Introduction
The Lebanese-Canadian Bank (L.C.B.) was located in Beirut, Lebanon, with over thirty-five branches all over the country. Further, it has representative offices in Canada, Quebec, and Montreal. L.B.C. was established in 1960 as a subsidiary of the Royal Bank of Canada, but it became a private bank in 1988. It provided various services and maintained an extensive network with other banks globally, including the United States of America. As of 2009, the bank’s assets were worth more than five billion dollars (Nassar, 2020). In 2011 L.C.B. was accused of laundering money for drug traffickers and funding terrorist groups by the American treasury and D.E.A. (Drug Enforcement Agency). The basis of these allegations was, however, concealed from the public. Moreover, it was believed that this bank had connections to the Middle East, South America, West Africa, and Latin America.
The bank was later banned from using the dollar by the American treasury; this resulted in the collapse and eventual sale of the bank. L.C.B. had to pay a settlement fine of one hundred and two million dollars for these actions. This bank, together with its subsidiaries, was identified as the primary money laundering institution for terrorist organizations and drug traffickers. Under the Patriot Act (section 311) (Nassar, 2020), the bank was sued since evidence proved that the bank managers were complicit with the terror activities of these organizations. The D.E.A. believed that these organizations moved drugs to America and the Middle East through West Africa and laundered millions of dollars every month through their L.C.B.-held accounts. They also used the trade-based money laundering system to move consumer goods worldwide. The D.E.A. confirmed at least $200 million in laundered every month through the bank (Zougheib, 2020). The U.S. treasury took legal actions to curtail money laundering.
Monetary crimes in the banking sector have been the leading cause of collapsing of many banks. Over the years, major banks have been accused of laundering millions for cartels and mobsters. It is the process of making dirty money appear legal. The money is moved through many accounts to create confusion. The money is moved in small amounts to avoid any suspicions, after which it is fully integrated into the banking system and appears legal. Some of these banks have been found guilty and forced to pay millions as settlements for their crimes. The money is then used to fund criminal activities and terrorist activities worldwide. An example of such a bank includes the Lebanese-Canadian Bank (Zougheib, 2020). This bank was found guilty of laundering money for drug traffickers and funding many terrorist organizations.
International connections
The L.C.B. bank had connections to other banks throughout the world; it had links to Latin America, Africa, Europe, and the U.S.A. This bank had a partnership with the BMCE bank, a subsidiary of the Africa Morocco Group (Halawi, 2019). These two banks were focused on distinguishing the Republic of Congo’s economy and empowering the citizens of this country. In partnership with MasterCard, L.C.B. introduced fresh digital developments into the country, improving innovation. However, these connections were enabled by the longstanding relationship between these regions.
The relationship between Europe and America initially began in 1953 when American diplomats visited steel and coal communities in Europe (Nassar, 2020). These two went ahead and formed organizations that have strengthened their relationship ever since. Europe and the US are partners who dominate the world market and hold crucial roles in international peace and diplomacy. Their opinions matter a great deal to the rest of the world. Hence, they are both members of NATO and play significant roles in world peace and security. These tight relations have made it possible for drug traffickers to carry out their operations swiftly since peace is already established (Mohammed, 2020). On the other hand, the same collaboration makes it even easier for these countries to curtail drug trafficking through sharing police intelligence and personnel.
The Europeans first initiated connections between Africa and Latin America during their expansion to Latin America. The Portuguese transported from the coast of West Africa to their newfound land in Latin America. These relations were further cultivated by their unified struggle against their colonial masters. These struggles brought these two regions together, and the ties have been maintained ever since. For instance, Brazil opened embassies in Ethiopia, Senegal, South Africa, and Ghana to enhance its relationship with the African states (Kumar & Lokanan, 2022). The Latin Countries were crucial in the struggle for independence in Africa as they supplied Africa with ammunition and soldiers to aid in the battle. These relations have been mainly focused on; trade, political alliances, international coalitions, and cocoa and coffee markets. Brazil developed extensive ties with Africa; it imported oil from Nigeria and exported cars to Africa. To date, relationships between Latin America and Africa are still intact as these governments have created favorable environments of business with each other.
Africa and Europe have connections that date back to the age of exploration and international trades. Furthermore, these relations developed even more during the colonization of Africa. After which, the ties were maintained, and organizations formed. African countries have still maintained ties and trade with their former colonial masters. Africa has numerous natural resources, without which most European countries will collapse. Africa, therefore, provides these resources, which are processes in Europe before they are put on the market (Zougheib, 2020). Europe depends on the tea and coffee produced in Africa. Africa generates resources that are vital to the economy of Europe. Africa provides a platform for investing surplus capital for the European countries. The same applies to the relationship between Africa and the U.S., and these two regions have a symbiotic relationship whereby Africa provides natural resources, and the U.S. processes them. Both regions import and export commodities that each of them produces.
Latin America is one of the fastest-growing trading partners of the U.S. Nevertheless, Latin America is moreover one of the largest suppliers of illegal drugs to America with its increased growth. Furthermore, it is the largest source of immigrants in America, those who are documented and those who are not. Over the years, America had a great influence on the development of Latin America. Nonetheless, with new superpowers, America’s power is fading with time (Kumar & Lokanan, 2022). Latin America has grown substantially, and democracy has spread hence opening up the economy, which has, in turn, reduced the poverty levels significantly. The federal government appointed a task force to evaluate Latin America’s challenges to adjust the American policies effectively. The task force reported positive growth in this region and recommended reinforcements in poverty, security, migration, and energy. Proof that this region has grown and issues like democracy and drugs are less of a concern now. Despite all challenges, the U.S. government has put much effort toward helping Latin America get on its feet; this has gone a long way in nurturing their relationship.
Commodity-Based Money Laundering
The laundering process was conducted in three stages; placement, layering, and integration. Nevertheless, these stages are somewhat complex due to all the illegal activities involved. Placement stage; here, the unlawful money is placed in the financial system, which is legal. The money is ‘washed,’ moved from its source and into a legal and legitimate system. For this case, the terrorist organizations would move some of the money into offshore accounts since they are legal. The layering stage; involves moving the money across various accounts through wire transfer (Nassar, 2020). The funds cannot be detected since there are many transactions done that act as layers on top of each other hence creating confusion. This process is crucial as it involves altering books of account, which experienced persons can only do. It helps to hide the initial source and owner of the money being transacted and prevents them from being caught.
Integration; is the third and last stage of money laundering. This money is now in the financial system and can now be used to absorb the economy by acquiring assets. Upon the absorption, the money is now considered legitimate, and it is very difficult to detect any illegality at this stage without proper documents. The terrorist organizations used the money to purchase cars in the United States of America, which ensured that they could not be caught (Kumar & Lokanan, 2022). The terrorists adopted bank complicity and asset acquisition, this way, the newly ‘washed’ money would be used to acquire assets which would be difficult to it to the illegal money. Bonk complicating involves paying bank managers who doctored the books to remove any proof. The legal actions of the United States Treasury led to the sale of the bank since it could no longer deal dollar, and thus it collapsed.
Conclusion
Lebanese Canadian Bank was based in Beirut with over thirty-five branches all over the country; furthermore, it had subsidiaries in Canada and Quebec. However, this bank was flagged in the U.S. treasury and D.E.A. for laundering drug money for drug traffickers and connected to terrorist organizations like Hezbollah. The L.C.B. was fined $102million as a settlement for its fraudulent activities. In addition, the U.S. treasury banned it from dealing with the American dollar; consequently, the bank collapsed, leading to its eventual sale.
The international connections between the United States of America, Latin America, Europe, and Africa were crucial in enabling the bank to launder money. These connections ensure harmony between these regions, which facilitated these transactions; nonetheless, they also ensured that respective authorities coordinated effectively, hence discovering the fraud. The terrorist organizations laundered money by first entering the illegal money into the legal financial system. After which, they conducted numerous transactions to mask the initial source and owner of the capital. Then the money is absorbed into the economy by purchasing assets. In this case, the terrorists purchased cars in America. The legal actions of the U.S. treasury led to the collapse and ultimate sale of the Lebanese Canadian Bank.
References
Halawi, R. A. S. (2019). Dirty money in the banking sector. Journal of Money Laundering Control.
Kumar, D., & Lokanan, M. E. (2022). Money laundering influences financial institutions and ways to retaliate.Journal of Money Laundering Control.
Mohammed, S. A. S. A. (2020). Money laundering in selected emerging economies: Is there a role for banks?Journal of Money Laundering Control.
Nassar, D. (2020). Evolution of the Lebanese banking sector legitimacy because of the pressure of the United States Regulations.Proche-Orient Études en management, 32(1), 105-129.
Zougheib, N. (2020). Challenges and efficiency measurement issues of Lebanese commercial banks.