Corruption is notoriously difficult to measure. It’s not just because it is an illicit activity. In part it’s because the concept itself is undefined and relative. Transparency International found a (brilliant) way around this when they began surveying each nation’s public perception of corruption, rather than trying to define a concrete set of corrupt activities.
So what is corruption?
Transparency International uses the following working definition of corruption: “the abuse of entrusted power for private gain.” I imagine that’s vague on purpose.
So how do we define specific corrupt activities? Corruption isn’t just bribe paying, although that’s often it. It’s not just in business relationships, but also political, social, and even athletic ones. Corruption isn’t necessarily illegal, although it’s often so. And in some cases, while it may be illegal, it isn’t always enforced, which makes it legal in practice.
China Economic Weekly Releases Report on Officials Escaping Overseas
The Epoch Times, June 11, 2012
Civil society groups call on EU to require firms to disclose true ownership
Trust Law, June 11, 2012
A Drug Family in the Winner’s Circle
The New York Times, June 12, 2012
Philippines risks joining money-laundering blacklist
Reuters, June 7, 2012
ING Bank N.V. Agrees to Forfeit $619 Million for Illegal Transactions with Cuban and Iranian Entities
The U.S. Dept. of Justice Press Release, June 12, 2012
Senator Lugar (R.-IN) helped insert Section 1504, a provision requires oil, gas, and mining companies to disclose all payments to governments in each jurisdiction in which they operate, into the Dodd-Frank Wall Street Reform and Consumer Protection Act. He delivered the keynote speech at Georgetown University for the annual USAID conference, “Frontiers of Development,” this week. He placed transparency at the heart of his speech,
This is vital not only to provide taxpayers a clear picture of how their money is being used, but also to reinforce U.S. leadership in transparent economic development. Transparency helps level the playing field for U.S. companies, counters the propensity of resource-rich developing countries toward wasteful spending, and combats the corruption that the World Bank has identified as “the single biggest obstacle to economic and social development.” Toward this end, the U.S. government should be moving forward with full implementation of the 2010 Cardin-Lugar Amendment, which requires all companies listed on the New York Stock Exchange to publish their payments to foreign governments for oil, natural gas, and mineral development. Failure to fully implement Cardin-Lugar would squander an opportunity to transform the development scenarios of resource-rich countries mired in poverty.
Dodd-Frank was passed in 2010, but the SEC has still not yet issued the final rule on Provision 1504. The deadline for the ruling is now over a year in the past (and counting). Earlier this Spring, on the one-year anniversary of the missed rule-making deadline for Dodd-Frank Provision 1504 (as well as other provisions), Task Force Managing Director Tom Cardamone commented on the matter,
Cross-posted with permission from Transparency International’s Space for Transparency blog.
It is increasingly recognised that corruption can only be tackled effectively through the joint action of all stakeholders, i.e. the public sector, business and civil society. There is a growing trend to include the private sector in development initiatives to ensure that it becomes part of the solution rather than being part of the problem. But can companies that are driven by short-term business interests really be part of the solution to corruption? And can multi-stakeholder groups made up of actors with very different aims and approaches really lead to effective solutions?
The Group of 20 (G20) leading economies, first convened as a forum to tackle the global financial crisis in 2008, is responsible for 80 per cent of world trade and more than 80 per cent of [global] gross national product. The private sector seized the opportunity to represent its views vis-à-vis the G20 early on. The first Business 20 (B20) Summit took place in parallel to the Canadian G20 Summit in 2010. Issues discussed at the B20 Summits included corporate social responsibility, employment, food security and corruption.
Civil society groups, including Transparency International, have been following the G20 process and emphasizing that a lack of integrity, transparency and accountability by both public and private actors significantly contributed to the global financial crisis of 2008. From the start, we have called for civil society to be at the table and for the G20 political process to be more transparent and accountable.
Illicit funds from Mexico find safe haven in U.S.
CNN, June 12, 2012
South Africa: The Missing Dimension in the Fracking Debate – How We Are Not Dealing With Greed and Shady Deals
AllAfrica (Blog), June 11, 2012
Uncertainty surrounds India’s GAAR implementation
World Finance, June 11, 2012
Government releases formal consultation on tax avoidance rule
IFA Online (UK), June 12, 2012
Bern and Rome “make progress” on tax deal
Swiss Info, June 12, 2012
Corporate America, in part through the now-dissolved WIN America Campaign, has spent a good portion of the last few years lobbying for a tax holiday. They would like Congress to allow them to repatriate deferred tax dollars that are sitting offshore and pay a very low tax rate, instead of the 35% that they owe. U.S. companies are allowed to wait to pay taxes on “foreign” income until they bring the money back into the United States. I put the word foreign in quotes because we know that “foreign” income is often just the result of abusive transfer pricing, as evidenced by the Apple story this spring. Billions and billions of dollars from corporate profits sit in offshore bank accounts, often completely untaxed.
In an attempt to bring some of it back, the Bush Administration and Congress passed a repatriation tax holiday in 2004, allowing tens of billions to come back into the United States after paying a tax rate close to zero. As a result, business leaders learned that if they wait long enough, they can avoid paying virtually all corporate tax on foreign income by simply parking the money in an offshore tax haven and waiting for Congress to cave in and pass a tax holiday. The total sum of deposits sitting offshore skyrocketed.
This outcome was absolutely foreseeable with basic logic. But on top of that, any student of Classical history should also be able to point to a real example of the same pattern: the tax remissions of the Late Roman Empire.
KPO Probe Highlights Customs Risks
The Wall Street Journal (blog), June 8, 2012
China tries to stop corrupt Chinese officials from fleeing with ill-gotten gains
Los Angeles Times, June 10, 2012
Obstacles Mar Quest for Arab Dictators’ Assets
The New York Times, June 7, 2012
Not all money kept abroad is black money: Pranab Mukherjee
Press Trust of India, June 11, 2012
NGOs call for disclosure of beneficial ownership of companies
Tax Journal (UK), June 11, 2012
Recognizing the relationship between anonymous shell corporations and stolen assets, the World Bank released a collection of case studies entitled “The Grand Corruption Cases Database Project” last week. Part of a larger anti-corruption report The Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It, the global collection has made 150 beneficial ownership case studies available online. Thus, users can compare instances of shell corporations between countries and see the state of individual cases and appeals.
Though the collection, which includes cases from 1980 to 2011, is far from complete, the publication indicates progress toward a goal of financial transparency, a particular concern when transnational legal structures allow large capital outflows from developing countries. According to World Bank Senior Financial Sector Specialist Emile van der Does de Willebois,
“we need to put corporate transparency back on the national and international agenda. It is important for governments to increase the transparency of their legal entities and arrangements and at the same time improve the capacity of law enforcement.”
Indeed, over a thousand groups composed a letter to the European Union this week asking for stricter and more transparent control of shell corporations, and a similar letter was sent on May 16th letter from forty-one American advocacy organizations to the United States Congress. Though the danger of terrorist financing through disguised or anonymous shell corporations may seem distant, some reports indicate a more immediate threat to the United States. For example, the database reveals the true owner of a Fifth Avenue office tower and its associated shell corporation to have been the Iranian government itself:
Check out the new press release from the Task Force regarding the global push for legislation to require financial transparency in all companies. The release outlines a letter from over a thousand organizations calling on the EU Commission to require beneficial ownership be disclosed or all EU companies, as well as a similar letter that was sent to U.S. legislators by a different group of organizations. From the press release:
Signatories, including anti-corruption coalitions such as The UN Convention Against Corruption, Publish What You Pay, European Coalition for Corporate Justice, development groups such as and Eurodad, religious organizations like Koordinierungsstelle der Österr. Bischofskonferenz and environmental associations such as Friends of the Earth Netherlands and Milieudefensie, called on the European Commission to require companies to reveal their true ownership. At present, corrupt politicians, money launderers, tax evaders and other criminals find it all too easy to hide their identity behind companies, allowing them to move their ill-gotten gains around the world.
The move comes on the heels of a similar letter sent by dozens of U.S. business and civil society groups to members of the House of Representatives and Senate urging them to co-sponsor the bipartisan Incorporation Transparency and Law Enforcement Assistance Act endorsed by the Obama Administration. That bill would require companies to disclose their ultimate owners at the time of incorporation.
Read the entire press release here.
Civil society groups call on the EU to require companies to reveal their true ownership
Task Force on Financial Integrity & Economic Development (Press Release), June 8, 2012
FATCA targets US fat cats abroad
Now Lebanon, June 7, 2012
Sweden to close $880 mln private equity tax loophole
Reuters, June 8, 2012
Gambia: Tax Commission’s Report
The Daily Observer (The Gambia), June 8, 2012
Figures show rich homeowners avoiding billions in stamp duty
The Independent, June 8, 2012
In May, the Italian energy plant Eni discovered around ten trillion cubic feet of natural gas off the shore of Mozambique, increasing the estimated reserves of Mozambican gas above 50 trillion cubic feet. This discovery placed the East African nation in the spotlight of economic development and energy production. On the other hand, Mozambique’s new intra-regional competition with Kenya and Tanzania, investment by Europeans, and lack of solid economic foundations create the possibility of corruption. Therefore, as the country enjoys a boost to its GDP, only an effective, transparent control of finances will ensure a parallel benefit to its population.
According to the Associated Press, worldwide natural gas consumption is expected to rise 17% in the next five years, as China’s need for the resource will likely double. This dramatic increase indicates the potential volatility of the non-renewable resource and the finances behind it, as scarcity will eventually inflate the gas’s price and the income of its harvesters:
The Department of Good News brought us a great story today. The Thomson Reuters Foundation – who, among other things, run the good governance, non-profit journalism outlet TrustLaw – has hired Stella Dawson to fill their new position of Special Corruption Correspondent. From the foundations’ press release:
Dawson has reported for more than 20 years on international economics, banking and monetary policy for Reuters from Chicago, Washington, New York, London and Frankfurt. As Global Editor for Economics and Markets between 2007 and 2010, she played a leading role in shaping Reuters news coverage of the credit crisis and the Great Recession.
She was named Reuters Treasury Journalist of the Year in 2005 and has won UPI awards for feature reporting and breaking news. Her coverage of corruption in Virginia led to the criminal conviction of a county chief executive. She also is an experienced radio and television journalist, and appears on the BBC, NPR, CSPAN and CNBC. Stella is seconded from Reuters to the Foundation for two years.
Its great to see a talented journalist being added to an organization like TrustLaw. We need more experienced, smart people to hold officials accountable. The even better news is that Ms. Dawson was hired as part of a larger initiative to organize a “worldwide network of freelance journalists focused on bringing good governance themes to life.” We’ve seen a lot of these organizations pop up lately – notable 100Reporters, who lists Task Force member Global Financial Integrity as a partner – and deliver some excellent reporting. We’ll be keeping an eye on this new development.
March 11, 2014·
Joint NGO Media Reaction Financial Transparency Coalition – Eurodad – Global Witness – Transparency International EU Office – Oxfam Brussels, March 11, 2014 – Today, the European Parliament endorsed the creation of public registers of who really owns companies, trusts and other legal structures. This will make it much harder for criminals, tax evaders, corrupt politicians and other money launderers to hide their identity, and their illicitly-acquired assets, behind anonymous companies and trusts.
February 20, 2014·
Joint NGO media reaction Financial Transparency Coalition – Eurodad - Global Witness - Oxfam A cross political party agreement in the European Parliament ...
December 5, 2013·
The FACT (Financial Accountability and Corporate Transparency) Coalition today praised Representative Lloyd Doggett (D-TX) and Representative Rosa DeLauro (D-CT) for the introduction ...