Learn About Illicit Financial Flows
Key Terms

Latest

Jun
6

The Global Shell Game

Joseph Kraus, Ph.D.

Originally published at Trust Law.

A shell game is a well-known parlor game in which players try to follow the movement of a ball placed under one of three quickly shuffled shells or cups and then try to correctly guess the shell that covers the ball once they are brought to rest.

When the operator of the game is especially skilled, correctly tracking the ball can prove quite difficult. If a skilled and dishonest operator uses sleight of hand to covertly move the ball to one of the shells not identified by a player, the game becomes impossible to win, a veritable “confidence trick used to perpetrate fraud.”

The use of anonymous shell companies, or “phantom firms”, can be similar to a parlor shell game. Both rely on operators adept at creating misdirection and keeping observers uninformed. Both can be used for legitimate purposes, but in the wrong hands can be used for nefarious purposes.

Phantom firms make it easy for corrupt government officials, drug traffickers, fraudsters, terrorists, and others to secretly and illicitly move money around the globe with virtually no oversight or repercussions.

In much of the world, the actual owners of anonymous shell companies are not legally required to disclose their identities. Instead, they can remain anonymous by listing the name of a stand-in (or “nominee”) director – or even another (often anonymous!) company – as the owner. This enables individuals and companies to shift money around the globe secretly and anonymously, making it nearly impossible for law enforcement and ordinary citizens to follow the money.

Phantom firms have become the world’s most complicated – and common – shell game, one that is played on a global scale with significant gains and losses. Phantom firms played a role in the loss of $859 billion from developing countries in 2010 in the form of illicit financial flows.

Continue Reading »

News
Jun
6

Catholic Bishops Urge G8 Leaders to Fight Poverty, Tax Evasion with Transparency

EJ Fagan

The US Conference of Catholic Bishops submitted a letter to the G8 Heads of State on Tuesday, urging them to fight poverty by addressing tax evasion and financial transparency. It reads, “The G8’s emphasis on transparency is critical. Human dignity demands truth, and democracy requires transparency. With more and better information, civil societies, including faith-based organizations, can hold their governments accountable and help insure that resources reduce poverty and improve the health of the whole society.”

Continue Reading »

Jun
4

Is Kenya Being Shaped Into Africa’s Flagship Tax Haven?

Gathoni Blessol and Mark Kirk

If anyone ever doubted the sheer scale of corporate greed, they had the unedifying spectacle of Tim Cook, CEO of Apple, to enlighten them last week. In already infamous evidence to a Senate Committee, he demonstrated there is no limit on what corporations will take from society. With the detachment of a sociopath, Cook said outright that he would not consider repatriating the $100bn they have hoarded offshore if it meant paying standard US corporation tax.

There is an argument to be made that this is just businesses doing what businesses do. However full of moral holes that is, it is a very common logic and unfortunately a compelling one to many politicians. This is why, if the tax-avoiding instincts of companies such as Apple – and Glencore and Google and Starbucks, in fact most large multinationals – is to be neutralised, the only thing to do is tackle the system of tax havens that makes every individual act of looting possible.

The imperative is overwhelming. Tax havens exist for one purpose only: to provide a way for the rich to get around the taxes that pay for the infrastructure and services we all – and they all – rely on. They have become, over the past 30 years, a key driver of vast inequality around the world. The system has grown so big that it is now an arterial drain on public budgets everywhere. According to James Henry, a former chief economist of management consultant giant McKinsey, somewhere between $21 and $32 trillion has been siphoned off from the mainstream economy.

The global tax haven system is a network with many parts, and the more parts, the more extensive and powerful the network. Thirty years ago there were a handful of relatively small tax havens, serving a small elite. Today, there are more than 80, and they are a parasite on the mainstream, public economy.

Finding a new tax haven

There is now mounting evidence that elite financial interests are planning to create a new tax haven – to add another node to the global spider web. This time it is on the African continent. If successful, this hub will be a key mechanism to extract wealth from some of the world’s poorest countries.

Continue Reading »

Jun
4

Towards Transparency: Making the Global Financial System Work for Development

Financial Transparency Coalition

Please Join The Financial Transparency Coalition and Policy Forum
for:

TOWARDS TRANSPARENCY: Making the Global Financial System Work for Development
October 1-2 | White Sands Hotel | Jangwani Beach, Dar es Salaam, Tanzania

You are invited to the 2013 annual conference of the Financial Transparency Coalition, which will take place at the White Sands Hotel in Dar es Salaam, Tanzania on October 1-2.  Details about the conference and the agenda are available on the conference website.  To register for the event, please click here.

Please submit any questions to the conference team via email to: conference@financialtansparency.org.

Download a PDF copy of the agenda here.

We regret to inform you that the FTC is unable to provide funding for travel, accommodation, or per diems for the conference at this time.  We apologize for any inconvenience this may cause.

Continue Reading »

News
May
31

NYT and FT Editorial Boards Call for Country-by-Country Reporting

EJ Fagan

Two great editorials today. The first, from the New York Times, responds to last week’s Senate hearing over Apple’s tax abuses by calling for country-by-country reporting, a Coalition policy goal, and ending corporate tax deferral in the United States. This is great news, and will hopefully help persuade U.S. policy measures to address the worst problems in their corporate tax code.

The second, from the Financial Times, also calls for country-by-country reporting at the EU level. Furthermore, it calls for another Coalition policy goal, automatic exchange of tax information.

Continue Reading »

May
30

Why is Africa Poor? The Unexpected Role of Net Resource Transfers

Ann Hollingshead

That Africa is poor is assumed, but rarely well explained. Generally, we—both in terms of those who study these issues and collectively as a society—have accepted the fact that Africa is underdeveloped. Yet this conclusion is neither forgone nor self-evident. Even more infuriating, it is often explained, but never sufficiently explained. That is, there are a lot of competing theories on the subject, but most fail to give a complete picture. Of course, it’s a complicated issue, so it makes sense that no one theory would prove universal. Yet, even with intense academic scrutiny, the picture is incomplete.

A new report by Global Financial Integrity and the African Development Bank may fill in some of these holes. The report, Illicit Financial Flows and the Problem of Net Resource Transfers from Africa: 1980-2009, finds that Africa is a “net creditor to the world,” meaning that, over the period of the study, the continent exported more capital than it received. It is difficult to overstate the importance of these findings in terms of our understanding of the question posed above, that is, Why is Africa poor?

Africa, at least in part, is poor because it is losing more money than it is taking in.

Let’s turn first to the competing explanations for poverty in Africa, then we’ll turn to the report and how it helps to fill some gaps in the economic thinking.

Economists have a lot of different ways to model economic growth (i.e., an expansion of real GDP per capita). Typically, economists think of economic growth as the result of the expansion of human and physical capital, or increased productivity as a result of technological advancements. There are a lot of different explanations for how to achieve these expansions, but the most basic are: productivity growth, quantity of labor, technological advancements, education and training, and quantity of capital.

Continue Reading »

Press Releases
May
30

Transparency International Welcome Good Governance Goal Proposed by United Nations Report

Transparency International

BERLIN - Transparency International, the anti-corruption organisation, welcomes the proposal to make transparent and accountable governance a cornerstone in the drive to end world poverty and reduce inequality, as outlined in the report published today by the High Level Panel convened by the United Nations.

Continue Reading »

May
29

Announcing the Financial Transparency Coalition

Porter McConnell

When the Task Force on Financial Integrity and Economic Development was created in 2009, only a handful of experts were following the issue of illicit financial flows. The subject was decipherable only to finance professionals taking advantage of tax havens, and a handful of civil society groups and finance journalists. Meanwhile, each year nearly a trillion dollars was being secreted out of developing countries, robbing them of revenue needed to build better lives for their citizens.

Over the last four years, a growing number of policymakers and citizens have begun to take heed. What good is pouring money into foreign assistance when ten times that amount leaves developing countries in corruption, crime, and corporate tax evasion, often arriving right back in rich country bank accounts? Meanwhile, activists in developing countries are pushing back against austerity, and demanding that foreign investors in oil, gas and mining and local elites pay their fair share.

Today, illicit financial flows are front page news:

These are exciting times, and we are changing with them:

As of today, we are changing our name to the Financial Transparency Coalition. We are a global group of experts, activists, and governments working together to blow away the smokescreen of financial secrecy and to build a more transparent financial system that works for everyone. It’s a simple premise, and it demands a simple name.

Continue Reading »

News
May
29

Taxcast: May 2013 Edition

Taxcast by Tax Justice Network

In the May 2013 Taxcast: Google and Apple are forced to defend their tax affairs in public, how anti-EU sentiment serves offshore interests and the Taxcast looks at tax havens and the arms trade: how secrecy kills. The Lord of War makes an appearance.

Continue Reading »

May
29

ONE Campaign’s 2013 Data Report: Financing the Fight for Africa’s Transformation

Ben Leo

Cross posted from ONE Campaign.

With less than 1,000 days to go until the deadline of the Millennium Development Goals (MDGs), ONE’s flagship DATA Report has a special focus in 2013, tracking how developing countries are progressing on these ambitious targets using the ‘MDG Progress Index’.   The 2013 DATA Report: Financing the Fight for Africa’s Transformation also measures how sub-Saharan African governments are faring against their own spending commitments in three poverty-busting sectors: health, agriculture and education. Finally, it offers recommendations for how the global community can intensify its efforts in a sprint to the MDG finish line.

We’ve uncovered remarkable progress:

  • There are 10 sub-Saharan African MDG ‘trailblazers’ and dozens of countries have improved their performance.
  • Sub-Saharan African resource flows have quadrupled since 2000, including domestic government expenditures, which account for almost 80% of all available finance. Domestic revenues, foreign investment, donor assistance and remittances are all playing an important role in boosting growth and development.
  • Countries that allocate more of their budget to health, agriculture and education are, on average, progressing faster on the MDGs. For example, over the last decade, Burkina Faso spent a whopping 52% of its national budget on these three sectors and is currently on track to achieve four MDG targets (out of eight) and partially on track for another two.

But here’s the bad news:

  • Some countries are falling behind on the MDG targets and slowing down regional progress. Nine of the fourteen global ‘laggard’ countries are in sub-Saharan Africa.
  • African governments are falling far short of their own spending targets, and this has very real consequences. Take a large country such as Nigeria, which alone accounts for 11% of annual child deaths – if it were to meet its health spending commitment over the next three years, the additional resources could amount to $22.5 billion. This could pay for vaccinations for every single child, anti-malarial bed nets for every citizen, and treatment for every HIV-positive person, saving millions of lives.
  • Many donors are also off track in delivering on their promises, such as reaching aid levels of 0.7% of GNI by 2015 and delivering half of those increases to Africa. While aid flows rose dramatically from 2000 to 2010, we have now seen two consecutive years of decline, and, shockingly, sub-Saharan Africa is bearing the brunt of these cuts.

Sub-Saharan African governments and donors must urgently step up to meet their promises. Smart aid investments make a huge difference to the lives of the world’s poorest people, and donors should prioritise funding to mechanisms that best serve the MDGs, such as the Global Fund, the World Bank’s International Development Agency and the African Development Fund; all of which have important replenishments this year.

Continue Reading »

Press Releases
May
28

New AfDB-GFI Joint Report: Africa A Net Creditor To The Rest Of The World

EJ Fagan

MARRAKECH, MOROCCO / WASHINGTON, DC – A new joint report by the African Development Bank (AfDB) and Global Financial Integrity (GFI), launched Wednesday at the 48th AfDB Annual Meetings in Marrakech, Morocco, reveals that the African continent has been a long-term net creditor to the rest of the world. The report [ HTML | PDF - 4.2 MB ] finds that Africa suffered between US$597 billion and US$1.4 trillion in net outflows between 1980 and 2009 after adjusting net recorded transfers for illicit financial outflows.

Continue Reading »

News
May
24

Video: TJN’s John Christensen discusses “The Finance Curse” on France24

EJ Fagan

Continue Reading »

Pg 21 of 181 First...10...20212223...3040...Last
Latest Press Releases

GFI Notes Significant Progress on Automatic Information Exchange but Warns that Poorest Countries Are Being Shunned

Global Financial Integrity · October 30, 2014

WASHINGTON, DC – While noting significant progress today in the global effort to curb tax evasion, Global Financial Integrity (GFI) expressed concerns that ...

Report reveals threat to U.S. interests from anonymous shell company owners

Global Witness · September 25, 2014

Owners of anonymous companies registered in U.S. states are ripping off innocent people and businesses across America, says a new report by ...

G20 Introduces “Transparency” Behind Closed Doors

Financial Transparency Coalition · September 21, 2014

WASHINGTON, D.C.—The G20’s recent focus on financial transparency is a welcome development, but instituting bare minimum requirements, or plans that allow for ...