Katharina Pistor | September 24 | Project Syndicate
Even if the latest scandals in banking reveal nothing new about the financial industry’s ethical standards, they have put a spotlight on a bigger emerging problem: the complicity of law enforcement agencies in white-collar crime. The watchdogs are not only shirking their duties; they have joined the other side.
NEW YORK – Although the proper role of government in society is much debated, few would dispute that law enforcement falls within the state’s remit. But governments have increasingly turned a blind eye to enforcing the laws against the world’s most lucrative crimes: the fraud, embezzlement, tax evasion, bribery, and money laundering committed by the well-heeled.
In part, this failure can be ascribed to a lack of resources. Law enforcement authorities often are no match for white-collar criminals’ sophisticated techniques, which are carried out with the assistance of high-paid lawyers and accountants. But the bigger problem is that law enforcement efforts are increasingly directed not at criminals but at journalists who attempt to uncover their crimes.
Consider Wirecard, the German payments processor and financial-service provider. A recent darling of investors, the firm turned out to be one of the greatest frauds in Germany’s post-war history. In a classic Ponzi scheme, the company claimed to have parked abroad money that never existed. As with the Enron and Bernie Madoff scandals, the accountants, lawyers, and regulators who were supposed to safeguard the integrity of the financial system were complicit. In addition to failing utterly to do their jobs, they turned their weapons against the journalists who tried to expose the fraud.
Originally published in Project Syndicate. Read the full article here.