known as exchange rate pass-through (ERPT). This article reviews the conceptual, methodological and policy issues connected with ERPT in emerging market and developing countries, and critically surveys selected empirical studies. A key contribution is to categorise and compare the heterogeneous methodologies used to extract ERPT measures in the empirical literature. Single equation models and systems methods are contrasted; frequent misspecifications that produce unreliable ERPT estimates are highlighted. The discerning policy-maker needs to ascertain by which methods ERPT measures were calculated, the controls and restrictions applied, and the time frame and stability of the estimates.     

Avoiding crisis contagion: Poland’s case

This paper examines the major reasons for limited crisis contagion to Poland in the period 2007–09. At this time Poland was the only European Union (EU) member that grew in the midst of the Great Recession and financial crisis. The following analysis focuses on domestic polices and economics structure which made this growth possible. Poland’s modest levels of private and public debt, low share of mortgages in bank assets, limited decline in real estate prices, and proactive policies by domestic and foreign banks substantially buffered Poland’s financial sector. At the same time, real economy was aided by a high share of domestic consumption as opposed to exports, a favorable labor market structure, and timely financial assistance from the EU, all that shielded it from major crisis contagion.     

Informal borrowing sources and uses: insights from the North West Region,Cameroon

Abstract

This article seeks to analyse the informal borrowing sources of the poor as well as the purposes for borrowing. The obsession on characterising the poor as financially excluded fails to grasp their active financial lives. This article emphasises how relations of credit/debt are rooted in complex social and cultural forces. It is precisely because of the social embeddedness of credit that family finance, though interest-free, is not a first resort. Similarly, credit in kind from shopkeepers, though critical to consumption smoothing, is detested by some people. Also, it is argued that the involvement of the traditional leader in repayment enforcement in informal financial groups challenges the economistic narrative that attempts to separate credit from cultural norms.     

THE GOVERNANCE OF FINANCIAL REGULATORY REFORM: THE AUSTRALIAN EXPERIENCE

The dominant perspective in the literature linking governance, globalization and public policy argues that globalization undercuts state capacity, weakening a government's ability to effectively regulate its domestic affairs. This paper shows otherwise with special reference to the Australian experience in financial regulation. It challenges the conventional wisdom that the Australian state is weak and cannot adopt anticipatory industrial policies. This paper argues that the adoption of the ‘twin peaks' model of financial regulatory arrangements is an example of the existence of government‐led steering in Australia which can adopt a proactive approach to financial regulation by steering and coordinating policy networks. ‘Governance through hierarchy’ in the financial services industry may be a function of the government's political entrepreneurship; its skill in setting and implementing an agenda; and an ability to create new policy communities and networks.     

Pluralising global governance: Analytical approaches and dimensions

This paper argues that a significant reframing of global poverty is likely to emerge in the next decade as world poverty becomes less about the transfer of aid and more about domestic distribution and thus domestic politics. This proposition is based on a discussion of the shift of much of global poverty towards middle-income countries. There are questions arising related to how countries are classified and to administrative capacities, as well as to domestic political economy, but it is argued that many of the world’s extreme poor already live in countries where the total cost of ending extreme and even moderate poverty is not prohibitively high as a percentage of gdp. By 2020, even on fairly conservative estimates, most of world poverty may be in countries that do have the domestic financial resources to end at least extreme poverty; this could imply a reframing of global poverty.     

The Political Economy of the Provos: Inside the Finances of the Provisional IRA—A Revision

Few academically rigorous accounts exist of the financial activities that sustained the rise of the Provisional Irish Republican Army (PIRA) during the Northern Ireland Troubles. Through a sustained methodology this study seeks to challenge some popular preconceptions and address omissions in the limited historical record. The article explores the organization's evolving financial sophistication by analyzing PIRA's acquisition of capital rather than its arms dealings. Using a new quantitative evaluation, this investigation confronts the prevailing understanding that Irish-American funds were of unrivaled significance to PIRA. It points to an array of domestic fund-raisers that collectively provided the overwhelming bulk of revenue. The study reveals also how PIRA developed an extensive reliance on criminal gangs for its expertise in illegal fund-raising, suggesting that moneymaking schemes were perceived as a necessary but unpopular by-product of the greater political objective. Finally, this article briefly explores how the British authorities sought to interdict PIRA's funding. While the general perception is that little was done to counteract PIRA's financing initiatives in the early phases of its violent campaign, this study, nevertheless, reveals that a subtle counterfinance initiative did take place in Belfast across the 1970s. Overall, the analysis enables a more rounded comprehension of the group's financial resilience.