Evolution, Problems and Prospects
- New Horizons in Money and Finance series
Edited by David Lane
Chapter 5: Banks and Illegal Activities
5. Banks and illegal activities1 Heiko Pleines Capital ﬂight, tax evasion and money laundering are often seen as major problems of post-Soviet Russia, indicating economic breakdown, the government’s failure to create a functioning state and the criminalization of society. At the same time, it is often assumed that banks – and especially those banks belonging to inﬂuential businessmen, so-called ‘oligarchs’ – are at the centre of these problems. Illegal capital ﬂight, tax evasion and money laundering are indeed all based on schemes which are intended to hide certain ﬁnancial ﬂows from state authorities. However, this does not necessarily imply that banks are the main culprits. This paper will examine the role of Russian banks in these three illegal activities. In the ﬁrst three parts the main characteristics of illegal capital ﬂight, tax evasion and money laundering will be depicted, devoting particular attention to schemes requiring the involvement of banks. In the following part the ﬁndings will be summarized, concentrating ﬁrst on the importance of Russian banks for the realization of these illegal activities and second on the degree to which the Russian banking sector has been criminalized because of its involvement. The conclusion presents the general policy options available to tackle related problems. ILLEGAL CAPITAL FLIGHT Capital exports are used to ﬁnance imports of goods and services or investments abroad. They are a result of international economic integration. Over recent decades a general tendency of capital exports from developing countries to the main industrialized economies can be observed. Capital ﬂight is...
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