Friday, October 29 2010 11:16
American and Russian lists cannot be completely unrelated
ArmInfo’s exclusive interview with Haroutiun Mesrobyan, Candidate of Technical Science, Independent Management Expert
Fifteen agents of the Federal Bureau of Investigation (FBI) arrived in Armenia last week to inquire into activity of the criminal group of Armenians arrested in the USA. The goal of the FBI mission is to find out the fate of the money stolen in the USA by 70 members of the Armenian crime syndicate. FBI in cooperation with the National Security Service of Armenia is going to find out how and what channels were used to launder the funds that were stolen from American pensioners in the real estate market of Armenia. There are rumors regarding an alleged "Russian list" related to the case of Luzhkov and Yeghiazaryan.
In this connection, ArmInfo News Agency applied to Haroutiun Mesrobyan, Candidate of Technical Science, Independent Management Expert, for professional assessment of the situation.
Mr. Mesrobyan, when the North Avenue was under construction many financial experts called the construction a big money laundering machine for lack of certain figures in the official, including banking statistics. Now we have faced this oversea scandal the traces of which lead to the real estate market of our country. Those illicit funds are in free use in Armenia. How open is Armenia for such criminal transactions?
Money laundering is not just an Armenian problem, it is a global problem. If past experience is any guide, we can say that today's system of banking supervision and market regulation in the world has run its course. The logical result of such outdated supervision was the global financial economic crisis. The authorities in many countries found nothing better to do than cover market debts with budget funds. In fact they have faced new state debts. There are certain breakthroughs now, specifically global reduction of off-shore zones, softening of the tough laws On Bank Secrecy. On the other hand, the emerging various financial bubbles also promote money laundering. At present, the global financial systems is “worn out”, to put it mildly. For instance, banknotes always facilitate the problem of shady turnover, including turnover of illicit money. Therefore, the quantity of banknotes is being reduced worldwide. Nevertheless, the share of banknotes, especially US dollars, in Armenia is very big. The American banknotes so much spoken about today are in free use in Armenia and beyond official control of our regulators.
A few years ago the government started actively introducing cash-registers to fulfill the requirements of international structures. In fact, the problem of cash registers has become political and social rather than functional. The interests of “ordinary” sellers coincided with the interests of big enchilada. In addition, sellers were more focused on the social component of the problem. The document flow in many sectors of economy in Armenia is “mutilated", which makes interference into channels of material flows possible not only theoretically but also in practice. In addition, some sectors easily absorb illicit money. This is the construction sector in the world and in Armenia specifically. This sector absorbs funds at any stage. Thus, mutilated documents on material funds, including the documents on cash flows alongside with the oligarchic system of Armenian economy and the big share of banknotes not issued by the Central Bank in the total cash are the three pillars that make financial and material flows in Armenia open for criminal deals.
Do you thin it was easy to organize the flow of over 100 million of US dollars into Armenia despite the extremely high control over financial flows in the United States?
There are mechanisms to bypass even the regulated zones of economy such as the banking system, for instance, through registration of one-day companies, offshore ownership structures. Various loopholes in price mechanisms allow changing the cost of a good or a service manyfold to absorb illicit money. All this works well especially that the Law on Bank Secrecy had been successfully applied worldwide for a long period of time. There are some countries, including Switzerland, where this law has been applied for already two centuries creating a good opportunity for the criminals to “crystallize” their financial flows. Therefore, the US tax authorities have been recently fighting furiously for access to the accounts of their citizens at banks in Switzerland.
On the other hand, special divisions to supervise money laundering and fraud were established at the Central Bank and the law-enforcement authorities in Armenia yet several years ago. In addition, Armenian banks prepare and send reports on money laundering and fraud regularly. However, these measures have not brought any significant result because “no tycoons have been caught yet.” Neither the years-long fight against corruption has brought any significant result. Such situation contributes to and even provokes illicit transactions.
Armenian opposition media permanently points to the country’s president being one of the links in the USA-Armenia criminal chain. Are such criminal transactions possible in our economy structure without knowledge of the authorities?
It is a rhetorical question, I think. On the one hand, they do not groundlessly consider that everything in Armenia is done with knowledge of the top leadership. On the other hand, I think that certain people in Armenia have what to conceal even from their families. Such is the human nature. The point is that the state governance and economic system in Armenia are most of all subject to criminal risks, first of all, because of the country’s oligarchic system. For instance, the tax-to-GDP ratio in Armenia is some 17% whereas in any other normal country this ratio totals 40%-50%-60% and even 80%. This alone suggests that there are funds in Armenia beyond control. Another matter if these funds are beyond official or unofficial control. Therefore, the system of management “asks" such shocks because huge financial flows in the country are not registered even at the level of informal control.
In other words, even official and unofficial levels of control are not a guarantee…
It is possible to improve the control by up-to-date methods and technologies, indeed. However, the global crisis and all the negative phenomena in Armenia and in the world are just the results. The reasons are not material. The system of religious values had been methodically destroyed throughout the 20th century. This process in every country was adjusted to ethnic specifics. Public aspiration for consumption without any moral or ethical norms of restraint makes the public accessible to criminal turnovers. In the meanwhile, the most reliable control can and must be inside us. Moral and ethnic norms are much more powerful method of protection against crime than the most perfect legislation and supervision. Various financial bubbles and pyramids that burst in 2008 are the best evidence of this. In 2007-2008 financial pyramids for dozens of billions of dollars burst, but the US regulatory authorities failed to anticipate that danger timely. Why didn’t the notorious system of control prevent the collapse of the biggest investment banks in the USA? Why did the vaunted systems of audit, ratings and corporate government fail? Why did the results of the IMF and WB recommendations they insistently introduced throughout the world prove so poor? There are many such questions regarding the USA and Europe.
Anyway, cash flows are a chain of transactions. The FBI and the National Security Service in Armenia are tracing these transactions. Who was the last beneficiary? Who became his beneficiary at the moment when he was already a sender?
They want to trace this chain of transactions to find out the destination of the illicit money. Together with two post-graduate students I published a scientific item in the Moscow-based magazine “Bankovskoye Delo” telling about the new method of control over such transactions.
The Central Bank declared that even theoretically FBI cannot check bank accounts in Armenia...
Legislatively in Armenia and in many other countries such actions must be based on court decisions. Checking transactions means controlling flow of funds on commercial or private accounts.
Any special service observes the golden rule i.e. not to detain the suspected person or a group of persons. Quite on the contrary, they do everything to keep those people under control to trace the entire chain, the source and destination. When they find nothing extraordinary or new in the chain revealed, they start acting. This happens almost always, especially in case of international transactions. Revealing such chains special services always act in favor of their country. If they have any suspicion on involvement of officials of third countries in the chain of illicit international money flows, special services double their efforts to get certain points of influence on those officials. All the special services respecting themselves
work in such way and when they reveal any officials involved in the
chain, they separate the criminal part of the case from the part related to political levers of influence. This gives wide opportunities of influence to the authorities of the country the special service represents. I mean influence on the foreign and domestic policy of the country the officials of which are involved in the illicit international money laundering. This applies also to Armenia. In addition, if guided by management theories, thing cannot be completely unrelated if they happen in the same place approximately at the same time. This is inherently impossible.
Do you mean the American and Russian lists?
Sure, it is an elementary law of management and the theory of management is not just a theoretical study. After all, one should remember that permanent interaction of special services of various countries is widely practiced in the world, especially by Russia and the USA that have quite old traditions of such interaction.
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