China lacks the credibility to lead the Financial Action Task Force – AEI – American Enterprise Institute: Freedom, Opportunity, Enterprise

4th July 2019 Off By binary
China lacks the credibility to lead the Financial Action Task Force – AEI – American Enterprise Institute: Freedom, Opportunity, Enterprise
Buy Bitcoin with Credit Card

China now holds the presidency of the Financial Action Task Force (FATF), the international anti-money laundering body created by the G7 in 1989. FATF has been instrumental in combatting terrorism financing and setting global anti-money laundering norms. With China at the helm, don’t get your hopes up for much progress on international money-laundering problems over the next year. Rather, we should focus on what we’re doing at home and plan for a future of greater cooperation with fellow rule of law democracies.

Authoritarian corruption is sometimes subtle — so slow and creeping that many don’t even notice it (see WTO). Sometimes it can be sudden, as was demonstrated last September when Meng Hongwei, the president of INTERPOL, an international policing body, disappeared on a trip to China. China held the presidency of INTERPOL until Meng “resigned” (read: disappeared) from the position, facing charges of “corruption” (read: not loyal enough to Chairman Xi). The Chinese Communist Party does not have a free press or an independent judiciary capable of conferring anything close to legitimacy in regard to the corruption charges. Furthermore, Meng’s wife says that she fears for her life, and she was recently granted political asylum in France. That should tell us all something.

I get it: nobody likes corruption. But it’s like humidity. It’s everywhere and in virtually everything, and it varies in matters of degree, location, and time. And like humidity, corruption can be mitigated in specific ways. Disappearing and jailing leaders of international institutions meant to confer legitimacy and stability is not the way to do it, especially if you don’t have the right domestic controls at home that people can use to decide things for themselves (like a free press, free speech, free and fair elections, independent judiciaries, the rule of law, and all that jazz).

Demonstrators attend a rally ahead of the G20 summit, urging the international community to back their demands for the government to withdraw a the extradition bill in Hong Kong, China June 26, 2019. REUTERS/Tyrone Siu

The Chinese system of government, like all dictatorships, is a form of what I term “authoritarian corruption.” Again, similar to humidity, when the levels are high, it’s pervasive and affects everything. Authoritarian governments, on average, permit higher levels of corruption than democracies, and it’s only gotten worse since the end of the Cold War. But no anticorruption campaign, arrest, or agency can fix the root cause: a monopoly on political power (i.e. dictatorship).

And this is why we should not expect much of any good to come out of the Chinese presidency of FATF. Under the US FATF presidency, Marshall Billingslea led the group in what will likely be a very long slog of identifying the risks and opportunities posed by virtual currencies. That’s likely to face an uphill battle, as China reportedly plans to eventually make its currency virtual (see Iran, Russia, Venezuela, and North Korea for more speculation on centralized crypto). I have suggested that FATF should begin systematically looking at trade-based money laundering (TBML). That’s highly unlikely under the Chinese presidency, as over 75% of seized counterfeit goods come from China.

You may say that the FATF presidency is largely symbolic, and you’d be correct. But symbolic gestures mean a lot these days, especially in places like Hong Kong (which, by the way, held the FATF presidency from 2001-2002 during which the organization expanded its mandate to combat terrorist financing after the 9/11 attacks). The bottom line: FATF shouldn’t be led by a member of the Communist Party. FATF was formed by the G7, a group created to address economic issues among developed, capitalist democracies. It should remain committed to that original goal.

Read freestyle options review