Money And Information Essay, Research Paper
- MONEY AND TROUBLE-
An analysis of motive within Europe
Wolfgang Stoltzenberg s business Castor Holdings displayed the illusion of being a very successful company and the large banks of the world continued to lend to Stoltzenberg despite the fact that in reality the business had not made a profit in years. Castor Holdings was a parent company to York-Hannover that was run by Kersten Von Wersebe. Eventually when the banks began to foreclose and call back their loans Stoltzenberg had to file for bankruptcy. It is believed by independent auditors that Wolfgang may have siphoned off as much as 200 million pounds and deposited it over a large number of bank accounts throughout the world. Still lives in Belgravia and as yet no real money has been found or traced to him.
Colombian cartels use corporate criminals in Europe to launder their drug money.
Introduction
The intention of this paper is to highlight the different levels of computer crime in Europe and to examine the various motives involved. One interesting factor, from my point of view, is how the traditional organised economic crime has adapted to the worldwide potential of globalisation. Although globalisation has led to the blurring of the distinction between economic crime and organised crime residual elements remain. The global network has made economic crime more lucrative, more anonymous, and therefore less risky. The focus of this essay will be on the part that European countries play in facilitating global computer crime and the role and motivation of corporations and individual actors within a European setting.
In order to present this essay with some element of clarity it is necessary at first to distinguish between the different areas of computer crime that I will be discussing. Crime committed with the aid of computers can be separated into four distinct categories. First of all, crime which is committed by corporate business. This type of crime is committed either for the benefit of the corporation itself, i.e. tax evasion, or the corporation is used as a front in order to legitimise or launder dirty money. I shall refer to this type of crime as corporation crime . The second category is corporate crime on an individual level, i.e. the perpetrator is either defrauding the company that he is working for or he is using the company as a legitimate front with which to defraud other companies. This category will be referred to as white-collar crime . The third distinct category of computer crime is independent financial hacking where an individual or gang use a computer to gain access to a separate business or bank and transfer funds to accounts that they control. The fourth category is the information hacker. The individual or group in this context has no interest in financial theft and instead seeks information or at least access to information.
This is the point at which any analysis of motive becomes problematic. To offer clearly demarked lines between the motives of one computer criminal and another is a near impossible task. All we can do in an analysis of this nature is to examine the crimes that the individual was charged with and the subsequent sentence that was imposed. The aspect of motive that I am referring to in this paper is purely the obvious distinction between an individual who has been charged and convicted of a crime of financial theft, whether it is fraud, embezzlement, or illegal transfer, and an individual who has been charged and convicted of an illegal act of computer misuse, i.e. hacking. The intention of this paper is to explore the differing levels of punitive measures that have been imposed on individuals and to show a correlation between excessive punishment and information crime . The inference that information is more highly valued than money is not a new concept nor a necessarily respected one however this paper will be discussing this issue in relation to recent convictions in Europe as well as recent policy changes.
The essay will be primarily focussed in Europe for several reasons. Firstly, the countries of Western Europe in particular Switzerland and Luxembourg are well known for anonymity in financial dealings therefore presenting ideal money havens for tax cheats or illegal transfers. Other tax havens in Europe include the Isle of Man, Jersey, Guernsey Alderney and Sark, Lichtenstein, Monaco, the Vatican, Malta, Cyprus, Gibralta, and Andorra. Secondly, organised crime and corruption is rife in Italy and Spain and the traditional methods of criminal activity are rapidly giving way to the comparatively easy and anonymous methods of financial manipulation that computers can provide. Business fronts can be set up on the World Wide Web in a few hours thus rendering the task of money laundering extremely simple. European organised crime factions have become masters of global finance.
FINANCIAL MOTIVE
To begin this chapter I would first like to set the scene with a brief look at the modern economy and the potential for fraud and embezzlement in the global market place.
Electronic-Based Production
The stages of development of capitalism are defined by specific developments in the productive forces; the microchip defines the current stage of the development of the productive forces. Introduced in the early 1970s, the microchip is a light, tiny, cheap device that can be widely deployed to control production processes. It was the result of an effort to satisfy the growing demand for devices to reduce production costs and to cheapen the cost of coordinating the growing world economy.
The microchip and its sister developments in electronics made possible practical robotics. It cheapened the cost of the instruments of scientific production, paving the way for breakthroughs in other fields like “smart” materials, biotechnology, and digital communications; and it dramatically reduced communication costs. The introduction of the microchip threw a radically new quality into an already global economy. Twenty-five years after its introduction, the power of the microprocessor continues to double every 18 months. As chips develop, they infiltrate new areas of production, increasing output and replacing the need for living labour – workers – in production.
At the same time, as The Economist noted, “by reducing the cost of communications, [new technologies] have helped to globalise production and financial markets. In turn, globalisation spurs technology by intensifying competition and by speeding up the diffusion of technology through direct foreign investment. Together, globalisation and [new technologies] crush time and space.” (July1997: 34) Cheap transportation and communication have also created a global commodity market, including a global labour market.
The Internationalisation of Capital
The drive toward cheap production – cheap labour (whether it be at gunpoint, in prison, by children or slaves), lax environmental laws, low taxes – drives capital across the globe and provides a profitable niche for criminal professionals that have learned all the rules of modern management. Capable of flexibility unmatched in the formal economy, they are able to exploit instability anywhere in the world. This can be seen with the constant exodus of refugees whom whilst fleeing a war zone are held to ransom by mafia-organised clandestine emigration networks. Or a country whose underprivileged resort to the synthetic paradise of drugs makes millions of addicts easy prey for suppliers. We see countries where the gap between rich and poor is so great that the most wretched who have only their bodies to sell are swooped upon by traders in women, children, workers or sources of transplant organs. Governments were quick to lower the barriers to trade and the movement of goods and capital. They cared little for what they were letting loose.
With the internationalisation of these markets in labour and commodities comes internationalised capital. While new technologies made the rapid movement of capital technically possible, the freeing of capital from national controls came from the growing power of the multinational corporations (MNCs). The intense concentration of productive capacity in a handful of corporations has carried forward from imperialism and grown more intense. William Greider estimates that the 500 largest MNCs produce one-third of the world’s manufacturing, three-fourths of all commodity trade, and four-fifths of the trade in technology and management services.
These capital flows are not just from the former imperial powers to the former colonies. Foreign direct investment increased almost fourfold in the 1980s, with the largest part being invested in the United States. “Hong Kong” capital is invested in the United States, “U.S.” capital is invested in Russia, “Russian” capital is invested in who-knows-where. (Some $150 to $300 billion has left Russia in the past five years, according to one Russian government official – The Nation, March 31, 1997). It is silly to speak of this capital belonging to any nation anymore. The new global regime creates an international class of investors with no tie to countries, only to stable havens where money can be parked and from which it can be moved rapidly.
Under imperialism, capital was “national” in the sense that it was deeply connected to a multinational state. There was U.S. capital and German capital and British capital. This fed the recurring territorial conflicts. Under the new globalisation, capital is trans-national, or even supranational. Capital has been increasingly successful in freeing itself from national restraints – from restricted markets, tariffs, taxes, environmental restrictions, and organized labour. Freedom from national controls allows this capital to roam everywhere – freely and quickly – in the search for the highest rate of return. Some $1.2 trillion flows through New York currency markets each day.
As Greider notes:
” [T]hese transactions are carried out by a very small community – the world’s largest 30 to 50 banks, and a handful of major brokerages. … The new communications technology has created a small, elite community of international finance – perhaps no more than 200,000 traders around the world who all speak the same language and recognize a mutuality of interests despite their rivalries.” (Greider1997: 245-246)
New Polarities, New Possibilities
The process of globalisation is driven by the dynamics of capitalism. Capitalism’s survival rests on the extraction of profit on a constantly increasing scale through the extension of production. While electronics has enabled the unification of the world commodity market (including the labour market) and the financial market – by dramatically cheapening communications and transportation – it also introduces a radical new quality – electronic production. This new element attacks the very foundation of capitalism – the extraction of surplus value from workers – by introducing labour-less production.
To maintain profits, capitalists seek out the cheapest production costs (regardless of whether production is done by robots or by human muscle, or whether it takes place in Detroit or in Jakarta). So, as electronics extends throughout the global economy, workers around the world are compelled to compete not only with each other but with their electronic counterparts – robots and automated machinery of increasingly diverse types.
For a number of reasons, employment under these circumstances can actually increase while electronics is at the same time destroying the value of labour power. With electronics driving down the value of labour power, and therefore wages, more members of the household are compelled to enter the job market, or to work past retirement age, or to take on multiple jobs in unsuccessful attempts to maintain a slipping standard of living. Others are being driven to the bottom of the job market by the end of welfare. This is temporarily providing a cheaper alternative to technology.
The capitalist does not care if production is done by the “gratuitous labour of machines” or by the “free” labour of slaves. The critical indicator of the impact of electronics on production is not “employment” statistics, but the polarization of wealth and poverty. With the destruction of the value of labour power and wages, wealth polarizes and the economic centre disappears. In this process, capitalism is compelled to destroy whatever social base it may have maintained in the old imperialist centre.
London, I would point out, is, of course, the biggest international financial centre in the world and the biggest foreign exchange centre. Consequently, it is crucial that the UK leads the way when it comes to the regulation of financial markets and the criminal process for fraudsters. Frauds are increasingly multi-jurisdictional in scope 80% of all cases investigated by the SFO during the 1996/97 reporting year had a significant foreign element, involving more than one jurisdiction. The fact that every country constitutes a separate and distinct criminal jurisdiction is a complicating factor in any investigation. Fraudsters exploit territorial boundaries and differing legal systems to make the process of investigation and prosecution more complicated and difficult.
What part does the SFO play in the fight against the international criminal?
Lord Roskill’s fraud trials Report of 1986 led to the setting up of the SFO in the following year. His vision of a dedicated organisation, with a unique combination of lawyers and accountants working alongside police officers, has proved a durable and effective one. For those of you today not familiar with our role and our work, the SFO fits into the post-Roskill architecture as a unique, focused agency with the task of investigating and prosecuting the tip of the fraud iceberg: those cases which are exceptionally serious and complex. This means that we are limited to a small number of very significant cases at the moment, we have 82 active cases, under investigation or going through the trial process. The combination of the investigation with the prosecution function enables “precision tailoring” of enquiries in a major investigation at a much earlier stage than would be the case if the two functions were separated. The SFO model has been adopted by a number of overseas authorities New Zealand, South Africa and Norway among them, for their own initiatives in tackling serious fraud.
WAYWARD CAPITALISTS
Too many transactions
Even in those countries that have many controls there are a lot of problems fighting money laundering.
Italy, for instance, has adopted the whole directive and has also lowered the EU’s limit for controls on financial activities from 15,000 Ecu to 10,000.
But although Italy has a system of identification of suspected transactions it does not work well. There are so many transactions that it is very hard to identify the illegal activities.
Another difficulty is that the rules do not guarantee confidentiality to the bank worker who informs the police. A modification of Community law on this is being discussed at the European Parliament.
Italy is now experimenting with an important new method for fighting money laundering, called Gianos. It is a computer system that is already used by more than 300 banks which automatically identifies anomalous operations and traces suspect transactions.
Mafia moves
Organised crime in the former Eastern Block has become a major concern since the iron curtain fell in 1990.
“The situation of organised crime in Eastern Europe is directly connected with economic differences between the East and the West,” said Raimond Edward Kendall, the Secretary general of Interpol, at a visit in Slovakia in April 1995. As the country’s society has undergone transformation it has seen changes on the criminal scene too: an unprecedented rise in the crime rate and the emergence of new elements in criminal activity, like organised crime. “Because of the high figures involved in illegal operations, certain people are able to commit large-scale criminal activities in an indirect way, using others entrusted with specific assignments. Such groups show a clear tendency to engage in criminal activities in a well-planned and systematic manner,” Jozef Holdos, President of Police Corps in Slovakia said as he explained the complexities of the almost impenetrable structures.
The Italian mafia boss Toto Riina in court 1993.
Organised crime has all the features of illegal business. Dirty money is invested to increase the dimensions of crime or it is legalised through money laundering. Although organised crime existed before 1989, it inevitably lacked the strong international character of today. It has been only too visible since the borders were opened.
A go-between country
According to the Slovak police, former Yugoslavians seem to be prominent organisers of the new forms of criminal activities in Slovakia. They use Slovakia as a go-between country, where they stay after committing offences in western countries. Before 1989 their practices were eased by there being no cooperation with Interpol. Nor were international warrants valid in Slovakia or the other Central and Eastern countries. That all changed in 1990. Organised crime was then able to reflect the situation in a given country. Within the country changes have been made that have benefitted criminals. Since it was re-written, Slovak law has included loopholes that are favourable to the rise in organised crime. As the economy moved towards a market economy it became easier to commit economic crime, but it has not yet reached the dimensions of the advanced economic countries.