Crime and Corruption | Page 6

to for the purpose of hiding

slush money). In light of this, it is not always correct to regard it as a
reserve fund that is not accounted for in the books. Deception, trickery
or forgery of various kinds are often resorted to for the purpose of
setting up a slush fund."

He mentions padded invoices, sham contracts, fictitious loans, interest
accruing on holding accounts, back to back transactions with related
entities (Enron) - all used to funnel money to the slush funds. Such
funds are often set up to cover for illicit and illegal self-enrichment,
embezzlement, or tax evasion. Less known is the role of these furtive
vehicles in financing unfair competitive practices, such as dumping.
Clients, suppliers, and partners receive hidden rebates and subsidies
that much increase the - unreported - real cost of production. BBVA's
payments to ETA may have been a typical payment of protection fees.
Both terrorists and organized crime put slush funds to bad use. They
get paid from such funds - and maintain their own. Ransom payments
to kidnappers often flow through these channels. But slush funds are
overwhelmingly used to bribe corrupt politicians. The fight against
corruption has been titled against the recipients of illicit corporate
largesse. But to succeed, well- meaning international bodies, such as
the OECD's FATF, must attack with equal zeal those who bribe. Every
corrupt transaction is between a venal politician and an avaricious
businessman. Pursuing the one while ignoring the other is
self-defeating.
Corruption and Transparency
I. The Facts Just days before a much-awaited donor conference, the
influential International Crisis Group (ICG) recommended to place all
funds pledged to Macedonia under the oversight of a "corruption
advisor" appointed by the European Commission. The donors ignored
this and other recommendations. To appease the critics, the affable
Attorney General of Macedonia charged a former Minister of Defense
with abuse of duty for allegedly having channeled millions of DM to
his relatives during the recent civil war. Macedonia has belatedly
passed an anti-money laundering law recently - but failed, yet again, to
adopt strict anti-corruption legislation. In Albania, the Chairman of the
Albanian Socialist Party, Fatos Nano, was accused by Albanian media
of laundering $1 billion through the Albanian government. Pavel

Borodin, the former chief of Kremlin Property, decided not appeal his
money laundering conviction in a Swiss court. The Slovak daily "Sme"
described in scathing detail the newly acquired wealth and lavish
lifestyles of formerly impoverished HZDS politicians. Some of them
now reside in refurbished castles. Others have swimming pools replete
with wine bars. Pavlo Lazarenko, a former Ukrainian prime minister, is
detained in San Francisco on money laundering charges. His defense
team accuses the US authorities of "selective prosecution". They are
quoted by Radio Free Europe as saying: "The impetus for this
prosecution comes from allegations made by the Kuchma regime,
which itself is corrupt and dedicated to using undemocratic and
repressive methods to stifle political opposition ... (other Ukrainian
officials) including Kuchma himself and his closest associates, have
committed conduct similar to that with which Lazarenko is charged but
have not been prosecuted by the U.S. government". The UNDP
estimated, in 1997, that, even in rich, industrialized, countries, 15% of
all firms had to pay bribes. The figure rises to 40% in Asia and 60% in
Russia. Corruption is rife and all pervasive, though many allegations
are nothing but political mud-slinging. Luckily, in countries like
Macedonia, it is confined to its rapacious elites: its politicians,
managers, university professors, medical doctors, judges, journalists,
and top bureaucrats. The police and customs are hopelessly
compromised. Yet, one rarely comes across graft and venality in daily
life. There are no false detentions (as in Russia), spurious traffic tickets
(as in Latin America), or widespread stealthy payments for public
goods and services (as in Africa).

It is widely accepted that corruption retards growth by deterring foreign
investment and encouraging brain drain. It leads to the misallocation of
economic resources and distorts competition. It depletes the affected
country's endowments - both natural and acquired. It demolishes the
tenuous trust between citizen and state. It casts civil and government
institutions in doubt, tarnishes the entire political class, and, thus,
endangers the democratic system and the rule of law, property rights
included. This is why both governments and business show a growing
commitment to tackling it. According to Transparency International's
"Global Corruption Report 2001", corruption has been successfully

contained in private banking and the diamond trade, for instance.
Hence also the involvement of the World Bank and the IMF in fighting
corruption. Both institutions are increasingly concerned with poverty
reduction through economic growth and development. The World Bank
estimates that corruption reduces the growth rate of an affected country
by 0.5 to 1 percent annually. Graft amounts to an increase in the
marginal tax rate and