In light of
this, it is not always correct to regard it as a reserve fund that
is not accounted for in the books. Deception, trickery or forgery of
various kinds are often resorted to for the purpose of setting up a
slush fund."
He mentions padded invoices, sham contracts, fictitious loans,
interest accruing on holding accounts, back to back transactions
with related entities (Enron) - all used to funnel money to the
slush funds. Such funds are often set up to cover for illicit and
illegal self-enrichment, embezzlement, or tax evasion.
Less known is the role of these furtive vehicles in financing unfair
competitive practices, such as dumping. Clients, suppliers, and
partners receive hidden rebates and subsidies that much increase the
- unreported - real cost of production.
BBVA's payments to ETA may have been a typical payment of protection
fees. Both terrorists and organized crime put slush funds to bad
use. They get paid from such funds - and maintain their own. Ransom
payments to kidnappers often flow through these channels.
But slush funds are overwhelmingly used to bribe corrupt
politicians. The fight against corruption has been titled against
the recipients of illicit corporate largesse. But to succeed, well-
meaning international bodies, such as the OECD's FATF, must attack
with equal zeal those who bribe.
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