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Thursday’s Top Stories From Global Financial Integrity

Kyle Hunter

Tax evasion fight starts to bare its fangs
Reuters Africa, June 28, 2012

Burma’s lure is a slippery slope
The Washington Post, June 27, 2012

Treasury Targets Drug-Money Laundering Network, Hezbollah Fundraiser
The Wall Street Journal (Blog), June 27, 2012

India to post clarifications on controversial GAAR taxes
Reuters, June 28, 2012

IRS Tax Evasion Disclosure Program Collects Only Small Percentage Of Money Lost
Huffington Post, June 27, 2012

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Wanted: A replacement for “petty”

Max Heywood

Cross posted with permission from Transparency International’s Space for Transparency Blog

The estimated costs of household bribery in Mexico exceeded 32 billion pesos in 2010. flickr / UnlimitedClass

Eduardo Bohorquez and Deniz Devrim of Transparencia Mexicana, our national chapter in Mexico, recently published an article arguing for the abolishment of the word “petty” in the term “petty bribery”. They point out that petty bribery in fact generates substantial costs to society, both monetary and non-monetary. For example, surveys find that in Mexico households with the minimum income spend 33 per cent of their monthly income on bribes.

A dictionary definition of “petty” reads “of little or no importance or consequence”. Losing 33 per cent of your salary can hardly be considered negligible. But this is not just a question of semantics. As the article states, the choice of words can “reflect attitudes, influence action, as well as the pace of reform”.

Which got me thinking: what could be a good alternative to replace “petty”? It should keep the idea of “small” while ideally having a negative connotation (virus?) or being value-free. Just two ideas come to mind for the moment: household bribery and micro-bribery.

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Sustainability and Illicit Financial Flows?: Not Unrelated Concepts

Ann Hollingshead

flickr / Fotos Gov/Ba

There are obvious relationships between illicit financial flows, corruption, and tax evasion and environmental sustainability. For example, shell corporations can be used to mask illegal fishing or poaching. Corruption can enable companies to get around environmental compliance laws. And tax evasion can divert valuable resources away from environmental enforcement. In sum, illicit financial flows are human constructs that supplement and enhance damaging human behavior, contributing both to stagnating economic growth and worsening environmental conditions.

But is there another—more direct—way to examine illicit financial flows and the environmental sustainability?

The definition of sustainability isn’t as obvious as you’d think. “Sustainable” in its traditional definition means “capable of being sustained,” or a pattern that can continue, indefinitely, on its own. When related to development, sustainable means using resources in such a way that does not compromise the ability of future generations to meet their needs.

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Wednesday’s Top Stories From Global Financial Integrity

Sam McWilliams

How Transnational Crime Hinders Development—and What to Do About It
Council on Foreign Relations (blog), June 26, 2012

Combating Facilitators of Crime and Terrorism
Global Financial Integrity, June 25, 2012

FATF Blacklists Ecuador, Yemen, Vietnam, Upgrades Philippines
The Wall Street Journal (blog), June 25, 2012

PH gets upgrade for anti-money laundering and anti-terrorist financing laws
Asian Journal (Filipino-American Newspaper), June 26, 2012

Government seeks concession on money laundering
Swissinfo.ch (SBC), June 27, 2012

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Bipartisan Group of 58 Members of Congress Tell SEC To Finally Issue Transparency Rules

Kyle Hunter

flickr / Leader Nancy Pelosi

After nearly two years of postponement, Congress has called for the Securities and Exchange Commission (SEC) to immediately enact the transparency rules of the July 2010 Dodd-Frank Act. These provisions include Section 1504, which requires energy companies to publish transactions to governments; thus, the threat of illicit flows from extractive industries will be reduced.

The bipartisan letter from Congress was signed by 58 members and reprimanded the SEC for its delay in enforcing the two sections, as the original deadline established by the law was April 2011. According to the letter,

“There is no clear reason for the delay. It has been nearly 18 months since the proposed rules were issued, and the comment period for both rules closed over a year ago. The Commission has received nearly 200,000 comments between the two rules, but the majority of these are simple messages from American citizens urging the Commission to issue strong final rules without delay. The Commission has had more than enough time to consider and respond to all of the substantive comments from industry, civil society, investors and others.”

Though the letter does conclusively ensure enforcement of the provisions, it includes an ultimatum for SEC Chairman Schapiro: either the Commission can vote on Sections 1502 and 1504, or it must explain the reason for its excessive postponement. If this reason is as absent as the 58 Congress members and the head of the U.S. Global Witness office Corinna Gilfillan insist, only the first option is viable. As Gilfillan stated of the delay,

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Tuesday’s Top Stories From Global Financial Integrity

Kyle Hunter

Lawmakers Pressure SEC on Dodd-Frank Extractive Provisions
The Wall Street Journal (Blog), June 25, 2012

Conflict diamonds’ entry to India raises money laundering fear
The Times of India, June 26, 2012

UAE, UK meet to further boost ties
Khaleej Times (UAE), June 24, 2012

Stop tax dodgers or there will be ‘riots on the streets’, warns top lawyer designing new anti-avoidance rules
Daily Mail, June 26, 2012

Danny Alexander describes aggressive tax avoidance as ‘morally repugnant’
The Guardian (UK), June 24, 2012

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Britflicks: A Pain On The Economy And The Eye- Tax Avoidance Schemes Used By British Filmmakers

Sam McWilliams

flikr / Salvagenation

Marina Hyde wrote a great article for The Guardian on Friday.  As we’ve seen in the media, tax avoidance schemes and scandals are popping up everywhere.  Jimmy Carr’s explosive case exemplifies this upward trend of tax avoidance.  Hyde brings to light one particular way (of numerous ways) in which Brits are getting rich from skipping out on their tax bill: they make shoddy “Britflicks.”  Hyde writes,

Obviously, there are exceptions. But for every rare Britflick success, there must be 20 sensationally appalling duds. In a country so strong in all the other arts, it was one of the great mysteries of the modern cultural era. So what a lightbulb moment to read that, according to the Times, £150,000 invested in a film could generate £1m of tax relief – even if it flopped. The product is in effect irrelevant. Those British films that take three figures at the box office should clearly be trailed with the tagline: “From the accountants who brought you Love, Honour and the Rancid Potato Men”.

Forgive the detour into esoterica, but have you seen Mad Cows? For some years now, my friend Matthew and I have nurtured a demented fixation with this 1999 British classic, watching it countless times, typically in drink, whilst howling: “HOW? How in the name of sanity did this get made?” I now wonder if it could be that the ever-perplexing sequence in which Rustie Lee is effectively interned in HMP Scrubsway, for merely being in a shop at the same time Anna Friel shoves some frozen peas down her bra to ease her nursing discomfort, is not an inexcusable plot hole after all, but an extraordinary act of cinematic accountancy that, every time it is watched, triggers an automatic payment of a hundred grand into some investor’s bank account.

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Friday’s Top Stories From Global Financial Integrity

Kyle Hunter

We Changed the World In Our Own Small Way – One NGO’s Influence on the Rio Agreement
Huffington Post UK (Blog), June 22, 2012

U.S. Strikes FATCA Deals with Switzerland and Japan
Accounting Today, June 21, 2012

French MPs examine Swiss banking secrecy
World Radio Switzerland, June 22, 2012

More than 1,000 doctors and dentists targeted by HMRC over tax evasion
The Telegraph, June 22, 2012

India in tune with global tax compliance rules: OECD news
Domain-B, June 20, 2012

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Money Laundering Tip: If They Don’t Serve the Time, You Haven’t Done the Crime

Alex Marriage

flickr / IRSGlover

“If they don’t serve the crime, you haven’t done the crime,” is the current message that the EU’s current anti-money laundering rules send to those in a position to launder the proceeds of tax evasion. It is a crime to launder the proceeds of tax evasion if the tax evader you help, gets caught and goes to prison for more than a year, 11months and its fine. For those considering whether or not tax evasion is a serious crime, it is worth pointing out that a Christian Aid study found that even with a very conservative estimate the money lost by developing countries to tax evasion by multinational companies was equal to US$160 billion. If this US$160 billion was supplemented to developing countries budgets with allocation unchanged it would be enough to save the lives of 1000 children every day.

It is important that the Financial Action Task Force’s (FATF) recommendation that tax crimes be made a money laundering predicate offence (an offence as a result of which proceeds have been generated that may become the subject of an offence) is adopted worldwide. However, this will be much more effective if, in addition to being defined as serious crimes, tax crimes are interpreted to mean all tax evasion and not the more slippery definition of tax fraud used by some secrecy jurisdictions to protect their parasitic business model.

Such professionals and industries who might deliberately or accidentally handle criminal cash are known in EU/FATF speak as covered institutions, a list which includes bankers, lawyers, and accountants. However, important groups, such as nominees, are missing from the list.

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G20 Communiqué Hits Some Priorities, Misses Others

Nick Mathiason

flickr / Gobierno Federal

Most attention at this week’s G20 summit focused on the euro crisis and the perilous state of the global economy. But the G20’s final communiqué and background papers indicate that financial transparency is integral to its high-level agenda.

The communiqué from Mexico highlighted 13 jurisdictions that have failed to meet the required standards of tax information exchange.

More significantly, world leaders gathered at the Los Cabos beach resort “expected” the Global Forum, an organisation composed of 108 countries overseen by the OECD designed to ensure international co-operation on tax matters, “to quickly start examining the effectiveness of information exchange practices.”

This is welcome given flaws identified by the OECD’s Global Forum Peer review process. These flaws, which include the withholding of relevant information by accountants and lawyers representing individuals and companies suspected of tax evasion and the failure to identify the individuals who control assets, contributes to continued rampant tax evasion and aggressive avoidance which globally is estimated to be worth $3.1 trillion (5.1% of global GDP).

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Thursday’s Top Stories From Global Financial Integrity

Sam McWilliams

Corruption, Drug and Gun Crime, Tax Evasion Caused Mexico to Lose $872 Billion in 4 Decades
Hispanically Speaking News, June 20, 2012

UAE reviews anti-money laundering measures with US and Russia
Khaleej Times (United Arab Emirates), June 21, 2012

Cuba brushes off Miami money laundering allegations
Reuters, June 20, 2012

UBS fined for anti-money laundering breaches
RTÉ (Ireland), June 21, 2012

Swiss working on U.S. tax evasion deal
Reuters, June 21, 2012

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Beyond the Debt Crisis: A Sustainable Future for Europe

Ann Hollingshead

flickr / akav

It’s not often that the G20, the summit of the leaders of the world’s biggest economies, is merely a preamble to a European meeting. But this week it is. When the world’s leaders met in Los Cabos, Mexico they had one thing on their mind: Europe. And while the leaders of the G20 had a lot to say about the European debt crisis, the real test, and the real action, will happen in Brussels next week, where we expect the European Council to agree to an action plan.

In Mexico, European leaders hinted at how this plan might look: a unified banking sectors and regulations, pooled economic sovereignty, and a European Central Bank more willing to come to the aid of struggling member states. There will also be money. Lots of it.

I’m going to go out on a pretty flimsy limb, here, and say Europe is not going to systematically collapse. It’s true: it’s possible. And it’s true that a lot of very prominent academics, and even leaders, have said it is more than unlikely. And it’s also true that if it happened it would be, in the words of Yves Tiberghien, a scholar at the University of British Columbia, the “defining crisis of the entire century.”

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Latest Press Releases

TED Prize Winner Charmian Gooch Announces Global Campaign to Abolish Anonymous Companies

Global Witness · March 19, 2014

Vancouver, Canada, March 18, 2014 –This year’s TED Prize winner – Charmian Gooch of Global Witness – has announced that she will use the prestigious million-dollar award “to make it impossible for criminals and corrupt dictators to hide behind anonymous companies.” The announcement was made live and online from the TED stage in Vancouver, with support from leading members of the business, political, law enforcement and campaigning community.

European Parliament Gives Overwhelming ‘yes’ Vote to End Secret Corporate Ownership

Financial Transparency Coalition · 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.

NGOs welcome MEPs’ vote for ground-breaking changes to fight money laundering

Financial Transparency Coalition · February 20, 2014

Joint NGO media reaction Financial Transparency Coalition – Eurodad - Global Witness - Oxfam A cross political party agreement in the European Parliament ...