Michael D Higgins (Galway West, Labour)

I welcome the opportunity of speaking in the debate on this legislation, which is welcome. It must be put in context. It is important that we are bringing forward this legislation and it is even more important that we use this debate as an opportunity to declare an intention to be part of further initiatives at the level of the European Union and globally.

One of the greatest failures of the international financial system is that it has chosen to be silent on the issue of what one might call the transmission of dirty money in the world. By that I mean that demands have been made in different parts of the planet to deal with the issue of hot money, as it is sometimes called, or dirty money as I call it, but we find that people in the banking system internationally will use the resources of law, as they have in many different countries, to try to invoke principles of secrecy for accounts and so forth. This arose in a case in the United States, for example, until the Supreme Court finally struck down objections to laws which facilitated some equivalent measures in the United States.

I welcome this legislation but what does the literature tell us about money laundering? This Bill refers, for example, to the proceeds of drugs and of terrorist activity. The literature tells us that so-called hot money or dirty money, which is the phrase I will use, and money that is the proceeds of drugs and different illegal arms exports and sales travel are on the same track, so to speak. If there is a lesson in that it is that the drugs barons realise they can transfer the proceeds into a form of tax evasion, which usually begins as tax avoidance. A deadly set of transitions, therefore, are all travelling on the same track. The failure to address tax avoidance and evasion creates the infrastructure for the more visible forms of the proceeds of drugs to be changed, even in regard to the arms trade.

The literature also tells us something else that is significant, which forms the background to this legislation. This legislation is to give effect to the transposition of the third EU money laundering and terrorist financing directive into Irish law and also relates to the United Nations convention against transnational organised crime and Article 6 thereof. It tells us also that the movement of the money to which I have referred is finding a home more frequently in Europe in recent years than elsewhere.

For example, the hot money is calculated on the basis of the US dollar-euro exchange rate, which has made it attractive for those wishing to operate in Europe. I therefore welcome that part of the Bill that refers to activities, both national and international. It is my hope that the international side will be addressed.

I was recently looking at a book on this matter Raymond Baker, entitled Capitalism's Achilles Heel, which advocates how capitalism can save itself. The Achilles' heel to which it refers is corruption. When one reads that book, and I have looked at those figures that have come out, one finds a list of different things that happen.

The area about which I have been concerned for some time is the cost of dirty money to some of the poorest states in the world. It is interesting to look at foreign affairs and the development area. How is it that one could have, for example, an increase in oil production and oil sales out of the so-called liberated Russian economy post-1988 and at the same time have the average income deteriorating? The answer is corruption.

Equally, one might ask why Nigeria does not move from the bottom six countries in regard to the international indicators while at the same time there is an export of more than 2 million barrels of oil a day. The answer is the same.

It is fascinating how the international banking system has facilitated dirty money. If we take the example of Nigeria in the period between 1993 and 1998, during the rule of Sani Abacha, one of its most notorious dictators, who was educated in Sandhurst and where he got a reference that said he should not be promoted above colonel, he made himself a general and took over the running of the Nigerian economy. In his case, when the Swiss Government was approached and when Credit Suisse was eventually fined, it was found that he had 120 accounts in Switzerland, with a minimum of $670 million, with $650 million in Luxembourg and a further $100 million in Liechtenstein. His son would later be arrested with suitcases containing $100 million.

There is abhorrent tendency, however, to view this an African style of behaviour. It is not, because it was the Swiss banks that were facilitating this. The same customer was able to use 23 banks in London to lodge $1.3 billion. In Mexico, Raúl Salinas was able to move $300 million into the western banking system, while in Indonesia the Suharto family moved between $15 billion and $35 billion. The Marcos family moved between $5 billion and $10 billion while in more recent times, it is calculated that Fujimori, during his period in office in Peru, moved $600 million.

The interesting side of that is that all this money found a safe home in the western banking system. It includes institutions that would later become notorious when they turned to damaging their own citizens, such as Citibank and others.

Researchers working in the area of international corruption have made another finding. The new technology that enabled money to be transferred in real time has been used principally by two groups, those interested in hot money and the drug industry. State systems have been trying to catch up with this technology that allows this money to flush through the world with disastrous consequences.

It is calculated that letters that are sent out which ask people to provide their bank details in return for 20% or 30% of accounts lodged elsewhere secure returns of about $1 billion per year. A person would be asked to put up a few thousand dollars to get details. Many people have gone to Nigeria, sometimes without visas, ending up losing what they put up, but having to bribe their way out of the country.

It gives me no pleasure to say this but when I looked into it I saw a need for an integrated approach through the Department of Finance and the nomination of directors to the World Bank and the International Monetary Fund to be able drive on Ireland's reputation. That is why I welcome this legislation at the level of the European Union and internationally.

This is the point of the structure of international capitalism in the post-technological era in which we live. Many people celebrated the 20th anniversary of what they refer to as the fall of the Berlin Wall and the collapse of the communist system. What has happened since 1989? The Russian mafia has taken over the resources of that country, operating initially as Manuel Castells work shows, by selling off the natural resources of the country to those who later became known as the oligarchs. It later moved to a position where resources were sold to their owners, an abuse of transfer pricing. Recently there has been a huge amount of money skimmed off the top. All of this is related.

What does this mean? The Minister has a real difficulty. We are right to bring in this legislation, but it is only a small part of a larger problem which has clear interconnection. Let us pause and think about what this tells us. It tells us about Bernie Madoff, the international banking system, international regulation and the refusal of the World Bank and the International Monetary Fund to deal systematically with this issue.

These institutions I have just mentioned, known as the Bretton Woods institutions, were at a particular time responsible to the Secretary General of the United Nations. If they had stayed within the remit of an institution responsible to the global community, anti-corruption measures could have been driven on globally. There are no global measures and only limited continental measures. Within the greater blocs, there are many multinational companies that are either before the courts or awaiting to be fined for their deals.

It is entirely wrong to look at corruption from one side only. For every bribe taken on the continent of Africa, there is an executive from a western company handling the bribe. To their credit, there have been fines in the US courts for people handing out more than $100 million for contracts. People can find some of the details of these cases in Raymond Baker's "Capitalism's Achilles Heel", published by John Wiley and Sons in 2005.

There are other issues. Often when corrupt money flows out of a country it comes back as foreign direct investment. Looking in detail at the investment that took place in Russia, Nigeria or other countries, this money often went out first in dubious circumstances before coming back under a different cloak. The international development bodies are unable to say what is clean foreign direct investment and what is recycled corrupt money.

What does the west do? The International Monetary Fund and the World Bank lay down how poor countries must reschedule their debt repayments and accept conditions because the institutions regard the debts, loans and borrowings of the dictators who robbed their own people as debts that must be serviced by those who came after them. This is immoral but a topic on which people stay extraordinarily quiet. In this regard it speaks for itself given the different developing countries that were allegedly modelled on western development. I have said enough about Nigeria, but Indonesia would be similar, where the Suharto family ended up in 1992 with 16.6% of the entire market economy. There is a question political personages here, throughout the European Union and internationally must ask themselves, namely, are we helpless in the face of all of this and are our actions in any way adequate? Do we really want to change all of this? One should start with what we could examine, namely, the contaminated debt or the debt that should never be paid by citizens, who will be paying it at the cost of investment in health, education, clean water and so on, as is happening in many African countries. They are being required to continue to pay the debts ratcheted up by these people I have mentioned.

It is calculated that in Russia, in 1988-89, the cost of what was looted out of the country was around €20 billion, and that it settled at about €20 billion a year for the following five years. In defining the consequences and the participants in such exploits, we need to realise that anyone who touches this money, whether to facilitate banking institutions or as regards borrowings and investment - the people who provide the professional shelters for its recycling - has to be hit.

I want to be very positive about this legislation. It could be a small step towards reputational recovery. This is what we should do now. We should just move on and try to establish a reputation for Ireland as being strongly in favour of an accountable system. People should not just rely on my description of all of this. I have not said anything that Joseph Stiglitz has not said about the country I described, in relation to Nigeria. I am trying to be very fair.

Switzerland is very slow to open up its system to any type of scrutiny. It should be put under relentless pressure, particularly by the European Union. As a person who often criticises some aspects of the foreign policy of the United States, I believe there have been prosecutions there. There is the 1970 Racketeer Influenced and Corrupt Organisations Act and the Treasury Department amended legislation under the Money Laundering Control Act 1986. There is the Money Laundering Prosecutions Improvements Act 1988 and then there is the deep form financial task force set up in 1989.

It would be a better world, in terms of the 8% of GDP that has been lost by the continent of Africa and the real investment needed to create jobs and employment on the planet generally, if there was an international effort aimed at identifying hot money and dirty money and their consequences, through, for example, the Tobin tax, as suggested such a long time ago. It is also very urgent that we examine what is genuine debt and what is contaminated debt as regards the national financial institutions.

I pay tribute to the Minister for introducing this legislation, but I strongly urge him to drive the thinking that must be at its core onto the Department of Finance. That Department, in turn, should present that thinking to the board of the IMF and to the World Bank, which are disgracefully silent on this issue.

See this speech in context