War on Iraq. An opportunity for laundering?

President Bush was given, yesterday, the authority to attack Iran if the UN fails in its mission to disarm Saddam Hussein. The world's favourite bogeyman is not giving in to all the demands being made and there is an element of reasonableness on his side. The US attitude is to say "give us everything that you can attack us with and then we will remove you from power." The presumption that the US can tell states what to do is precisely the reason that there is so much distrust, even dislike bordering on hatred, for the US across so much of the world.

Blair said, recently, "We are ready for casualties." No one WMLR spoke to in the UK included themselves in Blair's "we" but it's a safe bet he didn't mean that those resident in Downing Street were going to risk being shot at or the victims of chemical or biological weapons.

No one is talking about "Gulf War Syndrome" any more. The victims, prominent only six months ago, have become non-persons.

No one is talking about casualties.

TV and Radio are talking about the economic effects of war, in most cases accepting it as a done-deal.

And it probably is: having secured his authority, it is Bush and his advisers who will decide whether Saddam has complied with the UN resolutions: and they are the very people driving the agenda their way. Note, incidentally, that now the position has moved on - it is no longer just a question of weapons inspectors and the access they receive: it is a question of disarmament.

The economists wheeled out in many programmes are of one voice: the Gulf War (which is, seemingly, to be renamed GW1) had a detrimental effect on economies in the period of uncertainty leading up to action. Reports in the UK say that it will take anything up to three months to prepare men and machines and to get them into position. Adding these two statements together would mean that the latter part of 2002 will result in a reduction in consumer spending as expenditure is either curtailed or diverted; air travel will, again, be affected and tourism will reduce. Commercial spending on travel and discretionary items will also be cut back. But, say the economists, the effect of the commencement of war is to contain that uncertainty and some sectors will actually revive.

Other economic factors that differ from GW1 to now are that OPEC is no longer in a position of such dominance in the oil supply. Worldwide oil stocks are high, prices are low (not that many would notice) and companies have been stockpiling for over a year in anticipation of problems. Russia (currently courted by Blair - see story yesterday) is now a net exporter of oil. And, cynics would point out, it will do Bush's Texan oil pals no harm at all.

More, immediately Bush came to power he was anxious to grant oil exploitation licences in Alaska in the face of considerable opposition from environmentalists. His argument was that it was in the interests of the USA to be self sufficient in oil, and to ensure it was available at reasonable prices. Again, his arguments will be aided by any oil supply problems that may arise out of a conflict.

The economists also point out that, in the UK at least, interest rates are stable with a bank rate of around a quarter of the rates at the time of GW1. However, economists also say that businesses are in better shape with, on the whole, less borrowings than at the time of GW1.

Another factor that will affect economies is the cost to the public purse. The UK's Chancellor Brown has done a delicate balancing act, steadily increasing taxes whilst people have not really noticed and increasing public spending in a wide range of areas, whilst focusing public attention on spending on schools and hospitals. One area that has suffered in successive reductions in budget is the military. The UK's establishment is a fraction of what it was ten years ago. And its weapons are of questionable quality. Increasingly, the UK's armed forces are becoming a small elite force, envied by the rest of the world for their quality but with a very limited capacity for large scale warfare.

Of course, a war with Iraq will not be large scale warfare. It will be the USA and its allies kicking sand in the face of Saddam and his friends, killing innocent civilians by accident and killing each other with so called "friendly fire." In some quarters, spread bets are taken on how long after the declaration of war it will be before the USA fires on its own men or its allies.

But, there is a presumption that Saddam will not fight back. There is a presumption that the USA and whoever goes with it will turn up in Iraq, do their stuff and come home, some alive, some injured, some with latent damage and some in body bags. But there is no concept of strike-back.

In 1997, there was pandemonium in the UK press which had a report that Saddam was planning to introduce biological weapons into the UK. In the early days of the US (and pals) attacking Afghanistan, there was panic buying of..... gas masks. The fact is that the public knows that if there is retaliation, it would be ridiculous for Saddam to contain it to his own borders.

The arrogance of "we can come to your country but you won't come to ours" is ridiculous. The public know it and the governments ignore it: the press does not want to be seen to be conciliatory at a time when strong support is viewed as important.

Even more bizarre is that the justification for the proposed attacks is that Saddam has the means to operate outside his borders... an allegation of terrorism although there is no (disclosed) evidence that he has, or is preparing, to take such action.

One single issue here is central to all of the above: uncertaintly and volatility increase the opportunity for criminals. Aside from black market and sanctions busting activities, there are other issues, for example the fact that enforcement agencies are diverted to looking for the paraphernalia of war means that the opportunity for cash-crop smuggling: contraband dutiable items and narcotics are the obvious worry.

Again, and without justification, we will see suspicion land on financial transactions involving Muslims. Again, we will see concern as to the loyalty of Muslims within the workplace. The attack on Iraq is overlaid on the effects of the attacks on Afghanistan when many Muslims were demonised in western society. The cumulative effects will risk a growth in racial stereotyping and monitoring (in the broadest sense as well as in the more usual sense) of both customers and staff. This cannot be right but it will, inevitably, happen.

More, as suspicion falls on commercial and personal transactions involving Muslim customers and institutions, there is the risk that trade with them will reduce. It must be remembered that many of the world's poorest nations are Muslim, a fact that it is easy to overlook when thinking of the oil rich Arab states and failing to notice the North African Arabs living in squalor and the position of many other Muslim groups. There is, as a result, a political and social imperative not to make irrational and prejudicial judgements based on name, race or religion.

World events, seemingly far removed from anything to do with money laundering, can therefore be seen as having a direct impact on the risks that are raised and on the ways organisations deal with them.