The Marcos Cleptocracy - crony capitalism, money laundering and corruption in Philippines
the marcoscleptocracYillicit financial flows- case study of philippines -klára bažantová (333095)mvz474: corruption: global risks andresponses
introductionLiterature: Chapter 6 “The Marcos Kleptocracy” in: D. Chaikin and J. Sharman,2009. Corruption and Money Laundering: A Symbiotic Relationship, PalgraveMacmillan, pp. 153-187.Illustrative case study of Money Laundering and Corruption nexus in Philippinesunder the rule of the president F. Marcos (a practical illustration of crony capitalismand Money Laundering and Grand Corruption nexus)!biggest theft from public funds in historycorruption ranged from theft of military and foreign aid to domestic system of cronycapitalism, very sophisticated tools while laundering illicit assetsillustrates the enormous challenge of delay and lack of cooperation in recoveringcorrupt assets that have been laundered
structure1. Basic facts, brief introduction to the case study of grand corruption inPhilippines2. Political role of Marcoses3. The varieties of corruption of Marcos family and their cronies4. Money laundering methods5. International cooperation in recovering the illicit Marcos wealth6. Criminal prosecution7. Conclusion
Overviewbasic facts - 92 million people. 12th most populated country in the worldbrief history of his rule - president 1965-86, authoritarian regime, 1972 martial law(fighting the political opponents, prolonging presidential career, abusing humanrights, developing enormous grand corruption, nepotism and crony capitalism),People Power Revolution in 1986 - removal from power and exile in Hawaii
political role ofmarcos familyMarcos = Politically Exposed Persons1. Ferdinand Marcos- gifted child, great memory- murdering his fathers political rival and imprisoned, developing his brilliant legal skills -> instrument forconcealing his corruption and money laundering activities- 1949 to 1986: professional politician - Senator, Congressman, President of Senate, President of the Republic- authoritarian regime- monopolisation of traditional patron-client system- abusing military to crush the opposition, suppressing independent media and subverting the judiciary andbureaucracy for his own personal ambitions2. Imelda Marcos- the president’s wife, a senior powerful public figure during the fourteen-year Marcos dictatorship. Eccentricperson, obsession about shoes and jewellery- In 1978 the president created a new Cabinet post for his wife3. children- the beneficiaries of corruption under the will of Ferdinand Marcos.- daughter "Imee" - the cabinet representative of a national youth group (1979–1986) and a member of theNational Assembly (1984–1986) during her father’s presidency. Marcos family’s return to political power by servingas a Congresswoman from 1998 to 2007.- son “Bongbong” - the vice governor and then the governor of his father’s home province of Ilocos Norte (1980–1986)
the varieties of corruptionof the marcos family andtheir cronies1. diversion of foreign economic and military aid2. embezzlement of governmental monies3. the pork barrel4. theft of official gold stocks5. institutionalised and private sector extortion, securing of kickbacks from privatebusinesses6. illicit takeover from private firms7. creation of monopolies for the private benefit of the Marcos family, relatives, andcronies
size of stolen wealth- within a few weeks of the expulsion of the Marcos family, the Philippinegovernment estimated that $1 billion had been stolen by Marcos and hisaccomplice in the twenty years of his rule, later in 1986 estimated to $5 billion.- in 1986 Operation Big Bird revealed that at least $3 billion and possibly up to$8 billion of Marcos monies were in Swiss banks and financial institutions thathad assisted Ferdinand Marcos to hide his wealth over the duration of hispresidency.- in 1991 Operation Domino alleged that $13.2 billion in gold accounts hadbeen hidden in secret precious metal accounts at one of Switzerland’s leadingbanks.
money launderingmethods- possible mechanism of secrecy to launder his illicit wealth throughfinancial institutions, investments and multilayer shareholdings- 1st stage - the mechanism for receiving corrupt benefits- 2nd stage - layering of funds- 3rd stage - the integration of the illicit proceeds into the financial system by theprocess of hidden investment- during the period 1986–2007, the Philippine government recovered from theMarcos family, associates, and cronies only the sum US$1.8 billion
international cooperationin recovering the illicitmarcos wealth - part 1- strategy of the Philippine government - to obtain legal assistance in criminalmatters from foreign governments and to freeze and recover the illicit assets ofMarcos family.- legal requests to governments in the United States, Switzerland,Liechtenstein, Germany, Hong Kong, and Australia- the efforts of the Philippines government over twenty years to recover theMarcoses’ illicit wealth through international cooperation have been disappointing,with the largest recovery being the $356 million frozen in Switzerland in 1986.United States- the first country to help (e.g. Marcoses invested more than $100 million for thepurchase of leases in the New York buildings)- "Honolulu Papers" - done to protect the U.S. government from embarrassingfindings such as the alleged theft of U.S. aid monies
international cooperationin recovering the illicitmarcos wealth - part 2Switzerland- greatest amounts of legal assistance (freezing the assets of Marcoses, relativesand cronies x financial secrecy of Lithuania and Switzerland)- problems - returning assets to Philippines - technical problems, new untested legalsystem- ! the recovery of the Marcos assets from Switzerland has been presented as anexample of successful international cooperation, the Philippines government and itsSwiss lawyers have expressed concern that the Swiss authorities have failed to traceand return billions of dollars of Marcos assetsLichtenstein- "money laundering community" which has stronger bank secrecy and professionalsecrecy laws than Switzerland, is suspected of attracting money laundering businessfrom Switzerland, Marcoses’ wealth as well
criminal prosecution-> not one member of the Marcos family, any relative, friend, public official,or member of the military has spent one day in jail-> why criminal prosecutions are problematic in the case of dictators?- 1. a range of unique legal and political problems in putting a deposed dictatoron trial in the country where he or she has been the ruler.- 2. Anglo-American tradition - criminal trials must be heard in the presence ofthe defendant and meet the witnesses face to face- 3. Marcos in exile - danger of rallies among Marcos loyalists in Phillipines- 4. U.S. - concern that any future trial might be heavily politicised - Ferdinandand Imelda Marcos had been allies of the United States and had a close personalrelationship with U.S. president Ronald Reagan and his wife Nancy since 1969.- 5. difficult to link Imelda to criminal actions of her husband- 6. under the judicial system of the Philippines, excessive delays arecommonplace and the judiciary is inclined to postpone hearings at the request ofthe defence or prosecution
conclusionThe Marcos case study presents strong evidencethat corruption and money laundering will oftenoccur together, mutually reinforcing each other.During the time of the Marcos rule there were nointernational AML regulation:-> international AML standards are required in order to combat the most seriousforms of corruption.-> The Marcos case illustrates the importance of comprehensive anticorruptionpreventative laws, such as annual financial disclosure requirements of public officials.