Author: Martin S Navias
ISBN No: 9781787381360
Review date: 24/04/2024
No of pages: 310
Publisher: Hurst
Publisher URL:
https://www.hurstpublishers.com/book/finance-and-security/
Year of publication: 21/11/2019
Brief:
price
£30
Money makes the world go round, so the song went, and the same is true for crime, the lawyer and academic lecturer Martin Navias shows in his new book, Finance and Security.
Money laundering, he points out early on ‘is undoubtedly a major global business’ (page 23), and not only because south and central American drug cartels, having made huge profits from the illegal drugs trade in North America for decades, want to spend their money at home. Money laundering, as Navias points out, is an ‘inevitable consequence’ of crime where the criminals want to distance themselves (and who would not?!), and often it’s done after large-scale crime, because disguising the origins of criminal gains is difficult and expensive; so why would you bother for a small crime? In other words, we are talking about ‘tax evasion, fraud (including identity theft, mortgage fraud, retail and consumer fraud, securities fraud and health-care fraud), drugs, corruption, human trafficking, organised crime and public corruption’, to quote Navias’ disarmingly long list.
Laundering may date from interwar Chicago when bootleggers sought to ‘launder’ their earnings through laundromats, as a cash business;or, the traditional secrecy of Swiss banking. Whichever, the United States and allies have come to use financial and trade sanctions, whether against terrorists (especially after 9-11 concentrated US minds), drugs traffickers, or countries, such as Iran, including a blacklist of Iranian firms and people, and travel restrictions and asset freezes. In the case of Iran which Navias details, among others, western countries put ‘major effort … into using financial instruments to coerce foreign states to move away form behaviour they considered unacceptable’ (page 197). And, another thread through Navias’ account, such effort is a ‘public private coalition’; nations may set the policy, but bankers and other professionals have to carry it out (or commit an offence). It means, among other things, screening of customers, and having ever less confidence that whatever business you do, you are not falling foul of some regulation. Hence billions spent on financial compliance.
And for what gain? Navias asks in conclusion. He quotes a bank’s counsel that ‘the financial crime industry’ is the largest and most profitable in the world. ‘So much for the financial war against criminals,’ Navias comments. What about ‘finance as a weapon’ against terrorists, who after all need some money to buy weapons and pay troops. Although the author does not mention the 1930s League of Nations, surely we are there, the sanctions against Fascist Italy for invading Ethiopia, and 1960s sanctions against the illegal regime in what was then white-rule Rhodesia. Economic sanctions do not work. Or as Navias frames it, given the cost and effort put into ‘finance warfare’ it’s not bringing results. Navias does have a sense of history; he recalls the British bombing campaign against Germany to ask if freezing bank accounts is ‘financial virtue signalling’, and does not truly go after the terrorists or other criminals, but is for show, an excuse to avoid military violence.
And that phrase ‘financial warfare’ by the way explains why Navias, a banking and finance lawyer, teaches at the Department of War Studies at King’s College London; the book as he says (page 15) is based on an MA course he teaches. As he puts it, the subject is ‘a distinct area of focus within the broader realm of the study of security and war’. At £30, or if you have an interest in the subject but not enough to take a degree course in it, the book offers excellent value compared to the cost of the MA.
As Navias hints, no-one in business is going to question whether sanctions are effective to prevent ‘weapons of mass destruction proliferation’, for instance. Navias states that the ‘partnership’ between private business and governments is not equal; ‘the steady stream of compliance demands remains relentless’ (page 246). Since the financial crisis of 2008, financial institutions have been fined over $320 billion for breaches of anti-money laundering and sanctions. Hence banks (and professionals taking fees for related ‘gateway’ services, such as lawyers, accountants, estate agents and dealers in luxury cars and other goods) will be defensive; they will over-report any suspicious transactions, and avoid risk.
As Navias shows, ultimately ‘financial warfare’ becomes a geo-political issue; does the United States want to deny its banks markets, or leave some of the world to Russian and Chinese finance? Although maybe (as in other knotty human problems?) artificial intelligence may come to the rescue and sort out the criminal launderers from the merely suspicious.
The book closes with something of a rarity; financial sanctions ‘are only subordinate means of warfare’, and cannot replace more direct action. That said, don’t fall for the idea that finance is dry; the stories Navias tells are as dramatic and famous as any of our time – of Osama bin Laden; Mexican and Colombian cartels; and the London property market. The book quotes recent official and campaign group Transparency International’s findings that ‘London rmains an extremely popular choice for money launderers who employ opaque corporate vehicles’, and ‘London property is a major international target for persons laundering the proceeds of their corruption’ (page 36). Quoted next are the Godfather films, where laundering is a theme, and the efforts by a criminal family to become legitimate, whether through the gambling sector, or charities – that is, far from outright finance.
