NCJ Number
198307
Date Published
April 1999
Length
86 pages
Annotation
The primary objectives of this Dutch study of underground banking systems were to determine whether the available evidence supported the current international concern about this issue and how governments around the world were responding to it; policy recommendations to be considered by the Dutch Government are offered.
Abstract
A review of the relevant literature explored press reports, government documents, public hearings, academic articles, legal cases, and articles posted on the Internet. The literature review was complemented by numerous unstructured interviews with law enforcement professionals and other experts on the issue from all continents. The limited time and budget available for this study prompted its authors to consider it preliminary. The researchers adopted the term "informal value transfer systems" (IVTS) instead of the term "underground banking." They define IVTS as "any system or network of people facilitating, on a full-time or part-time basis, the transfer of value domestically or internationally outside the conventional, regulated financial institutional systems." This report notes that most contemporary forms of IVTS have evolved from two main variations: the South Asian and Chinese methods of value transfer, both of which originated centuries ago. Following a presentation of the historical roots and evolution of these two prototypes, a more contemporary Colombian method of IVTS operation is outlined. The mechanics of each of these IVTS are profiled, and six contemporary variations are explained. Although IVTS systems were initially developed as non-criminal remittance methods and continue to be so used among certain ethnic groups, the anonymity they offer has made them attractive to criminals and intelligence agents. This report provides evidence of their use for the facilitation of capital flight, tax evasion, covert operations, corruption, intellectual property violations, ransom collection, financial fraud, terrorism, smuggling of illegal immigrants, money laundering, and the illegal trade in drugs and other commodities. Case examples for each type of such illegal transactions are provided from various countries. The author advises that criminal laws are the least effective way of dealing with the IVTS as a tool for criminal enterprises. The report concludes with a number of regulatory, public policy, and training issues that should be considered. The most effective policies are considered to be those that address the core of the problem, namely government over-regulation; discrimination; political and economic crises; inflexible bureaucracies; high taxes; unfriendly, inefficient, expensive, or limited banking services; and lack of confidence in a given country's economic system and banks. Given that the issues are mostly international concerns, better collaboration and exchange of information among control agencies is needed. The study advises that regardless of the measures and policies adopted by a government to address the abuses of IVTS, evaluation tools should be used to monitor the progress, successes, and failures of the countermeasures. 108 references and appended supplementary material and illustrations