Nikos Passas

Having offered a more precise definition of the practices and issues involved in what is indiscriminately called underground banking, as well as a brief look at the origin of the practices in question, this report outlines the findings of a parallel study, discusses the prevalent modus operandi, incorporates the findings of a wider IVTS research, examines the factors contributing to IVTS continued popularity and concludes with a summary of the findings and policy implications.

Over millennia, mankind has used hard cash in various forms ranging from shells to gold coins and paper. More recently, cash has become unpopular in political circles, as it effectively restricts states’ power to tax (explicitly or via negative interest rates) or to survey and potentially control their citizens. Several states have enacted restrictions to the use of hard cash. Above all, a strong new competitor to cash has arisen in the form of various electronic means of payment. Are we heading towards a society in which ‘coined freedom’ (Dostojewski) will cease to exist? Under this provocative ‘motto’ SUERF organised a combined evening event (in German at the University of Zurich) and one-day conference (in English at the theatre ‘Millers’ in Zurich) to take stock of the arguments brought forward in the current debate on the pros and cons and, more generally, the future of cash.

ABSTRACT Terrorism is not a new problem, and politically motivated offending has been ­handled in a variety of ways from ancient Greece to modern times (Passas, 1986). The process of globalization and the cross-border movement of ideas, information, people, goods, and capital, have brought terrorism to the fore of public, media, and government attention. Policymakers, scholars, and others have increased their efforts to understand, detect, and prevent this phenomenon, which defies scientific and universal definition (National Research Council, 2002). A necessary and important piece of this puzzle involves the financing of terrorist activities. In the aftermath of the 11 September 2001 attacks in New York and Washington, DC (hereafter “9/11”), countering of terrorist funding took center stage as a focus of global law enforcement and policy (Giraldo & Trinkunas, 2007; Naylor, 2006; Passas, 2008; Pieth, Thelesklaf, & Ivory, 2009; Warde, 2007).

PurposeThe purpose of this paper is to raise the question of whether the combating the financing of terrorism (CFT) arsenal following the attacks of 11 September 2001 was developed and applied too fast, to the point of being unnecessarily costly, ineffective, unfair and even counterproductive.Design/methodology/approachAn outline of two private sector contributions follows two illustrations of areas in which CFT policies may be resting on shaky assumptions, missing their targets and rendering the international community more vulnerable to extremist actions: the regulation of cross‐border fund transfers and commodities trade.FindingsMany of the control functions have been de facto outsourced to the private sector without proper guidance and accountability.Originality/valueThe paper goes beyond a mere critique of current regulatory and control arrangements to suggest concrete ways in which the private sector can support the objectives of CFT policies more efficiently and productively.

This chapter is concerned with the financial controls of international terrorism and informal value transfer systems (IVTS). IVTS refers to any network or mechanism that can be used to transfer funds or value from place to place either without leaving a formal paper-trail of the entire transaction or without going through regulated financial institutions at all (Passas, 2002). These may be full-time, part-time or ad hoc operations.

Defines hawala, which in Arabic means “transfer”; what distinguishes it from other fund transfer methods is its informality, reliance on trust and networks, and lack of records. Describes how it can be used to finance terrorism and launder money, evade tax and so on. Discusses the many problems for law enforcement arising from the lack of records in hawala, or sometimes an excess of confusing records, and the mix of various businesses which tend to coexist with hawala transactions; also linguistic issues, cultural and legal or administrative differences between communities and countries, and “benami” accounts, which are false name or nominee accounts often accepted in ethnic groups that also engage in hawala. Concludes that the success of law enforcement efforts to solve cases depends on international cooperation, but that this is not always forthcoming; excessive zeal may sour working relationships, and it may not be easy even to know whether policies are working.

The UN convention against corruption, also known as the Merida convention, came into force on the 14 December 2005 and constitutes the most comprehensive international instrument on this matter. It mandates independent anti-corruption bodies for States Parties. Such bodies may already exist and there may be more than one body in each jurisdiction. These may address prevention, analysis, law enforcement or a combination of these functions. A new organization was created in April 2006 aiming to assist in the effective implementation of the UN convention and to bring representatives and activities of anti-corruption bodies together: the International Association of Anti-Corruption Authorities (http://www.iaaca.org). At the same time, many governments are motivated to demonstrate leadership and political will against corruption. One way of doing this is through the establishment of anti-corruption commissions and related bodies. In this context, many new authorities have been designated or created in recent years. As we learn from this timely special issue, the record is mixed and a great deal of work lies ahead as the international community seeks to build on the current anticorruption momentum. The papers of this volume show how diverse anti-corruption bodies are as they reflect different cultures and traditions, some have made great strides toward accomplishing their goals while others have fallen back, some are national while others local, some are well integrated with other government agencies and interact well with other anti-corruption stakeholders, while others operate in isolation. Readers of this special issue will see how some national agencies are better resourced and more effective than others and how these results may be related to political will in the country to deal seriously with corruption. We learn how a small country, Fiji, has established an independent commission the investigations of which reached up to prime-ministerial level, and how social views on what is corruption Crime Law Soc Change (2010) 53:1–3 DOI 10.1007/s10611-009-9230-0

Abstract This paper challenges the widely shared view that the United States and international frameworks regulating terrorist finance and money laundering (AML/CFT) is productive and effective. Through a careful look at the evidence regarding the formal and informal fund ...

Financial intermediaries – Anti-money laundering allies in cash-based societies? U4 is a web-based resource centre for development practitioners who wish to effectively address corruption challenges in their work. U4 is operated by the Chr. Michelsen Institute (CMI) – an independent centre for research on international development and policy – and is funded by

Corruption causes some crises, but others are inevitable. However, the effects of all of them are made far worse by corruption. Social problems and inequalities are thus exacerbated, justice and rule of law are undermined, and all of this increases social turmoil and security risks. Systemic corruption, fraud and mismanagement result in a lack of crisis preparedness for the prevention of certain crises or mitigation of unavoidable disasters. When natural disasters inevitably strike or other emergencies arise, inadequate preparedness or responses result in government distrust and legitimacy crises, which aggravate problems and cause further victimization. This paper analyzes the COVID-19 crisis through the analytical lenses of “lawful but awful” practices and of "institutional corruption". In this way, it emphasizes the need to pay attention to negative consequences some political, economic or other activities have on society, even though they are allowed by the law or promoted by governments. This form of analysis can guide debates on public policy and reform: if something is not right, we need to fix it.

Organización de los Estados Americanos – Banco Interamericano de Desarrollo – Centro Internacional de Investigaciones para el Desarrollo 4 Mayo de 2014 No. 18 El Rincón del experto Los efectos de la agenda anticorrupción en la Contratación Pública en Latinoamérica y el Caribe Por: Jorge Claro y Nikos Passas Promover la Integridad y rendición de cuentas son objetivos muy importantes de las reformas anticorrupción en lo que respecta al gobierno, las empresas y la sociedad en general. Así como todas las partes interesadas están comprometidas con estos valores y metas, también poseen gran interés en operar en un ambiente que promueva el crecimiento económico, la buena gobernabilidad, la competencia saludable y las relaciones productivas público-privadas, las cuales están siendo socavadas por la corrupción y el soborno. Las significantes cantidades involucradas en la CP tornan el proceso vulnerable al abuso, de tal manera que la ley y otras reformas en varios países aspiran a mejorar la ...

This chapter is concerned with the financial controls of international terrorism and informal value transfer systems (IVTS). IVTS refers to any network or mechanism that can be used to transfer funds or value from place to place either without leaving a formal paper-trail of the entire transaction or without going through regulated financial institutions at all (Passas, 2002). These may be full-time, part-time or ad hoc operations.

The UN convention against corruption, also known as the Merida convention, came into force on the 14 December 2005 and constitutes the most comprehensive international instrument on this matter. It mandates independent anti-corruption bodies for States Parties. Such bodies may already exist and there may be more than one body in each jurisdiction. These may address prevention, analysis, law enforcement or a combination of these functions. A new organization was created in April 2006 aiming to assist in the effective implementation of the UN convention and to bring representatives and activities of anti-corruption bodies together: the International Association of Anti-Corruption Authorities (http://www.iaaca.org). At the same time, many governments are motivated to demonstrate leadership and political will against corruption. One way of doing this is through the establishment of anti-corruption commissions and related bodies. In this context, many new authorities have been designated or created in recent years. As we learn from this timely special issue, the record is mixed and a great deal of work lies ahead as the international community seeks to build on the current anticorruption momentum. The papers of this volume show how diverse anti-corruption bodies are as they reflect different cultures and traditions, some have made great strides toward accomplishing their goals while others have fallen back, some are national while others local, some are well integrated with other government agencies and interact well with other anti-corruption stakeholders, while others operate in isolation. Readers of this special issue will see how some national agencies are better resourced and more effective than others and how these results may be related to political will in the country to deal seriously with corruption. We learn how a small country, Fiji, has established an independent commission the investigations of which reached up to prime-ministerial level, and how social views on what is corruption Crime Law Soc Change (2010) 53:1–3 DOI 10.1007/s10611-009-9230-0

... The bank's fast expansion enabled it to cross national and cultural as well as ideological boundaries ... the need to fill in holes caused by its heavy losses in treasury deals, the default of ... The concept of "illicit enterprise" is useful be-cause it allows the inclusion of many phenomena ...

The Inception Impact Assessment (IIA) is ill-conceived, not grounded on firm empirical evidence and harmful to both crime control and the legitimate interests and rights of the EU citizens. The action under discussion is presented as a measure against terrorism finance, serious crime and tax evasion. The problem is that these criminal acts correspond to very different methods, volumes, perpetrators, causes and control challenges. Cash Payment Limitations (CPLs) are nowhere near a panacea that can address all of them and cannot make any of them go away magically. Even when each of these crime challenges are considered on their own, the empirical linkage of CPLs to effective controls is not there. The evidence from EU countries with CPLs in place shows higher levels of informal economy, corruption, tax evasion and terrorism risks than those without. There is substantial evidence of non-cash very serious and organized crime, while the amounts needed and used by terrorists in European are usually very small in cash transactions, way below the thresholds under consideration. In fact, determined offenders will shift to other methods and become more sophisticated, posing new problems to controllers. Displacement and incentives for better organized crime may well be the main products of such measures. At the same time, a long list of negative consequences are very likely to happen: transaction costs will go higher, privacy will be undermined, trust to institutions may be weakened (the power of state, financial, commercial and data-mining entities increases, even though there is plenty of evidence of abuse and serious violations in the past), the potential for abuse and basic rights violations grows, bank-runs and post-crisis bail-in regulations place citizens’ savings at risk of devastating losses. In addition, there may be monetary policy dysfunctions, risk of property losses for savers, and legitimate cash industry interests will be harmed. Moreover, the news risks and problems will apply to the most vulnerable parts of the population (elderly, migrants, unbanked, etc.). As the world leaders are pledging since 2008 to better control the financial Leviathan, such policy will provide them with extra powers. The world, including most parts of Europe, is not ready for this push towards cashlessness (requirements for which include universal access to financial services, financial literacy, infrastructure, technological support, broad cultural acceptance, etc.). Cash is extremely popular (80% prevalence in monetary exchanges for the people in Europe), supports sociability and good management of personal affairs, and provides a safety valve in times of crisis (downed systems, wars, natural disasters, cyber attacks, such as the recent ransomware, etc.). Cash is also deeply rooted in people’s culture. In the recent bank-run cases (Argentina, Cyprus and Greece to some extent), communities have created their own paper currency to supply the need for a physical and trusted means of exchange. Legal tests of the IIA thus fail: no proportionality, no subsidiarity, vague respect for basic human rights and fundamental harm to the freedom to enjoy one’s property in peace. In short, both internally (the EU does not comply with its own better regulation principles, conventions and fundamental normative framework) and externally (the ineffectiveness of the measures and the collateral damage they will cause) the IIA on EU-wide CPL is on rather thin ice. Instead of considering policies with little or no effect on stated objectives, the key aim ought to be the construction of a demand side approach to serious crime problems. That is, a strategy based on a solid understanding of the root causes and key drivers of terrorism, serious crime and tax evasion. Supply side approaches have not worked in the past (cf. drug trade) and will be ineffective in the future too. In addition to smart-policing that takes advantage of new control options, available intelligence and better cooperation within and across countries, well thought-out financial controls can indeed be helpful and effective. Remember: good law enforcement and community policing is the best counter-terrorism. Thus, the EU IIA is unsupported, out of proportion and therefore should not be imposed on Member States against the will of the people, whose interests the suggested policy would undermine rather than protect. [FULL TEXT AVAILABLE HERE: http://www.emeraldinsight.com/doi/full/10.1108/JFC-06-2017-0058]

The Inception Impact Assessment (IIA) is ill-conceived, not grounded on firm empirical evidence and harmful to both crime control and the legitimate interests and rights of the EU citizens. The action under discussion is presented as a measure against terrorism finance, serious crime and tax evasion. The problem is that these criminal acts correspond to very different methods, volumes, perpetrators, causes and control challenges. Cash Payment Limitations (CPLs) are nowhere near a panacea that can address all of them and cannot make any of them go away magically. Even when each of these crime challenges are considered on their own, the empirical linkage of CPLs to effective controls is not there. The evidence from EU countries with CPLs in place shows higher levels of informal economy, corruption, tax evasion and terrorism risks than those without. There is substantial evidence of non-cash very serious and organized crime, while the amounts needed and used by terrorists in European a...