Raymond W. Baker knows of the working of world capitalist system in all its intricacies to the minutest details as he worked for almost four decades in Africa and South America as a prominent businessman. Later, he was associated with two prominent think-tanks of America, including the Brookings Institution.

There are three main components of dirty money, namely, criminal, corrupt, and commercial. The criminal component comprises wide-ranging evil activities such as racketeering, smuggling of men as well as material goods, all kinds of fraud, counterfeiting of goods and currency notes, embezzlement, fraud, forgery, prostitution, piracy of all types and so on. It needs to be noted that most countries have banned proceeds of drug trafficking, bank fraud, and terrorism. The corrupt component has in its fold the yield of bribery and theft by foreign government officials. The commercial component is generally the result of tax-evasion and it does not find any place in official records.

There are many ways to get rich while the government and the society do not know where the money comes from. One of them is under- and over-invoicing. This is a very old tactics resorted to in international trade, real estate deals, purchase of services, etc. that form part of international business transactions. To give an example, an Indian businessman may export textiles worth $10m but show in the invoice just $8m and understanding is reached before hand with the importer that he would remit to the exporter $8m and deposit the rest in some Swiss bank account or somewhere else after deducting his commission or service charges. Similarly, some Indian businessman  imports machinery and equipment worth $8m but bills, as per the secret understanding, for $10m. The Reserve Bank of India releases on the basis of the invoice a sum of $10m. The exporter takes $8m and the rest of the amount is deposited in the name of the Indian businessman or his nominee, after deducting the service charges. Thus India is defrauded to the extent of $4m in these two transactions taken together and dirty or black money to the tune of $4m is generated, which multiplies if ploughed back in business activities. So far as India is concerned, its government is deprived of foreign exchange to the tune of  $4m that could have been used for developmental purposes.

The U.S. and other Western governments claim that they have legally forbidden their companies to indulge in bribery in foreign lands, but this stipulation is very easily circumvented. Baker has found that the usual trick is to allow 20 per cent or so in place of usual 10 per cent commission to the agents to procure the business. Agents understand the purpose of this unusually high rate of commission and they leave no stone unturned to influence and bribe the decision-makers. They offer money and various kinds of other inducements on one pretext or the other. As is widely known, one American company, Enron, now defunct, gave money to certain people in India in the name of promoting education! Baker mentions a widely used trick: “An expatriate lawyer in the MiddleEast does a thriving business representing arms manufacturers. He sets up billion-dollar weapons deals under two contracts, one for the main equipment and a second for support services such as training, maintenance, and software updates. The first contract with the government of the purchasing country is priced properly. The second contract is channeled through a joint-venture company in a Caribbean tax haven, owned by the arms manufacturer and by designated friends of the government officials in the buying country. While doing no work, these nominee partners share in the venture’s deliberately bloated revenues, passing the funds along to their principals, the officials who are the real but silent partners.” Even a reputed company like IBM entered into such an arrangement with an Argentine firm. Baker has the details of this shady deal.

The Indian government’s scheme of offering subsidy to exporters has led to inflating the items entering export trade to corner as much subsidy as possible. “Lots of exporters continue to get rich off their government’s programs, so be alert to this money-making opportunity.” This is one of the findings of Baker so far as India is concerned. It speaks volumes about the honesty of Indian businessmen and the media they control.

Consulting contracts claims arising out of imaginary damages, warranty payments, countertrade deals, etc. are some of the other effective tricks to generate dirty money and fleece developing countries.

Another frequently used device is the formation of dummy or bogus companies. It is very simple, a reinvoicing company is formed that buys, changes prices, issues a new commercial invoice, and resells. This dummy company requires only a computer, a letterhead, and a bank account to come into play. Baker has given a number of concrete examples to illustrate the operation of dummy companies.

Dummy companies play a major role in disguising the source of dirty money and then help launder it. Baker has named a number of “delightful places where you can situate and purchase your secret companies.”  In all, they come to “63 jurisdictions providing varying degrees of incorporation concealment and protection from probing eyes.” There are printed manuals that guide all the way. These dummy companies have a number of variations such as trusts, foundations, and so on. Offshore dummy companies are known as international business corporations (IBCs) or personal investment corporations (PICs). If we believe Baker, then “the United States is encouraging havens and secrecy jurisdictions to keep up with the owners of IBCs and PICs and is trying to insist on mutual legal assistance and cooperation in specific tax and criminal matters.” If you are interested in details, then Baker has them. In addition to all this, one can very easily fake the entire transactions without stirring out of your home!

Criminal component of dirty money has its source largely in drug trafficking, mostly from Afghanistan, Colombia, Peru, etc. and in thuggery and racketeering in which terrorists as well as Mafia have a key role. So far as commercial component is concerned, one has to look at the modus operandi of multinational corporations and the state of affairs prevailing in the Soviet Union and the East European countries after the collapse of socialist regimes. Baker has the details in his book.

Baker thinks that, in spite of all its rottenness, capitalism has no alternative and it can be reformed and rejuvenated to take the humanity forward. It is difficult to accept this proposition because it is nothing but pure and simple quixotic.

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