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Drugs, Guns and Gold: The Criminal Scourge of the Developing World

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By Jeremy Haken and Raymond Baker

Rumors spread today about the potential departure of Egyptian President Hosni Mubarak, but just last week, the President assured the Egyptian people that he loves his homeland, is proud of his service, and plans to live out his days in Egypt after he graciously steps aside. And why shouldn't he love his country? As president he and his family allegedly amassed an enormous fortune, some estimate as much as $40 to $70 billion, believed to be stashed in British and Swiss banks and invested in properties from London to Manhattan to Rodeo Drive. And while he is the corruption bogeyman of the hour, among world leaders he may well represent the rule and not the exception. Mubarak's fortune points to a story behind the story. It is yet another example of the ease with which corrupt, criminal, and commercially tax evading money can be hidden, moved, and laundered in the global shadow financial system.

Though it often requires great courage and personal sacrifice, corruption can be exposed and corrupt leaders deposed through populist movements like we're seeing throughout the Middle East. Transnational criminals, on the other hand, are not constrained by issues of popular legitimacy, national security, economic stability, or other pesky expectations we place on governments. In fact, for criminals, high levels of insecurity and poverty translate into business opportunities. A new report by Global Financial Integrity, a Washington, D.C. based think tank, demonstrates how criminals are making an estimated $650 billion by exploiting the desperation of the world's poorest communities. Traffickers prey on people who have no options. A child does not choose to work long hours in a dangerous Congolese gold mine in order to put bread on the table. A Syrian man does not choose to sell his kidney to support his family. People simply do what they must in order to survive, and entrepreneurial criminals profit.

With approximate values of $320 billion, $250 billion, and $32 billion respectively, drug trafficking, counterfeiting, and human trafficking are the three most profitable criminal markets. Other illegally traded items include wildlife, human organs, small arms and light weapons, diamonds and other gemstones, oil, timber, fish, art and cultural property, and gold. These huge sums of money are not stashed under mattresses or in secret desk-drawer compartments. In fact, criminals move their money through the same channels as the ill-gotten gains of corrupt rulers. Using well known tricks of the trade and loopholes such as secrecy jurisdictions (tax havens), disguised corporations, anonymous trust accounts, and money laundering techniques, the origins of criminal money are obscured, and the money is allowed to enter the legitimate financial system.

Citizens of the world's wealthiest nations must be part of the solution to this problem--we must demand change in how the global financial system operates. There must be greater transparency and accountability throughout, from dispelling the secrecy which enshrouds tax havens like Switzerland, to making financial institutions accountable for knowing their customers and for refusing to accept the proceeds of crime and corruption. As recent events in North Africa have shown, change is possible even in the most repressive and entrenched regimes; the rest of the world should do its part to foster lasting economic growth and prosperity by upholding higher standards of economic conduct.

Jeremy Haken is a research associate at Global Financial Integrity and the author of a new report "Transnational Crime in Developing Countries" released Tuesday, January 8.

A Senior Fellow at the Center for International Policy in Washington, D.C., Raymond Baker is the Director of Global Financial Integrity, a research and advocacy organization promoting increased transparency in the international financial system.