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Osama bin Laden and Kim Jong Il, watch out. February 28, 2007

Posted by breichen in Finances.

The financial system is said to be the newest front in modern warfare. With the existence of such a distinctly globalized economy, money resulting from all sorts of transactions flows instantaneously and anonymously across all borders. This is said to be a significant benefit to low-brow money movers including but not limited to drug-lords, terrorists and rogue nations that need quick cash such as North Korea.

Kim Jong Il has a penchant for fine wines and Hollywood blockbusters.

Keeping these customers out of the global financial system is becoming increasingly difficult.

Transactions of this type do not result in the transmission of “tainted” money but is said to result in financial crises as well. The difficulty that arises here is that it is becoming harder and harder for financial institutions to know where financial risks lie, a big reason being that a great deal of this money is “hidden away on islands with variable supervision.”

The biggest problem that such fluid and mobile financial flows presents governments is that when the money is transmitted over borders and out of country of origin, these flows take potential tax revenues with them. An example of the problems this cause would be rich Western countries such as the United States that have large portions of their populations approaching retirement and requiring support, i.e. Social Security.

These countries have recently been taking initiatives to make the global financial system impervious to the debilitating side effects causd by this global system including: tax evasion, financial contagion, and financial crime. These countries are working together to force international financial centers to adopt policies of practicing bank supervision, collection of all financial information of customers and the institution, and to enforce money-laundering rules in order to limit money-laundering. This would result in more difficulty in sending so-called tainted money to offshore financial institutions to avoid scrutiny.



1. Jordi - March 5, 2007

There is an ongoing debate about whether nation states are losing power in the globalized economy.

How does this fit in?

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