Learn About Illicit Financial Flows
Key Terms



Trust Law: India Fighting Against Illicit Financial Flows and Real Estate

EJ Fagan

flickr / mckaysavage

Real estate is often the choice conduit for money launderers to transfer money, primarily because it can be difficult to misprice, but also because of the way some countries write their laws.

India, in its ongoing fight against illicit financial flows, is now struggling to clamp down on shady real estate deals. From Trust Law:

Ulwe, a village of dusty, uneven streets on the outskirts of Mumbai, lacks basic amenities like water supply and electricity, but a two-bedroom, 1,000 sq ft house costs about 5 million rupees ($91,000), beyond the reach of many middle-class Indians.

According to prospective buyers, many developers will demand up to 30 percent of that price in cash, a small slice of the ubiquitous, unaccounted “black money” that costs India’s straitened exchequer billions of dollars in lost taxable income.

Legislation that would bring more transparency to the industry will be considered during the winter session of India’s parliament, which starts on Thursday.

However, investors, tax officials and bankers Reuters spoke with were sceptical the law would stamp out illegal practices they say are closely entwined with politics.

“Four out of 10 developers were ready to do it in full white and six were asking for a black component,” said 35-year-old Umesh Kolhapure, who was looking for a three-bedroom house around Ulwe, near the proposed site of a new international airport serving the country’s financial capital.

You can read the full analysis here.

Continue Reading »


Video: Niger’s Struggle for Transparency

EJ Fagan

For many developing countries, natural resource wealth offers a potential way out of persistant poverty. There are few places in the world where this is as true as Niger, a landlocked country with a per-capita GDP of just US$400. The country has substantial mining exports and potential oil reserves, but an opaque financial system empowers a corrupt and increasingly autocratic regime, and little wealth from natural resources has reached the people on the ground. Niger ranks 186th out of 187 countries on the UN Human Development Index.

Our friends at Publish What You Pay (PWYP) have been leading a campaign for revenue transparency in the oil, gas, and mining industries. The goal is to make sure that every time a multi-national oil, gas, or mining company makes a deal for natural resources with a government anywhere in the world, the citizens of that country know what money is coming in. This information will help them hold their governments accountable, and make sure that precious resource wealth does not disappear into a black box of corruption in places like Niger.

Of course, a lot of people stand to lose from this kind of transparency. Below is a video produced by PWYP about what their activists are struggling with in Niger.

Continue Reading »


A Strong, Sustainable Future for FATCA and Tax Compliance

Ann Hollingshead

In 2010 Congress enacted the Foreign Account Tax Compliance Act (FATCA), which aims to combat tax evasion by U.S. citizens holding investments in offshore accounts. Under this law, the IRS and the U.S. Department of the Treasury require U.S. taxpayers holding financial assets on foreign soil to report those assets. FATCA also requires foreign financial institutions to report certain information about U.S. taxpayers directly to the IRS. The Treasury planned to phase in the law’s requirements in several stages. Starting in 2013, the IRS would require participating banks to conduct due diligence for identifying new and pre-existing U.S. accounts and reporting requirements would begin in 2014.

FATCA faced a lot of criticism from both Americans living abroad, foreigners, and heads of foreign institutions. Institutions maintained there are “huge expenses” associated with implementation; American Citizens Abroad claimed it would “destroy the lives average, honest and hard working Americans;” and other opponents called it “big brother” legislation. My own post about FATCA compliance got a lot of the same remarks.

Partly in response, the Treasury has modified its approach. I don’t agree with much of the criticism, nor do I admire the opprobrium. At the same time, however, I do believe the extended approach represents a strong, sustainable future for global tax compliance.

Continue Reading »


U.S. Department of Justice and Securities and Exchange Commission Release FCPA Guidance Manual

EJ Fagan

flickr / John Linwood

Today, the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) released long-awaited guidance [PDF] on Foreign Corrupt Practices Act (FCPA) enforcement. The FCPA prohibits U.S. multinationals from bribing foreign officials in almost all cases. It is considered the keystone anti-bribery law in the world, and has been vigorously enforced over the past decade by the U.S. Department of Justice, after a spotty record of enforcement since its 1977 passage.

The guidance, which is really a handbook for anyone concerned about FCPA compliance, lays out detailed criteria of what DOJ is looking for companies to do and not do. The full document can be downloaded here. Joe Palazzolo at the Wall Street Journal summarizes the document:

But let’s cut to the chase. Broadly, the guidance recites positions long held by the government and avoids the firm policy pronouncements sought by the U.S. Chamber of Commerce and other critics of the law.

You’ll find some meat in the “gifts, travel and entertainment” section (page 15). There, the agencies suggest –note: they do not promise — that paying for a foreign official’s cab fare or buying him or her a cup of coffee wouldn’t alone trigger an FCPA investigation.

Of course, we already knew that. DOJ isn’t interested in prosecuting companies who buy a foreign official a cup of coffee while having a routine meeting with a foreign official. But at least now that is officially written down, so anti-FCPA groups will not be able to use it as an excuse to oppose the law. The purpose of the FCPA is to prevent U.S. companies from going out and using public bribes as a competitive advantage in doing business abroad, instead of following the rules and selling a better product than their competition. This was always the case, but the guidance makes it more clear.

A coalition of civil society groups, including Task Force members Global Financial Integrity and Global Witness, released a statement today welcoming the guidance:

Continue Reading »


Task Force Director Raymond Baker Speaking at the International Anti-Corruption Conference

EJ Fagan

Task Force member Transparency International held their 15th annual International Anti-Corruption Conference (IACC) in Brazil last week. It was a week packed with high quality discussion from the world’s leading anti-corruption experts and activists.

At one presentation, Task Force Director Raymond Baker spoke on the global shadow financial system, in the plenary session, “Dirty Money: A stolen future. How to restore people’s trust?” The session, moderated by Trust Law’s Stella Dawson, found its way to the front page of the IACC newsletter this weekend:

Also speaking at the session were Task Force members Tax Justice Network’s Nicholas Shaxson and Global Witness’s Patrick Alley. You can read more about it here. We’ll post video when it comes online.

Continue Reading »


Enforcing Laws Works: HSBC Money Laundering Edition

EJ Fagan

flickr / Kansir

Two pieces of pretty good news about anti-money laundering enforcement came out of HSBC this week. You might recall that earlier this year, a U.S. Senate investigation uncovered incredibly lax money laundering enforcement at the bank, including close ties to organized crime.

The first piece of news comes from Reuters, which reports that HSBC’s fine–long thought to end up around $1 billion–could not only be much higher than expected, but also be accompanied by real criminal penalties for individuals:

A U.S. fine for violating federal anti-money laundering laws could cost HSBC Holdings significantly more than $1.5 billion and is likely to lead to criminal charges as well, Europe’s biggest bank said on Monday.

HSBC said the U.S. investigation had damaged the bank’s reputation and forced it to set aside a further $800 million to cover a potential fine for breaches in anti-money laundering controls in Mexico and other violations. The provision was on top of $700 million it put aside in July

“It could be significantly higher,” Chief Executive Stuart Gulliver told reporters on a conference call, saying the latest provision was based on discussions with the various U.S. authorities involved in the probe.

Continue Reading »


Video: How to Rob Africa

EJ Fagan

Africa and the rest of the developing world are often criticized for failing to effectively combat corruption. While many of these countries have a lot to do to get their domestic house in order, not enough attention is paid to the systemic global problems that make it very difficult for even a well-meaning, responsible African government to put a serious dent in illicit financial flows. Western financial secrecy and lax regulations make it very easy for elites in developing countries to squirrel away illicit money, far away from any tax authority.

In a great new documentary, Al Jazeera looks at how this is happening and how it prevents the continent from escaping widespread poverty despite immense natural resource wealth and an industrious, hard-working, young population. A great quote:

“When these diamonds came, they came as a God-given gift. So we thought now we are going to benefit from jobs, infrastructure, we thought maybe our roads were going to improve, so that generations and generations will benefit from this, not one individual. But what is happening, honestly, honestly it’s a shame!”

Watch the video below, or read more here.

Continue Reading »


Task Force IACC Panel: Illicit Financial Flows: Plugging the Leaks to Curtail Corruption and Promote Economic Development

EJ Fagan

This afternoon, at Task Force member Transparency International’s International Anti-Corruption Conference in Brazil, the Task Force will be holding a panel discussion on illicit financial flows, corruption, and economic growth. Task Force Director Raymond Baker will be moderating the following panel:

  • Raymond Baker, Director of Global Financial Integrity and the Task Force
  • Heather Lowe, Director of Government Affairs of Global Financial Integrity and the Task Force
  • Øygunn Brynildsen, Policy and Advocacy Officer at Eurodad
  • Brigida Benitez, Steptoe & Johnson LLP
  • Marlon Paz, Principle Integrity Officer at Inter-American Development Bank

How does tax evasion undermine economic growth in developing countries? What infrastructure of the global financial system is shared by both multinational corporations and organised crime? The financial architecture that allows money to move around the world is the same one used by corrupt dictators and criminals to hide funds and evade law enforcement. The movement of dirty money around the globe is enabled by mechanisms of the shadow financial system, which in turn undermine development initiatives. These systemic issues have enabled some individuals to become spectacularly rich, while the poor in developing countries – and to an ever-growing extent the developed world – struggle to secure life’s basic necessities.

This workshop begins with an introduction to illicit financial flows, by Raymond Baker, one of the world’s foremost experts on the subject. A series of short presentations follows, addressing tax as sustainable development financing; money laundering; recent developments in country-by-country reporting; trade mispricing as a tool for trade based money laundering; transparency in beneficial ownership; the mechanics of transfer pricing and the need for greater monitoring for the proceeds of corruption in the finances of public figures.

Panelists will put forward strategies for regulatory authorities and the private sector to further transparency and accountability in the international financial system and curtail illicit financial flows.

Continue Reading »


Legislative Priorities to Promote Transparency for President Obama

Ann Hollingshead

After a long, hard battle, President Obama won a second term from voters last night. The media has pointed out he’s not taking much time to celebrate; it’s time to back to the long, hard work of governing. In that spirit, this is a good opportunity to check the pulse of several important transparency-enhancing legislative initiatives that are on the table in Congress right now. Over the next four years, the President and his administration will have opportunities to promote transparency in the financial system, fight corruption worldwide, and enhance tax fairness, both abroad and at home. In that spirit, here’s a list of what I’d like to see him support and, hopefully, accomplish in the next four years.

  • Strengthen law enforcement and national security by signing the Incorporation Transparency and Law Enforcement Assistance Act in law. This bill would require companies to disclose the names of the beneficial owners of corporations and limited liability companies when formed. This would effectively put an end to “anonymous shell corporations,” closing a major loophole that criminals exploit to launder their funds within U.S. boarders. This bill would strengthen law enforcement officials’ ability to keep criminal and tax evading money out of the United States. As Joseph Kraus, Ph.D. and Stefanie Ostfeld pointed out on the Task Force blog recently, this “would increase our national security, lower the amount of money lost to tax evasion, and thwart the corruption that enables leaders to live extravagant lives to the detriment of their citizens.”

Likelihood of Obama’s support? Strong. President Obama was the lead sponsor of the bill when he was a U.S. Senator.

Continue Reading »


Task Force Members Start Collecting Impressive Hardware

EJ Fagan

Two amazing stories have emerged out of the UK over the past few days for members of the Task Force. Our members in the United Kingdom are collecting meaningful and important recognition for their work on global tax dodging issues.

Task Force Assistant Communications Director Nick Mathiason was nominated by the Press Gazette for the Business Journalist of the Year British Journalism Award, for his work as part of the Bureau of Investigative Journalism. The Press Gazette editor, Dominic Ponsford, said:

“The genesis for these awards was the hacking scandal and the Leveson inquiry. If ever an industry needs some positive PR the journalism industry does.

“We knew there was far more important public interest journalism going on in the UK than our much-maligned colleagues get credit for and, like many others, Press Gazette has noted that Lord Justice Leveson saw mainly a one-sided and negative picture during his inquiry.

“The finalists for the first British Journalism awards prove comprehensively that there are two sides to this story.”

We not only congratulate Nick for becoming a finalist, but also will be rooting for him to come out on top and receive the award on December 4th. You can read more about the awards here.

John Christensen and Nicholas Shaxson of Tax Justice Network, were listed as two of the fifty most influential individuals and organizations in the world on global tax issues by International Tax Review. John was included for his work on country-by-country reporting, tax havens, tax avoidance, and automatic exchange of tax information. Nicholas earned his spot on the list through his landmark book Treasure Islands, as well as his reporting on U.S. Republican Presidential candidate Mitt Romney’s involvement with tax havens in Vanity Fair

Continue Reading »


A bill to end secrecy surrounding shell companies

Joseph Kraus, Ph.D. and Stefanie Ostfeld

This post was originally written for The Hill’s Congress Blog.

flickr / Embassy of Equatorial Guinea

Did you know that it can take more information to obtain a driver’s license than to start your very own anonymous shell company with which you can use and abuse the U.S. financial system? In a matter of minutes, and with minimal documentation, you can own a company without disclosing that you are, in fact, the owner. These opaque entities are a favorite tool of terrorists, drug traffickers, arms dealers, corrupt government leaders, tax evaders and other criminals to launder money into the U.S.

Putting an end to the “anonymous” in “shell company” would increase our national security, lower the amount of money lost to tax evasion, and thwart the corruption that enables leaders to live extravagant lives to the detriment of their citizens.

Fortunately, Congress already has the tools to take this necessary action. Now it must act.

A bipartisan Senate bill, the Incorporation Transparency and Law Enforcement Assistance Act, and a companion House bill, would help end the secrecy surrounding shell companies. The legislation would require companies to disclose information about the real people who own or control them. Knowing the “beneficial owners” of such entities would better enable law enforcement to pursue terrorist cells, financial crime, and drug cartels.

Continue Reading »


Transparency as Funding for the Millennium Development Goals

Ann Hollingshead

In September at the turn of this century, the leaders of the world convened at the Millennium Assembly of the United Nations. The Assembly was the culmination of nearly a decade of United Nations summits and conferences to address development and poverty. It was in 2000, however, that the world’s leaders adopted the United Nations Millennium Declaration, a commitment to a noble new partnership to drastically reduce poverty worldwide. All 193 member states of the United Nations and 23 organizations have agreed to achieve a set of eight goals by 2015. They are:

  1. Eradicate extreme poverty and hunger;
  2. Achieve universal primary education;
  3. Promote gender equality and empower women;
  4. Reduce child mortality;
  5. Improve maternal health;
  6. Combat HIV/AIDS, malaria, and other diseases;
  7. Ensure environmental sustainability; and
  8. Develop a global partnership for development.

By and large, developed countries and international organizations provide the policy advice, technical assistance, and financial support to achieve these goals. In 2005, members of the G8 also provided enough funds to forgive an additional $55 billion debt owed by Highly Indebted Poor Countries.

Continue Reading »

Pg 31 of 180 First...1020...30313233...4050...Last
Latest Press Releases

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 ...

Press Release: No Role for Public Scrutiny in OECD Plan to Curb Corporate Tax Dodging

Financial Transparency Coalition · September 16, 2014

WASHINGTON, D.C. — The Organization for Economic Cooperation and Development’s (OECD) new recommendations to fight multinational corporate tax avoidance look robust from ...