Where's the Money Going?

26 July 2018: ​Beyond emptying out an increasingly untenable global black market and creating a new army of billionaires, what could London's money men be planning to do with their money?

A prominent Bitcoin bull might have given us the answer with a prediction so wild that it went viral yesterday. Mark Yasuko, chairman and CEO of hedge fund Morgan Creek Capital Management generated global buzz yesterday with the prediction  that the value of the cryptocurrency would rise to $500,000 by the end of 2024.

The only way that could happen would be if all the billionaires getting the trillions of dollars from Britain's emptying global black market are pledged to invest it all in Bitcoin.

That would send the price of the currency zooming up and establish a new virtual secrecy jurisdiction, replacing Britain's "tax haven" network. Bitcoin will allow MI6 to continue providing the stealthy support services needed by global organized crime and help sustain its paymaster role to every major terrorist organization in the world.  

What can the rest of the world do to protect itself?

Governments should keep very close tabs on who trades on Bitcoin exchanges. That way at least their taxes will increase enormously over the next few years, and we will have a map of the entry points into the new digital secrecy jurisdiction.

A small part of the river of ivory that flows into China every year

UN Deputy-Secretary-General Amina Mohammad has made a speciality of ignoring problems developing countries consider extremely seriously: money laundering, terrorism and drug trafficking. She devoted just 25 words to all three combined in the 15,000+ word Agenda 2030.  In the report benchmarking indices to be met, she omitted them completely. She was a British nominee for her current post; her father was Nigerian but she was raised in Britain by her British mother.

Chinese indentured workers

Gun pyre at Uhuru Gardens, Kenya

Afghan Mujahideen took the field to fight a Soviet invasion.  The Taliban replaced them to protect British interests in opium and heroin

UN Secretary-General Antonio Guterres made a speech in May 2018 on global corruption in which he made no mention of the 70 or so "tax  havens" without which organized crime would be unable to operate  

British shelling of Canton in May 1841, during the First Opium War. 

Chinatown, San Francisco,

The largest in North America

Oxfam noted in January 2018 that a new billionaire was created every two days in 2017.

It was a serious undercount.

London’s Sunday Times reported in May that one was created every 0.97 days.

Why is this happening?

There is no ready explanation. In fact, there is no explanation at all. You can look in vain through the reports of the world’s biggest financial institutions and organizations like the World Bank, IMF and OECD. The financial Press has nothing to say, other than describe the various strategies used by the $3 trillion “hedge fund industry.” There are no pictures of this new crop of the ultra-rich. Forbes list of the youngest billionaires (under 40) in 2018 has an unprecedented number of faceless moguls. The lack of explanation is almost as extraordinary as the situation itself, for people have never got rich this fast except at times of war and genocide, as when the Spanish plundered Inca gold and the British looted India.

A Working Hypothesis

What’s Probably Happening is that the British financial elite is emptying out the global black market it has built over the last five decades. The paucity of comment reflects embarrassment, somewhat like the silence of a family with a grisly family member chained in the basement. Here’s the story:


The global black market is rooted in the opium trade the British East India Company foisted on China from the second half of the 18th Century. Its managerial elite included the rich and famous of three continents who acquired stakes in the business when opium was the most valuable commodity in world trade. The British Crown acquired much of its current wealth from its one-third interest in the East India Company, which had a monopoly of Indian opium exports until 1834. In the United States, the “China trade” accounted for many fortunes, including that of John Jacob Astor, who at his death in 1848 was the wealthiest man in the country. Opium was one of the early interests of India’s Tata family which gives its name to the country’s largest multinational corporation.

To begin with, the opium trade was entirely legal – or to put it another way, in the days of European colonialism, everything was legal in Africa, Asia and Latin America. How it got illegal is a complicated story we come to a few paragraphs down. 

China was strongly against it from the beginning, but when it tried to stop the trade that was ruining millions of Chinese lives, Britain fought two “Opium Wars” to keep the business going. The first (1839–1841), resulted in expanded drug imports and the loss of Hong Kong Island to the British. The second (1856–1860) forced Peking to open up the whole country to the drug trade, hold Europeans immune from Chinese law, and lift the ban on the export of indentured labor.

But balancing that history is the “One Country Two Systems” deal Margaret Thatcher made with Deng Xiaoping in 1984 to return Hong Kong to Chinese sovereignty. The unadvertised core of the deal was that in return for letting Hong Kong continue as Britain’s primary money laundering center in Asia, China would get an unconditional flow of investments. That deal rescued China from the ashes of Mao Zedong’s brutal economic policies and put it on its current path.

To understand how all these strands come together in the 2017 multiplication of billionaires we have to follow a tangled skein of unexpected consequences. It begins with the agreement at the end of the Second Opium War that Chinese indentured laborers would be allowed to go to the United States without restriction. That was necessary to meet the labor shortage imposed by the end of slavery and manpower losses due to the Civil War; it was needed to build the infrastructure for accelerating industrialization.

Unforeseen Consequences
The Chinese influx into urban America created “Chinatowns” in many cities, and among the comforts they provided for newcomers were “opium dens.” The drug itself was not a major concern to Americans, for opium was already widely available, peddled by snake-oil salesmen and sold at corner drug stores under various brand names, including Heroin, the Bayer Corporation’s patented remedy for feminine discomforts and colic in babies. What did raise public alarm was a vividly racist campaign by a California newspaper about the danger of Chinese men debauching White women in opium dens. The sensational charges carried all the way up to the United States Congress, which banned opium in 1905.

Meanwhile Baptist missionaries in the Philippines (which the United States acquired after its 1898 war with Spain), had begun a campaign to stop the opium trade globally. Washington took up the cause as it maneuvered in China to distance itself from European Powers, and under American pressure, an International Opium Convention was agreed to in 1912. It banned a trade that had been a significant source of colonial revenues for some 150 years and, not surprisingly, had no more effect than the Manchu edicts of the previous century.

When the League of Nations tried to implement the ban after the end of the First World War, British merchants delegated trafficking to criminal Chinese “Tongs” (secret societies), and in short order the whole trade disappeared from view. The British confined themselves to banking the enormous profits, establishing the Hong Kong and Shanghai Banking Corporation in March 1865. It is now HSBC, Britain’s (and Europe’s), largest bank. From the beginning, it has laundered the proceeds of the opium trade, leading the way into a system that in the second half of the 20th Century developed into a structured support system for organized crime, most importantly the drug trade.

The “War on Drugs”
International efforts to deal with drug trafficking has been a saga of continuous failure. To shore up the 1912 Convention the League of Nations adopted a number of instruments but succeeded only in spreading corruption to new areas. In 1923, a Vienna-based International Criminal Police Organization was established, but it too made no difference, especially after the Nazis overran Austria and moved the ICPO headquarters to Berlin. After a post-war cleansing the ICPO changed its name to its telegraphic address and continued to be ineffective as INTERPOL.

In 1961 the United Nations rationalized the various international drug laws into a Single Convention, to which a decade later was added the Convention on Psychotropic Substances (amphetamine-type drugs). By then the punitive approach had ramified widely. States were required to punish “cultivation, production, manufacture, extraction, preparation, possession, offering, offering for sale, distribution, purchase, sale, delivery on any terms whatsoever, brokerage, dispatch, dispatch in transit, transport, importation and exportation of drugs.”

None of the treaties takes note of the money laundering arrangements that support drug trafficking. The CEOs and senior managers of banks that launder drug money are as complicit as drug lords and pushers but have always been magically exempt from the requirement that “imprisonment or other penalties of deprivation of liberty” be the punishment for “any other action which in the opinion of such Party may be contrary to the provisions of this Convention.” Not that there is any reason to believe that incarceration would discourage bank employees any more than it has traffickers.

Those failures have made no impression on votaries of drug prohibition, for every new treaty since the 1912 Convention has prescribed new punitive measures. The 1988 United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances imposed on States the obligation “to extradite or prosecute accused drug offenders, to provide mutual legal assistance, to cooperate in restraining and confiscating drug proceeds or property of corresponding value and to engage in law enforcement cooperation.” Those arrangements cover not just drugs but also “precursor chemicals” — including such common substances as acetone, hydrochloric acid and sulfuric acid. They have led to surveillance of pharmacists and employees of stores selling drug-related materials or paraphernalia in “suspicious” quantities. Major retail chains of those innocuous substances have been pressured into “voluntarily” participation in control programs and bank records of everyone involved have been open to police inspection.

None of this has made a dent in drug trafficking or use, but it has legitimized the brutal practices of autocratic regimes and seriously eroded the basic norms of democratic societies. Rogue elements in police forces and intelligence agencies have invoked the threat of drugs to mistreat, imprison, and murder people with impunity in countries around the world. In countries like Indonesia, Malaysia and Iran execution has become a routine punishment for drug trafficking; in the Philippines under the presidency of Rodrigo Duterte (since 2016) the police have taken to murdering suspected traffickers without any legal procedures whatever. India executed its first (and so far only) drug dealer when P. Chidambaram in the pre-Modi Congress government, was seeking to curry favor with London. (On a visit there, he prated about deep "cultural ties" between the countries.)

Spies, Cartels, Jihadists, “Leftists”
During the first half of the Cold War the opium trade was centered in the “Golden Triangle” of Burma, Laos and Thailand; by its end Afghanistan had become the primary source of illicit opium. In the former, various ethnic mafias were engaged in drug trafficking; in the latter, groups claiming to be motivated by “extremist Islam” were the traffickers. In both cases, British and American intelligence agencies were in the background, providing arms, finance and other facilities to process and market the drug. In Afghanistan, Saudi Arabian and Pakistani agencies were also involved. After the end of the Cold War, American and Saudi involvement in the Afghan drug trade appears to have ended but British and Pakistani engagement seems to have strengthened.

While the Asian drug trade was passing into its Afghan phase the cocaine trade in the Americas was brought into the global black market. The Bahamas, which gained independence from Britain in 1973 but remained closely linked to London’s financial industry became the key logistical center. In 1979, Carlos Lehder, a Colombian with a German father bought a 165-acre property in the Bahamas and turned it into a refueling point for small planes smuggling cocaine from Colombia to the United States. In very short order cocaine use in the United States went from being a high-society indulgence — described by Newsweek in 1977 as “de rigueur at dinners” of the smart set, passed around “like Dom Perignon and Beluga caviar” — to a street drug in decaying inner cities.

In the 1980s cocaine replaced coffee as Colombia’s main crop and Lehder became a founder of the Medellin cartel. The FARQ guerrilla movement took on the government of Colombia as it tried to bring drug trafficking under control, dragging the country into the hemisphere’s longest civil war. Western mass media steadfastly reported the FARQ as “Leftist.” In September 2012, weeks after the Obama administration hit Britain’s HSBC Bank with a $1.9 billion fine for money laundering and other criminal violations of American laws, FARQ sued for peace in Colombia.

Mass Media
That coincidence escaped the attention of mass media, which reported without irony that the money laundering had been a matter of managerial oversight. In a masterpiece of comic understatement an analyst on the BBC even described HSBC’s multi-trillion dollar money laundering as an “amazing lapse of concentration.” However, the charges leveled against HSBC did cause a rare shift of media attention from the violence and criminality of drug trafficking to its financial aspects.

None of the major news organizations reported what researchers at the UN Office on Drugs and Crime (UNODC) had revealed, that only two per cent of the proceeds of drug trafficking stayed in producing countries. The UN did not say, but the remaining 98% presumably went to those managing the money laundering arrangements.

There was also little investigative zeal to find out who had taken over HSBC’s Latin money laundering business or how Central America and Mexico were affected by the end of the Colombian cartels. Curiosity remained dead even as the extreme violence accompanying changes in the region sent waves of hapless asylum seekers to American borders. However, President Trump waxed indignant over “illegal” asylum seekers and his opponents raged against the despoliation of American values in separating parents from children in the custody of US Immigration authorities.

Black Market Business
Drugs constitute the highest volume of business in the global black market. The Geneva-based UN Office of Drugs and Crime has estimated that the Afghan opium/heroin trade is worth some $60 billion a year. It also estimated the overall street value of all forms of mind altering drugs to be $500 billion. It backed away from that figure under challenge but much expert opinion continues to affirm it.

In the post-Cold War era the global black market boomed with two forms of organized crime, gunrunning and trafficking in people. As major Powers downsized their arsenals by selling off millions of weapons at fire-sale prices, brokers channeled them to conflict areas in developing countries. A UN report in 2003 said that in the decade since 1990, arms trafficked into areas of conflict in West Africa had been used to kill two million people, 90 percent of them civilians. It said that in East Africa the boom in supplies had made weapons so cheap that in Uganda an AK-47 assault rifle cost no more than a chicken. Most African conflicts were (and continue to be) “commercial wars” serving as cover for the large-scale theft of natural resources ranging from diamonds and precious earths to hardwoods and gold. Where there is no ongoing theft of resources, African conflicts signal the use of terrorist movements to facilitate drug trafficking. 

Meanwhile, in Eastern Europe, a new traffic developed to supply women and children to brothels in Western Europe and Asia. The European Union estimated in 2000 that about half a million women from outside the region were working as prostitutes in its member countries and that an estimated 175,000 were being trafficked in every year. More recent statistics show a continuing decline in those numbers, but new flows are emerging from Asian trouble-spots. People from at least 127 countries are estimated to be trapped in involuntary servitude in 137 countries. The proceeds from their misery are estimated in the billions of dollars per year.

An altogether new form of organized crime developed in the last quarter of the 20th Century as governments put in place laws to protect the natural environment. With almost total impunity corporations set about breaking air and water pollution laws, ignoring guidelines for the treatment of hazardous wastes, trading in ozone-depleting chemicals and endangered species, and stealing the natural wealth of poor countries. African countries caught in conflict and thus unable to defend their territorial integrity, Somalia in particular, became dumping grounds for European toxic waste.

The exploitation of endangered animals is also big business in the global black market, with demand for animals or their body parts mainly East Asian, and supplies coming from Africa, Latin America and the rest of Asia. The money generated by the grisly trade in tiger parts, rhino horn and elephant ivory is not large by world standards, but is enough to drive those animals towards extinction. Tiger parts are estimated to generate sales of $5 million per year. Poachers kill between 5,000 and 12,000 African elephants every year to supply the market with between 50 and 120 tons of ivory, valued at about $62 million. Rhino horn sales of some 800 kilograms generate some $8 million per year.

The trade in hardwoods is much more lucrative, with supplies valued at $2.6 billion going from East and South East Asia to the European Union, and another $870 million supply chain bringing stolen South-East Asian forest products to China. Criminal counterfeiting has piggybacked on the trend to outsource production of luxury brands from the industrialized world to China. According to the World Customs Organization two-thirds of counterfeit products are shipped from China. The main market for these products is in the European Union, where vending them involves people who are themselves victims of traffickers. Based on seizures by police and consumer surveys, the EU has estimated the trade at over $8 billion per year.

On the ground, all the illicit activities described above are in the hands of violent thugs but those who manage them are not the snatch-and-grab captains of earlier generations. A UN report on the State of Crime and Criminal Justice Worldwide in 2000 noted that in response to “changing structures of trade, finance, communication and information” criminals had become businessmen. They had “established networks in their home countries as well as abroad in an effort to carry out activities more effectively in both licit and illicit markets” and were “able to infiltrate financial, economic and political systems of countries all over the world.” They had “adopted corporate-like structures … employing highly skilled persons and mechanisms to assist in generating and concealing profits.”

Shell Games
Every one of the illicit activities described above involves shell companies — corporations with unidentifiable owners and assets — doing business through “secrecy jurisdictions.” There are several million shell companies and some 70 secrecy jurisdictions. The money they process passes into the world’s most illustrious banking centers with a nod and a wink. This internationally distributed system, most of it developed since the 1960s, has been directed from The City (financial center) of London, and constitutes a new British Empire. It subjects the rest of the world to massive exploitation. Global Financial Integrity (GFI), a Washington-based non-governmental organization run by a former World Bank economist, has estimated that over the last decade developing countries have lost $5.86 trillion in illicit transfers. The London-based Tax Justice Network (TJN) has estimated that offshore tax havens hold assets of over $30 trillion, with the world’s High Net-Worth Individuals owning over a third of that. In 2010 the International Monetary Fund estimated that just the “small financial centers” (i.e. excluding Switzerland and London), held some $18 trillion in secret assets.

The overall size of the underground economy is anyone’s guess but there have been expert estimates of its magnitude at the regional and national levels. About 50 to 60 percent of economic activity in sub Saharan Africa is off the books; in the Russian Federation it is 40 to 50 percent, in China about 20 percent, the United States eight percent, and Japan six percent. The United Nations estimated money laundering in 2010 at two to five percent of global GDP: $800 billion to $2 trillion.

The United Nations Conference on Trade and Development (UNCTAD) reported in its 2010 World Investment Report that the flow of Foreign Direct Investment (FDI) from Hong Kong in 2009 was more ($52.2 billion) than those of mainland China ($48 billion). Tiny British Virgin Islands had more outgoing FDI ($26 billion) than all of oil-rich West Asia ($23 billion) or the “Tiger” economies of South-East Asia ($21 billion). In comparison, India’s outflow of FDI in 2009 was $14.8 billion. As for FDI stock (cumulative total), Hong Kong was reported to have $834 billion and the British Virgin Islands $224.8 billion, dwarfing China’s $229 billion and India’s $77 billion.

Corruption in the UN System
Since a new head of UNCTAD took over in 2013 such invidious comparisons have not appeared. At the United Nations too, the appointment of particular senior officials has dramatically changed the level of the Organization’s functional integrity. A striking example was the preparation of the development goals of Agenda 2030. Developing countries had campaigned hard to have the 15-year development agenda take cognizance of money laundering, drug trafficking and terrorism as three interlinked problems, each a major obstacle to sustainable development. Britain said nothing on the three issues (each with an important role in its foreign policy) but had the last Secretary-General appoint as coordinator of Agenda 2030, a Nigerian national raised in Britain by her British mother. She went through all the motions of consulting with governments and then produced a set of goals that devoted just 25 words to the three issues in the 15,000+word Agenda 2030.

The same official, promoted to the high rank of Deputy-Secretary-General by the incumbent UN Secretary-General, omitted those issues altogether from the UN’s main benchmark report in 2016. In 2017, she had the text of Agenda 2030 quietly rewritten to separate terrorism from money laundering and drug trafficking; it was placed in a new paragraph, alongside national crime. This is standard high corruption at the UN: poor countries have their concerns routinely ignored while senior officials bend themselves into pretzels to please the powerful.

In May 2018 the incumbent UN Secretary-General thought nothing of making a major speech on global corruption without a single mention of offshore tax havens. Their role was most recently exposed amidst much scandal in the Panama Papers in 2016 and the Paradise Papersin 2017. See also here

No UN agency has attempted even a tentative mapping of the global underground economy or tried to bring into focus the mechanisms and elite groups which launder and manage illicit money. International Conventions have been adopted against Transnational Organized Crime (2000) and Corruption (2003), but action against money laundering has been stuck at the level of intergovernmental coordination based on guidelines agreed among major industrialized countries. Most of the estimates about the flow of funds into tax havens have come from non-governmental organizations, with the World Bank and the IMF occasionally playing catch-up.

The Emptying Black Market
Over the last decade, as the United States and the European Union have tightened the screws on money laundering, Britain has responded by seeking to escape oversight and control. Brexit has been the most significant move in that direction. London has also packed the ranks of senior United Nations officials with its own officials (far more than any other state). Among the latest is the head of Public Information ahead of a major review of drug policy in 2019.

However, the hacking of millions of confidential records and their exposure in the 2016 Panama Papers and the 2017 Paradise Papers have made those UN maneuvers largely immaterial in protecting British interests. It is difficult to see how the Humpty Dumpty of the global black market can be put together again. And without the black market it will be impossible to run the global drug trafficking empire or sustain terrorism networks from Afghanistan and Latin America to major markets. (Something more open and violent might be in the works, using the newly enriched population of billionaires; it is something democracies have to worry about.)

That brings us to why there is a sudden surge in the number of billionaires. With no future for the global black market, all its trillions of dollars have to go somewhere. The bid by Bitcoin and other cryptocurrencies to become a virtual secrecy jurisdiction having clearly failed, there is no alternative but to park the money with deserving individuals. As the money flows into hedge funds and is traded in world markets through computer trading algorithms, we have a global market system dominated by oligarchs and profiting them predominantly. The more that system grows, the less democracies have a chance of survival, especially if Britain uses its assets methodically to create political and economic chaos.  What will that entail?

Looking Ahead

In looking ahead, it is necessary to keep in mind the following points:

  • Britain already has deep ties to the full range of “Islamic terrorist movements” dating back to the colonial-era founding of the Muslim Brotherhood in the British-controlled Suez Canal Zone of Egypt. See here.

  • London has close ties to Pakistan's Directorate of Inter-Services Intelligence (ISI), which was founded by a serving British officer to coordinate action in the first Kashmir war. See here 

  • One of the startling revelations from the Osama Bin Laden Files seized by the United States is that Al Qaeda and Iran have very close ties, a contingency that could not occur without a lead role by Britain. See 18 May 2018 C-Span broadcast for the information; the interpretation is mine. 

  • It is also clear from the roles of Cambridge Analytica, “former MI6” agent Christopher Steele and “music promoter” Rob Goldstone in manipulating the last American presidential elections that all democracies have to be watchful. See here

  • The United States as it approaches the 2018 midterm elections and India as it nears the 2019 general elections have to be especially watchful of those who have become newly rich. A particular area to watch would be the collaboration of Russian oligarchs with British plots; the supposed use of Russian nerve agents in Britain should be seen as purely diversionary, creating the impression of bad blood when there is collusion instead.  


The face of Organized Crime is no longer

The Godfather. It's the mega bank.


The Second Opium War: British and French forces looted the ancient Summer Palace near Beijing and burned it to the ground. 

Lumber smuggling in Siberia is pushing the last 450 tigers in the area towards extinction

  • All the world’s 2,754 billionaires together now have $9.2 trillion. 

  • Just forty-seven of the richest individuals now own as much as the world’s poorest 3.7 billion people. 




A swift increase in billionaires provides a clue  

Only during periods of colonial genocide and conquest has wealth ever grown so rapidly: the Spanish rape of the Inca, the British looting of India.

The League of Nations began the futile effort to stop drug trafficking in 1919 that Richard Nixon escalated to a "War on Drugs in 1971. It continues today with as little success as at the beginning. The reason for failure? Those who claim to fight drugs are corrupt. They do it for the money. The only way to stop the poisonous trade is to legalize all drugs and arrange to give them away free from doctor's offices, clinics and hospitals. That will make it unprofitable for traffickers and pushers while bringing addicts in touch with people who can help.