The US economy: For whom the bell tolls

posted June 06, 2020 at 12:05 am
by  Rod Kapunan
"Many countries today see this practice as a form of financial hegemony."



Sixth, the US assiduously worked to ensure the passage of the Anti-Money Laundering Law. The law is premised at preventing the use of foreign currency for terrorism, financing criminal syndicates, smuggling of arms and drugs. Section 3 of R.A. No. 9160, or An Act Defining the Crime of Money Laundering, states to quote: “It is hereby declared the policy of the State to protect and preserve the integrity and confidentiality of bank accounts and to ensure that the Philippines shall not be used as a money laundering site for the proceeds of any unlawful activity. Consistent with its foreign policy, the State shall extend cooperation in transnational investigations and prosecutions of persons involved in money laundering activities wherever committed.”

Economies tightly controlled by the US blindly enacted the law to punish violation enumerated in R.A. No. 9160. However, it tends to ignore that almost 100 percent of those that violate the law involves the use of the dollars. Specifically, money laundering is defined as “… the illegal process of concealing the origins of money obtained illegally by passing it through a complex sequence of banking transfers or commercial transactions. The overall scheme of this process returns the "clean" money to the launderer in an obscure and indirect way.”

Today, the US dollar has become a widely used currency to commit crimes like smuggling, illegal transfer of funds or to evade payment of taxes. Eighty-seven percent of all worldwide foreign exchange transaction involves the use of US dollar. According to SWIFT, more than 80 percent of trade finance in 2013 was conducted in US dollars. In the same period, the Chinese RMB accounted only for 8.7 percent of world trade while the Euro accounted for 6.6 percent. The significant driver to this is the easy exchange of the dollar backed by the US Federal Reserve and the trust by many markets.

But behind the passage of R.A. 9160 is the county’s unwitting accommodation to enforce what strictly is considered a violation of US domestic laws on currency. The jurisdiction of the violations, like counterfeiting, minting and/or mutilation of coins, tempering, unbridled issuance of checks to encash foreign currencies, “dollar salting” and/or smuggling is where the crime or violation was committed.

Americans always argue that the US dollar is an exception to the rule on jurisdiction, it having attained the status of international currency consequent to its emergence as the world’s biggest economy.

This is now opposed by many because the evolution of the US dollar as an international currency is not their choice but imposed by the US through its controlled finance institutions. Often, violation is without their knowledge and consent, that criminals often act independently of the state. Should the state not prosecute them, they are made liable one way or the other.

The extra assignment to safeguard the US currency now becomes the liability of every state where US dollars are traded. In fact, the dollar has been used to wreck the economy, destabilize governments or give ground for the US to intervene in its domestic affairs.

Many countries today see this practice as a form of financial hegemony. It is for this that counties have been proposing the use of their own currency to transact business with other countries. This will not only get rid of financial hegemonism but allow them to save their currency and avoid its being manipulated by others. Besides, currency is imbued with the sovereignty of the state, symbolic of its independence.

Another problem is not about terrorism or the commission of crimes related to the use of the dollar but the expenses that entail in the enforcement of laws to safeguard a foreign currency. One has to be reminded that for every dollar remitted, changed or converted to other currencies, commercial bank collects a service fee through the system called Society for Worldwide Interbank Financial Telecommunication. SWIFT also enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment.

The approval of the US Patriot Act in 2003, many international banks not intimately familiar with US banking regulations were enforcing actions for violating anti-money laundering regulations. Severe penalties were imposed that up to $8.9 billion was slapped for a major European bank in 2015. The recent penalty against Asian banks for violating AML sends a message of the long arm of the US law. Remittances from other countries automatically favor US banks with the Philippines acting as collecting agents. In short, the AMLA law provides the US government additional revenues for securing the sanctity of their currency when that duty should be left or paid for by them.

Finally, China is on the right track in reviving the ancient trade route. Known as the Belt and Road Initiative, it designed to be a continuing system intended to liberate the capitalist system from the cycle of boom and bust. It principal objective is to facilitate the flow and exchange of goods to and from any country that chooses to get on board the integrated superhighway. China’s role is not to dominate or monopolize, but to apply the win-win approach for the benefit of all.

Reviving the ancient route using the modernized railway system of long haul could speed up the delivery of goods from central China to the various terminal nodes traversed by the modern Silk Road. To compliment the BRI is the Maritime Silk for which littoral states in the South China Sea would all be shipping their goods to China as their gateway to Central Asia, Asian Subcontinent, the Adriatic and Mediterranean Sea, Europe and onward to Africa. China’s location is a geographical circumstance that allowed it to serve as the central hub. To sustain their fuel requirements, various networks of gas pipelines are being constructed. These are:

1. The Russia-China pipelines, a 2,800-kilometer pipeline starting from the Purpeyskaya to terminate in China’s Xinjiang region. Alternative eastern route through Mongolia is being studied.

2. China and Myanmar pipeline, down to Thailand and Cambodia. The Myanmar section was completed in Aug, 2014.

3. The Russian-German Gas Pipeline known as Nord Stream 2. The project begins in Ust-Luga, Russia passing through the Baltic Sea ending in Greifswald, (Lubmin), and Germany

4. The Russian-Turkey Gas Pipeline or TrukStream, a natural gas pipeline running from the Russkaya compressor station near Anapa in Russia's Krasnodar Region, crossing the Black Sea to the receiving terminal at Kıyıköy.

The completion of the BRI and the various transnational pipelines could result in the integration of the Asian and European land mass. Although not intended to isolate the US, the two great oceans of the Pacific and the Atlantic now served as natural barriers that hamper the completion of globalization. There is optimism in the integration of the Asian and European land mass hoping it would finally eliminate the worldwide cycle of violence that visited mankind twice in the 20th century.

Topics: Rod Kapunan , US economy , US dollars , Anti-Money Laundering Law
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