Learn About Illicit Financial Flows
Key Terms



The Economist Publishes Major 14-Page Special Report on the Shadow Financial System

EJ Fagan

null In today’s issue, the Economist published a fantastic 14-page special report on the shadow financial system and the crime, corruption, and tax dodging that it facilitates. The report included numerous citations of Task Force members Tax Justice Network, Christian Aid, Global Witness and Global Financial Integrity, as well as strong arguments in favor of Task Force recommendations for automatic exchange of tax information and the elimination of anonymous shell companies. Money quote from the cover-page editorial:

Individuals have a right to financial confidentiality, but only as long as they set about their business lawfully. When it comes to tax crimes, money-laundering and the like, such confidentiality needs to be set aside. Some OFCs still make this difficult, and layering by service providers compounds the problem: try penetrating a Belize bank account fronted by nominees that is owned by a shell company in the British Virgin Islands (BVI) that in turn is owned by a foundation in Panama. Over the past decade the bigger OFCs have co-operated more with foreign law-enforcement agencies, but progress is patchy, and offshore structures still crop up regularly in corruption and money-laundering cases. A recent example is the alleged use of Cayman companies as conduits for bribes to Saudis by a subsidiary of EADS, a European aerospace and defence company.

We highly recommend reading the whole series. It speaks for itself:

Storm survivors
Enduring charms
The OFCs’ economic role: The good, the bad and the Ugland
Onshore financial centres: Not a palm tree in sight
Tax transparency: Automatic response
Company taxation: The price isn’t right
The merry enablers
Switzerland and its rivals: Rise of the midshores
Who’s the criminal?
Prospects: Sunshine and shadows

Continue Reading »


Incentives, Economic Growth, and Distributional Effects of Various Tax Expenditures

Ann Hollingshead

flickr / afagen

President Obama’s State of the Union address this week included an impassioned argument for a “balanced approach” to deficit reduction; meaning that spending cuts should be coupled with revenue increases. Many Republicans disagree—arguing we should cut spending while leaving taxes at their current rates.

The bright line between taxes and spending is, in fact, not so bright. One obvious example is tax expenditures—government spending through the tax code, also called loopholes. In some ways tax expenditures are good; for example, they can be used as incentives to encourage corporate and private behavior that provides a social benefit. On the other hand, these expenditures both lower government revenue and can skew the horizontal and vertical equity of our tax system. For example, corporate loopholes can result in dramatically different effective corporate rates for nearly identical companies. Similarly, they allow some very wealthy American families to pay lower tax rates than their counterparts in the middle class.

Last week Senator Bernie Sanders (I-Vermont) introduced the Corporate Tax Fairness Act, a proposal to cut one of the U.S.’s tax expenditures. The bill would raise an estimated yearly $60 billion by ending “deferral,” which allows U.S. corporations to indefinitely defer payment of overseas earnings. This loophole creates two incentives: (1) for corporations to shift profits overseas to tax havens using transfer pricing, and (2) for those corporations to hold large deposits of untaxed cash sitting in bank accounts overseas.

Continue Reading »


Oil industry support for new transparency laws grows

Jospeh Powell

Cross posted from ONE Campaign.

flickr / mjanec

There is big news today on both sides of the Atlantic for campaigners – including ONE – in the Publish What You Pay coalition for transparency in oil, gas and mining. The major Norwegian oil company Statoil has withheld their support from last-ditch attempts to overturn the new US rules on transparency, and a former Shell executive has declared his support for similar laws in Europe.

At ONE, we’ve been pushing for laws in the US and Europe that would lead to the publication of all payments from extractive companies to every government where they do business, on a project-by-project basis. This will help empower citizens in resource-rich but poor African countries with the information they need to hold their leaders accountable for money coming in. However, some of the largest oil companies have chosen to fight these efforts, including through a lawsuit filed by the US industry body – the American Petroleum Institute (API) – against rules that implement the “Cardin-Lugar” amendment to the 2010 Wall Street Reform Act.

Today our partners Global Witness have published a letter from Statoil, a major New York Stock Exchange-listed Norwegian oil company, indicating they do not support industry attempts to overturn these rules. They said: “Statoil has not supported the lawsuit initiated by API; in fact, Statoil has explicitly withheld support for the litigation. As you know, we have not taken an active stand regarding the lawsuit, but chose to communicate our view on the new rule to the SEC, internally in the API and in other relevant fora.” Statoil’s decision deserves considerable praise and we are encouraging ONE members to tweet them a well done message using their handle @statoilasa. We are now calling on other companies to similarly distance themselves from the pro-secrecy API lawsuit, and cease attempts to weaken the proposed European transparency law.

Continue Reading »


Task Force Event: Financial Transparency: Challenges and Opportunities for Developing Countries

Sarah Bracht

When: April 3, 2013
Venue: India Habitat Centre
Where: New Delhi, India

The Task Force on Financial Integrity and Economic Development, in partnership with the Centre for Budget and Governance Accountability, will host its first Asia regional conference, Financial Transparency: Challenges and Opportunities for Developing Countries, at the India Habitat Centre in New Delhi on April 3, 2013

According to the latest report by Task Force member Global Financial Integrity, the Asia region lost an average of US$344.4 billion per annum in illicit financial flows from 2001-2010.  It accounted for 60.91 percent of the total illicit financial flows from the developing world, with China, Malaysia, the Philippines, and India among the top 10 countries with the highest measured average annual illicit financial outflows over that decade. Conference panelists will address the issue of illicit financial flows in the Asian context and discuss possible solutions.

Read more about the conference on the Task Force Conference website.

Continue Reading »


Video: Introduction of the Corporate Tax Fairness Act

EJ Fagan

Late last week, Senator Bernie Sanders (I-Vermont) introduced the Corporate Tax Fairness Act. Right now, corporations based in the United States are allowed to defer taxes on any overseas earnings indefinitely. In practice, this leads to two things: tremendous amounts of profit shifting via abusive transfer pricing to tax havens, and large deposits of untaxed cash sitting in bank accounts located in those same tax havens. If enacted, this law would end deferral, requiring that all U.S. corporate profit would be taxed for the year that it was earned.

Below, Senator Sanders speaks on the bill:

On top of collecting an estimated $600 billion in tax revenue over 10 years for the United States from the world’s biggest multinational corporations, this bill would create a huge windfall for developing countries. Under the status quo, U.S. multinationals have an incentive to use abusive transfer pricing to shift profits away from developing countries, where they often earn billions of dollars. The U.S. would immediately tax this profit at 35%, but offers a 1:1 tax credit for any U.S. multinationals who pay tax in other countries. The U.S. companies don’t care whether or not they pay taxes to Uncle Sam in the United States or to local authorities in Nigeria or India or Argentina, so they do not invest resources in shifting profit away from these countries. Acme Multinational Inc. might end up paying something like 15% tax in India and 20% in the United States, bringing in lots of revenue for both countries.

Read more about the bill here.

Continue Reading »


A year of corruption-busting in South Africa

Nicky Rehbock

Cross posted from Transparency International’s Space for Transparency blog.

Exactly a year ago, in the clinical hall which once housed an infamous women’s prison, South Africa’s Corruption Watch was born. The imposing space was packed to capacity with political heavyweights, anti-apartheid luminaries, journalists and human rights activists who had come to welcome the launch of the first civil society watchdog of its kind in the country.

The organisation was set up to provide safe, credible reporting mechanisms for the public to share their experiences of corruption and expose perpetrators, specifically those involved in the abuse of public power and resources.

One year on, the organisation has received more than 3 000 reports from the public, of which 1 227 or 38% relate to corruption as the organisation understands it. We average about three reports a day. People can share their experiences via a reporting tool on our website, SMS, email, fax, post, walk-ins and Facebook.

An integral part of Corruption Watch’s work is our assurance to whistleblowers that we will never reveal their identity without their full permission. Obviously, some reporting channels are more anonymous than others – by choosing to report via SMS, Facebook, email or walk-ins, 61% of reporters reveal either their cellphone number, email address or name.

Of the reporters who use the online tool, 68% choose to remain anonymous, but a third are prepared to put their names to the allegations.

Continue Reading »


How Shell Corporations are Corrupting U.S. Democracy

Ann Hollingshead

On January 22nd, 2010, the day after the Supreme Court ruled on the Citizens United v. Federal Election Commission case, Americans knew elections in our nation would never be the same. Although no one was really sure exactly how. In the landmark 5-4 decision, the court ruled that, under the First Amendment, the government could not restrict independent political expenditures from corporations, non-profits, and unions.

In his dissent, Justice John Paul Stevens argued that allowing unlimited corporate money to flood the political marketplace would corrupt our democracy.

We might not all agree with the contentious Citizens United decision, but it is the law of the land. And while we don’t all agree on whether or not corporations should be able to exercise a “right to free speech” with unlimited spending on election advertisements, most Americans do agree on two things: 1) foreign nationals shouldn’t be allowed to spend money on American elections, and 2) the American people have the right to know who’s doing the spending.

Continue Reading »


Australia: Multinational Tax Payments Should Be Transparent

EJ Fagan

flickr / Ariaski

Australia has long been an international leader on financial transparency issues, whether we’re talking about taxes, beneficial ownership academic research, or money laundering laws. They aren’t perfect, but it looks like the Australian Parliament will support an important new provision to make their tax system a whole lot more transparent:

Global giants including Apple and Google will be forced to reveal how much tax they pay the federal government, under a plan to name and shame firms seen to be dodging their responsibilities by using tax havens.

The proposed crackdown, announced today, would also clear the way for the government to publish more detail on how much mining tax resources firms are paying. Until now, the government has refused to say exactly how much money the mining tax has raised, citing the need for taxpayer confidentiality.

A fundamental principle of tax law is that the affairs of all taxpayers, from individuals to corporate giants, are kept secret.

But with governments around the world seeking to protect their budgets against use of tax havens, especially by technology firms, large companies operating in Australia may no longer enjoy such privacy.

Federal Labor hopes to pass legislation before the September election that would require large firms to publish more detailed information on how much tax they pay.

The controversy arose when Google, which operates in Australia, paid a reported $74,176 in 2011, and Apple fell into similar trouble. The move itself won’t capture any tax revenue directly for Australia, but will make it difficult for companies to hide behind walls of secrecy when using abusive transfer pricing schemes to shift profit out of countries where it is earned. Even in Australia, Google is somehow claiming that it actually paid a lot more than $74,176 in taxes, although its difficult to imagine how this can be a fact in dispute. The system needs a heavy dose of transparency. 

Continue Reading »


Immigration Reform, Bulk Cash, and Border Security

Ann Hollingshead

flickr / aresauburn

The last blue moon occurred on August 31st of 2011 and we won’t enjoy another until 2015. In the meantime, the Senate has fulfilled its duty to introduce truly bipartisan legislation on a hot button political topic exactly once. I’m talking about the Senate’s immigration reform plan—which this week a group of senators from both parties unveiled and President Obama promptly endorsed.

One key element of the Senate’s plan is a provision which stipulates that illegal immigrants would not be able to become American citizens until the U.S. government takes action to adequately secure the border. Of course, this brings up the question of what does a “secure border” even mean? At what point can we say that the border is completely secure? And given our looming budget problems, how much will the boots, trucks, x-rays, fencing, dogs, and cameras we need to get to that complete security cost us?

Over the last ten years, the focus in the conversation about border control has shifted several times. Just after 9/11, the U.S. bolstered border security out of the fear that terrorists could sneak weapons in from Mexico. Later, when cartels threatened to unravel Mexico, these concerns were overshadowed by drug trafficking. Then, when unemployment in America soared, the central theme in the issue turned to illegal immigrants.

Continue Reading »


How the Groenewald Gang Made Millions off Illicit Wildlife Trafficking

Regina Morales

flickr / Dane Larsen

Dawie Groenewald of South Africa and 11 conspirators were arrested in September of 2010 on 1,872 counts of racketeering, including illegal trade of rhino horns. Among those arrested are two veterinarians, Karel Toet and Manie Du Plessis, as well as several professional hunters. This case is one of the biggest wildlife cases seen in South Africa and has been postponed several times since 2010. It is currently scheduled for early May 2013.

Groenewald owns a big game farm in Polokwane, South Africa as well as Out Of Africa Adventurous Safaris. A burial site of over a dozen horn-less rhinos was found on his property in 2010. Investigators show that these rhinos are thought to have been purchased from the South African National Parks in 2007-2010. In order to increase his profit margin, Groenewald decided to slaughter the rhinos after removing their horns; thus eliminating any upkeep costs associated with live rhinos.

Rhino horns are worth up to $60,000 per kilo in parts of East Asia, namely China and Vietnam. They are thought to possess medicinal value, including curing cancer and small ailments such as fevers and headaches.  Rhino poaching in South Africa has been rising steadily over the past several years. According to South Africa’s Department of Environmental Affairs, approximately 588 rhinos were poached in 2012. One could point to China and Vietnam’s increased affluence as having increased this demand.

Investigators have so far seized $6.8 million in assets from Groenewald, Toet, and Du Plessis. They also uncovered Valinor Trading CC, a “closed company” Groenewald used to launder money. However, this was not Groenewald’s first run in with the law. Groenewald is a former police officer and was discharged because of his ties to a car smuggling ring allegedly outfitted by ZANU PF, the ruling party of Zimbabwe’s notorious Robert Mugabe. Groenewald was arrested in Alabama in April 2010 for importing an unlawfully hunted leopard trophy. He was banned from the U.S. and ordered to pay a $30,000 fine as well as a $7,500 fee to the buyer in Alabama.

Continue Reading »


Event: Global Corruption: Money, Power and Ethics in the Modern World

EJ Fagan

Global Financial Integrity will be holding a panel discussion about the new book, Global Corruption: Money, Power and Ethics in the Modern World, by Transparency International’s Laurence Cockcroft. All are invited to attend. If you are outside the Washington, DC area, the event will be filmed and posted online shortly afterwards.


Tuesday, February 12th, 2013, 11:00am – 12:30am


Carnegie Endowment for International Peace
Choate Room
1779 Massachusetts Ave. NW
Washington, DC, USA, 20036


Laurence Cockcroft, Author
Michael Hershman, President & CEO of The Fairfax Group, former federal fraud and financial crime investigator
Claudia Dumas, President & CEO of Transparency International USA
Raymond Baker, Director of Global Financial Integrity

RSVP:           Send RSVPs to Patrick Benson at pbenson@gfintegrity.org

Note: This event was previously scheduled for October 29th, 2012, but was postponed due to Hurricane Sandy.

Corruption is a key factor in sustaining appallingly high levels of poverty in many developing countries, particularly in relation to the provision of basic services such as education and health. It is also a major reason why increases in the growth rate in Africa and South Asia have failed to benefit large segments of the population. Corruption drives the over-exploitation of natural resources, capturing their value for a small elite – whether timber from Indonesia or coltan from the Congo. In the developed world, corrupt party funding undermines political systems and lays policy open to heavy financial lobbying.

Continue Reading »


Global Witness: The Price for Helping Cyprus

Robert Palmer and Rosie Sharpe

This op-ed was originally published in the European Voice on January 24th.

flickr / Dan…

Cyprus’s teetering economy needs a significant injection of bail-out cash from its European Union partners. However, a group of countries, led by Germany, is baulking at the prospect of propping up what many regard as a money-laundering haven. A bail-out package, it is argued, could see eurozone taxpayers footing the bill for protecting the offshore banking deposits of criminals. European leaders are arguing that Cyprus should have to beef up its anti-money laundering controls in order to qualify for any bail-out package.

The Cypriot government insists that it runs a clean financial centre. In fact, EU ambassadors to Nicosia have been told that Cyprus has a better anti-money laundering record than many other EU member states.

This argument is disingenuous and ignores crucial holes in Cyprus’s attempts to fight the movement of dirty money. Indeed, last year, a leaked report from Germany’s Federal Intelligence Service declared Cyprus to be a “gateway for money laundering activities in the EU”.

Although Cyprus has made commendable efforts to improve its financial crime laws since joining the EU in 2004, there are serious questions about how well these rules are enforced in practice, and the apparent ease with which criminals can abuse Cypriot companies to hide their identity and their ill-gotten gains.

Continue Reading »

Pg 31 of 185 First...1020...30313233...4050...Last
Latest Press Releases

European Commission’s Tax Transparency Package keeps tax deals secret

Financial Transparency Coalition · March 18, 2015

The European Commission’s new measures to combat secret tax deals made between multinational companies and governments cannot be called ...

The world can’t afford to exclude developing countries from new anti-tax evasion system

Financial Transparency Coalition · March 16, 2015

BRUSSELS—Weeks after the shocking revelations of wide-spread tax evasion at HSBC’s Swiss branch, a new report from a European Commission expert ...

Leaked HSBC Records Shed Light on Culture of Corruption in the International Banking System

Global Financial Integrity · February 9, 2015

WASHINGTON, DC – Leaked HSBC documents revealed today by the International Consortium of Investigative Journalists (ICIJ) highlight a culture of corruption in the ...