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The globalization of drugs and money laundering

The globalization of drugs and money laundering
Turkish Daily News Electronic Edition, Features Section, Feb 12 1997

12 February,1997,Copyright©TurkishDailyNews
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  • The globalization of drugs and money laundering

    The globalization of drugs and money laundering

    By Zeki Ayik / Turkish Daily News

    ISTANBUL- It has been reported that the Drug Enforcement Administration of the USA sent a warning letter to the Security Department requiring the enforcement of legislation for the control of black money in June 30, 1994.

    The letter was sent through the American Embassy in Turkey. A group of high-ranking state authorities have alleged that the former Interior Minister and the Chief of the Security Department in 1994, Mehmet Agar, whose name is alleged to be the key to state-mafia relations, did not send the letter to the Interior Ministry, the Foreign Affairs Ministry or the Prime Minister.

    The deadline which was given to Turkey for the enforcement of the legislation for the control of black money by the US and international institutions, was over on June 25, 1996. The president of the Financial Action Task Force On Money Laundering (FTAF), Ronald K. Noble, came to Turkey and met Mehmet Agar, the Justice Minister at the time, Deputy Interior Minister Erol Cakir and Vice President of the Treasury Department Mehmet Kaytas in April last year.

    Noble's visit and intentions did not result in an expected solution, and FATF made a second warning stating: "Turkey is the only FATF member country which has not enforced the necessary legislation against black money laundering. The Administrative force cannot require the same precautions from the nonmember countries, if the member countries have not taken the necessary precautions against money laundering. The Deputy Interior Minister was hoping that the bill to prevent the narcotic and psychotropic drug smuggling and money laundering would be passed by the National Assembly. Sanctions will be implemented in case of the rejection of the bill and the violations of the FATF conditions."

    Pressure on Turkey from the USA and international institutions has increased in the recent years. With the legalization of the draft law waiting at theMinistry, the Drug Committee, organized by the United Nations every year, is to declare Turkey a: "haven for black money and drugs." As a result of this, all financial institutions, the IMF and the World Bank will impose sanctions on Turkey and this will badly influence the flow of foreign capital to the country.Law still hanging in parliament

    This draft law, which has still not been put into force due to the governmental crisis, considers black money as an offence in our domestic law and gives way to the investigation of the money coming from this offence.

    Some chemicals and equipment used in the production of drugs will also be controlled by this law. The law, issued under the United Nations Vienna Agreement in 1988 against drugs (and drug related material) was accepted by the Turkish parliament on November 22, 1995 and the draft law against "Drug and psychotropic materials smuggling and black money," including all legal arrangements, was transferred to parliament, but still hasn't been put into force.

    Republican People's Party (CHP) Istanbul parliamentarian Algan Hacaloglu gave his opinions concerning the law draft, and said that Turkey had become in the last year a haven for black money laundering and added that a struggle against drugs was urgently needed.

    Welfare Party (RP) Afyon parliamentarian Sait Acba pointed out that Turkey was a transit country for drug smuggling due to its geopolitical position.

    "There are nearly 1.5 million people in Western countries using drugs," Acba said. "Seventy-five percent of these drugs pass through Turkey. In addition, drug smuggling and terrorism are intertwined. If the necessary measures are taken against drug traffic, this will also stop terrorism."Globalization of drugs

    The drug sector is perhaps the only sector which is truly globalized today. For example, the coca leaf produced in Bolivia is transformed into cocaine in Columbia. It is than transferred to the USA by the Mexicans and the marketing is realized by a band dominated by the Panamanians. The money is laundered by Italian companies and invested on the stock exchanges of the developing countries. The raw materials for drugs -- opium, hemp and coca leaf -- are easily produced on desert and marginal ground. There is also no need for expensive and complex facilities to produce heroin, cocaine and hashish. Simple laboratories and easily obtained chemicals are sufficient. The essential need is to find thousands of people ready to take risks while working as distributors, drivers and guards; and those people are easily found in the poorest regions of the developing countries.

    Generally, a crisis originating in developments in the world economy can hit the economy of the developing countries and leave the drugs sector as the only way out. For example, the starting point of the cocaine production boom in Columbia was the collapse of the Columbian textile sector because of customs duties put on by the European Common Market at the end of the '60s. The decrease in cotton prices in the middle of the '70s was also the basic reason that forced the cotton producers in Santa Cruz, Bolivia, to produce coca. The inclusion of Nigeria in world drug traffic also started with the decrease in fuel oil prices in the '80s.

    The terrorist environment in South East Turkey since 1984 and the economic stagnation dominating the region after the Gulf War also introduced Turkey to the drugs sector.Lazkiye harbor: the key point

    Another interesting point is Syria's Lazkiye harbor, which is claimed to be the key point in international drug smuggling. According to the authorities of Coastal Security, a very large part of maritime drug smuggling is realized via Syria's Lazkiye harbor. The materials belonging to drug smugglers from drug producing regions such as Pakistan, Afghanistan and the former Soviet countries are taken to Syria via sea. From this point, a part of these drugs is transferred to Western European countries and the USA passing through Turkey and other countries with the "tolerance and support of Syria."

    Authorities point out that drug smuggling by terrorist organizations and arms smuggling by the mafia is well known, and say black money, drugs and arms smuggling are working together. The authorities, who claim that terrorist organizations and the mafia are using each other for drugs and other kinds of smuggling, say the names of many Turkish citizens were included in this traffic.

    "Every two people in 100 who are seized because of smuggling are normal citizens. And the others are organization members. Normal citizens are used by these organized groups without being aware of it," the authorities say.

    The "black money" miracle
    By M. Akif Beki / Turkish Daily News

    ISTANBUL- Due to debates over the connections between drug smuggling gangs and high level state officials, Turkey faces allegations of being a black money paradise, while economic indicators show that foreign currency reserves have increased beyond expectations over the last few years.

    The most controversial issue recently, drug smuggling and black money laundering, suggest a question mark in many minds that "Turkey was in need of 70 cents before 1980, but today foreign currency is coming out of its ears; how could this happen, despite there being no such an economic miracle happening anywhere in the world?"

    The former Smuggling Branch Chairman of the Police Department, Atilla Aytek, on a TV program broadcast recently said: "Turkey was among the official hashish producer countries till 1977, when Turkey faced serious allegations of officially protecting drug smugglers made in the international area by European countries like they are doing now.

    "Then Turkey stopped hashish production while since that time other official producers increased their production to meet the needs of the medical sector. These excess products of the so-called Middle and South East Asian "Golden Moon" countries -- such as Pakistan, Myanma (Burma), Bangladesh and Afghanistan -- crossed through Turkey to the European markets."

    Ex-police chief Atilla Aytek went on to say that this was Turkey's geographical role within international drug smuggling, and otherwise Turkey could not openly be accounted among the hashish sourcing countries.

    "That being so, Turkish smugglers only take a commission for transporting hashish," he emphasized and added: "But we have to accept that there are laboratories producing heroin from hashish which use Turkey to reach Europe. Turkish partners of multinational drug smuggling organizations established these laboratories for transforming hashish into heroin, and only 20 percent of all the circulating black money from heroin remains in Turkey as the share of Turkish gang members."

    In this view, 80 percent of all heroin trafficking from Eastern Asian countries to Europe goes by way of Turkey, (as an example, Afghanistan alone produces 300 tons of hashish per year), while the circulating black money within the drug market around the world is about $500 billion per year. Therefore, the ratio of black money to the percentage of drugs crossing Turkey shows that the market size to be considered is $400 billion. The share of Turkish smugglers in this market is its 20 percent commission, meaning $80 billion.

    Although all of this $80 billion does not remain in Turkey, what does this drug commission mean for Turkish economic balances?

    For instance, Myanma earns over $40 billion from drug production per year, according to a report from the Geopolitical Drug Watch establishment, based in Paris. Furthermore, the economic dynamism of Myanma is based on the laundering of black money earned from the illegal drugs trade, the report reveals, and adds the black money dependency of Myanma's economy.

    "The Myanma government has spent $1.2 billion on arms, while her official foreign currency reserves were only around $300 million," the report states.

    Just 20 years ago, Turkey's foreign currency crisis was explained by a politician as "Turkey needed 70 cents," but the Turkish official reserves account increased to $18 billion at the end of 1996 with an over $5.6 billion sum in excess of predictions. The 1996 program predicted an increase of just $2.5 billion, while the 1997 program predicts a $3 billion increase.

    "As has happened throughout the last few years, enlargement within the financial reserves of the Central Bank depends basically on the increase in foreign currency reserves more than net domestic capital, and in 1996 too," revealed a report issued by the Independent Industrialists' and Businessmen's Association (MUSIAD).

    Black money laundering makes up a major part of the interaction between the unregistered and registered economy. On the other hand, economic experts often underline that economic dynamism in the market is taking place over real reserves which can only be explained by the existence of a very strong unregistered economy.

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