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International conference organized by "JurInfoR-MSU" Institute for Contemporary Education, “JurInfoR” center, the Criminalists and Criminologists’ Union (Moscow), and the U.S. Department of Justice, 20-21 May, 1997, Moscow

On combating new types of economic crimes in Russia and the United States

The International Financial Market, Organized Crime, & International Law

Joshua Sussman

Today's financial market is truly international in scope. However, the international legal system continues to be based on the principle of national sovereignty. The result is an absence of international institutions capable of regulating this global financial market. Criminal organizations take advantage of this situation in pursuit of their interests. The activities of criminal organizations on the global financial market should be of great concern because they constitute formidable obstacles to law enforcement and represent a risk to the stability of these markets.

The need to regulate financial markets has been recognized at the national level. Financial markets are far from perfect, and without regulation they are prone to operate in a boom bust cycle which threatens economic stability. Financial markets are also vulnerable to manipulation and misuse by unscrupulous participants. Institutions, such as central banks and security commissions, have been developed on the national level to protect financial markets from these dangers. Corresponding international institutions have not been developed. The international financial market is an extremely important mechanism in the global economy as it enables the international allocation of capital, and as such should be protected by appropriate institutions.

Criminal organizations are capable of using the international financial market to take advantage of the limitations of an international legal system based on the sovereignty of states. A wide variety of economic crimes can be facilitated by using the international financial market to move capital throughout the globe quickly and often anonymously. This creates complex jurisdictional problems for law enforcement efforts. Additionally, the primary motive of criminal participants in the international financial market, to avoid law enforcement efforts, can lead to rapid shifts of capital that have the potential of disrupting the stability of this market.

International law is based on the principal of state sovereignty. This implies that institutions designed to regulate the international financial market must be based on voluntary cooperation. Many states have a vested interest in the current unregulated global capital market and may resist the development of international institutions to regulate the market. Additionally, the establishment of effective international regulatory institutions would require the sacrifice of elements of state sovereignty. However, it should be recognized that international financial crimes have the potential to erode a state's sovereignty as they can undermine a state's tax base and erode a government's ability to control its national currency. The international community should recognize its collective interest in regulating the global financial market and establish institutions for that purpose.

In conclusion, a need exists to recognize the truly international nature of the global financial market and develop regulatory agencies capable of protecting it. The fact that this market is a tool that can be used by criminal organizations to evade law enforcement, and the risk such misuse of the system poses to economic and political stability, should be recognized and addressed. Responding successfully to this issue will require a considerable amount of political will.

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