The recent charges against insider trading at SAC Hedgefund and the government’s prosecution to seize the proceeds raises a very important question for the government coffers.  No need for austerity is these funds were available to societies.

The Federal Action Task Force says: It is critically important that governments include all relevant voices in developing a national anti-money laundering programme. They should, for example, bring law enforcement and financial regulatory authorities together with the private sector to enable financial institutions to play a role in dealing with the problem. This means, among other things, involving the relevant authorities in establishing financial transaction reporting systems, customer identification, record keeping standards and a means for verifying compliance.

Here is a report from Zambia. Definitions of Finance and Money Laundering

Secretive offshore tax havens help funnel billion of dollars out of the poorest countries and into the bank accounts of their corrupt officials. This video shows a how a dodgy politician could hypothetically abuse this shadowy financial network to enrich himself, and explains why we need greater financial transparency in the fight against international corruption.

More on Thomson Reuters Foundation 

Money laundering allows gangsters, terrorists and corrupt politicians to profit from their crimes.

The offshore financial system makes it too easy for these criminals to hide their wealth and too difficult for the police to catch them.

Here is an example of how a politician could use the secrecy of tax havens to steal from a developing country rich in natural resources.

If you want to move dirty money then you need a shell company in a tax haven. Our politician chooses the Seychelles, where you can register a new firm online in under 10 minutes for just 690 euros.

This company needs directors, so he pays residents in another tax haven, such as the British Virgin Islands, to use their names on all official documents.

This practice is completely legal in the UK and its overseas territories. A recent investigation into these nominee directors found a group of 28 individuals who collectively controlled more than 21,500 companies worldwide.

The next step is to set up a corporate bank account somewhere with strict secrecy laws.

The crooked politician picks Panama, where the authorities makes life very difficult for anyone requesting information.

This creates another valuable layer of secrecy, letting money launderers stay one step ahead of the authorities.

The politician can then use the shell company to open a high street bank account, buy a fleet of supercars or invest in the prime real estate markets of London, Paris and New York.

Even if his bank questioned how a civil servant could afford a Bugatti Veyron, it would be next to impossible to prove he had stolen the money.

Offshore tax havens have made sure his name never appeared on a public register.

Until these secret jurisdictions become more transparent, corrupt politicians will be able to loot developing countries with little risk of being caught.

Design Rachel Gold
@wtwfinance

A recent report by Labaton Sucharow suggests that many young people coming into finance regard corporate wrongdoing as the cost of doing business.  Here are the main points of the report.

• Despite the many reforms put in place in the wake of the financial crisis, only 36% of respondents felt that Wall Street has changed for the better since Dodd-Frank’s passage in 2010.

• More than half of respondents–52%–felt it was likely that their competitors have engaged in unethical or illegal activity to gain an edge in the market; 24% felt employees at their own company likely have engaged in misconduct to get ahead.

• Misconduct is still widespread in the financial services industry; 23% of respondents indicated that they had observed or had firsthand knowledge of wrongdoing in the workplace.

• 29% of respondents believed that financial services professionals may need to engage in unethical or illegal activity in order to be successful.

• More than one-quarter of all financial services professionals–26%–believed the compensation plans or bonus structures in place at their companies incentivize employees to compromise ethical standards or violate the law.

• An alarming number of financial services professionals, 24% of respondents, likely would engage in insider trading to make $10 million if they could get away with it.

• Shockingly, and consistent with recent and high-profile criticism of the culture within the financial services industry, a full 28% of respondents felt that the financial services industry does not put the interests of clients first.

• Building on this seemingly endemic culture problem, a concerning number of financial services professionals indicated that their leadership may put profits above ethics; 17% felt their leaders were likely to look the other way if they suspected a top performer engaged in insider trading. Equally concerning, 15% doubted that their leadership,upon learning of a top performer’s crime, would report it to the authorities.

• As enforcement actions are on the rise and new reforms have strengthened financial regulators and law enforcement authorities, the court of public opinion is following suit; 62% of financial services professionals felt the SEC is an effective watchdog and 57% felt that FINRA is effective.

• Despite the encouraging 89% of financial services professionals who indicated a willingness to report wrongdoing given the protections and incentives such as those offered by the SEC Whistleblower Program, 40% of respondents were still unaware of the SEC’s Whistleblower Program. Financial Services Survey July 2013

Whether or not this tactic will work is a matter of considerable debate, but if the courts are wiling to interpret the law in favor of the prosecution, billions of dollars may flow into the public coffers.  It is a long shot.  The FInancial Death Penalty