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Mar
15

USSOUTHCOM Commander: Illicit Financial Flows Enable ‘Staggering’ Transnational Organized Crime

EJ Fagan

Last week, U.S. Air Force General Douglas M. Fraser, Commander of US Southern Command, testified before the Senate Armed Services Committee. SOUTHCOM is the U.S. military’s arm in the Americas, and naturally deals frequently with issues relating to the drug trade and organized crime syndicates. During his testimony (PDF), he highlighted the problems posed to U.S. security by the easy flow of illicit money across borders:

Transnational criminal organizations possess a critical enabler that many states in Central America lack: enormous financial reserves.  The illicit financial flows associated with transnational organized crime are staggering; the United Nations Office of Drugs and Crime 8 (UNODC) estimates annual global gross profits from cocaine sales at $84 billion, $35 billion of which is generated in retail and wholesale profits in North America alone.

Illicit traffickers in South America, Central America, and the Caribbean pocket an estimated US$18 billion in gross cocaine profits per year.

Lucrative profits enable organized crime to increase operational capacity at a rate that far outpaces that of regional law enforcement and militaries, purchasing sophisticated, military-grade weapons, investing in semi and fully submersible vessels to improve transportation, corrupting and coercing government officials to ensure freedom of movement, and recruiting and bankrolling highly trained specialists, many with military backgrounds.

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Mar
14

Kony 2012, Social Media, and a Plea for Complexity

Ann Hollingshead
Kony 2012

flickr / Brad Bethell Photography

If you’re not one of the 112 million people to have already watched Jason Russell’s Kony 2012 video on YouTube, you might be inclined to tune in here first.

Kony 2012 is part-documentary, part-over-produced-Hollywood-flick that has engendered an enormous amount of attention and emotion on Facebook, Twitter, and blogs. It concerns Joseph Kony, a warlord from Uganda who, with the help of his forces, the Lord’s Resistance Army (LRA), has abducted and enslaved tens of thousands of children in his own country, as well as the Democratic Republic of the Congo, South Sudan, and the Central African Republic. He remains at large, despite the fact that he is wanted for war crimes by the International Criminal Court and that President Obama has sent U.S. soldiers to help hunt him down.

But in the media, the video itself hasn’t been the dominant issue. Rather it is the fact that the video has generated so much attention itself that is, apparently, the most attention-worthy. And perhaps as a direct result of all this attention, the short film has also generated a whole lot of obloquy.

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Mar
14

WATCH: Task Force Director Raymond Baker Live, Speaking at George Tech

EJ Fagan

Task Force Director Raymond Baker is speaking right now at Georgia Tech, his alma mater, on inequality and the future for business students. It is being streamed live here. Note: a quick, free, registration is required to view the feed.

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Mar
14

More evidence of the OECD’s failure to stop tax abuse

Richard Murphy

The OECD’s Insight Blog has published a discussion between Christian Chavagneux (co-author of Tax Havens: How Globalisation Really Works) and the OECD’s Pascal Saint-Amans. The latter claims success (“early measures to deter tax evasion have already resulted in 100,000 individuals paying a total of $14bn in unpaid tax”), while Chavagneux argues that the measures taken since 2009 do not go far enough: ”Unfortunately, the G20 is still far from having done everything to control these parasitical states.”

I recommend you read the blog direct, but first a few comments about the claims being made.

First, Saint-Amans cites $14 billion being raised from anti-evasion measures, but this is largely the product of other initiatives and certainly cannot be attributed to the G20′s initiative to promote Tax Information Exchange Agreements (TIEAs).

Second, while there has indeed been a significant increase in the number of TIEAs signed since 2009, as the OECD notes, there is little evidence that the TIEAs signed either before or after that date have proved effective. Indeed, Chavagneux cites a recent statement by French finance minister Valérie Pécresse that TIEAs are simply not up to the job:

“France made 230 requests for information to 18 countries in the first 8 months of 2011. The reply rate was only 30% and the quality of the information supplied wasn’t always of the highest quality, adding weight to the demand of international NGOs to move to a system of automatic exchange of information.”

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Mar
14

Wednesday’s News Digest from GFI

EJ Fagan

Bringing back what’s ours
The Hindu, March 14, 2012

Humans for sale
Islands Business (Fiji), March 13, 2012

Corruption eating away PSM: SC
The Pakistan Tribune, March 14, 2012

Zimbabwe: ‘No to Corruption’
Office of the Prime Minister (Press Release), March 13, 2012

Haitian Official Convicted In US For Laundering Bribes
The Wall Street Journal (blog), March 13, 2012

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Press Releases
Mar
13

New study reveals serious flaws in OECD’s tax evasion crackdown

Tax Justice Network PDF

New study reveals serious flaws in OECD’s tax evasion crackdown

The OECD’s Global Forum peer review, the main mechanism for assessing the effectiveness of Tax Information Exchange Agreements (TIEAs), is seriously flawed and therefore contributes to failure in reducing rampant tax evasion.

The findings of a new Tax Justice Network report published today run directly counter to claims made by the OECD that its TIEAs represent the new international standard on tax transparency.

The Creeping Futility of the Global Forum’s Peer Reviews, written by Markus Meinzer, has established:

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Mar
12

GFI’s Heather Lowe To Speak on FCPA Panel at Georgetown University, and Other Upcoming Events

EJ Fagan

The Task Force and its members employ a number of experts in the fields of law, public policy, and economics. Over the next few weeks, several of these experts will be giving a few talks and presentations on a variety of issues related to the fight for global financial transparency. If you are able to attend, these represent great opportunities to both learn more about these issues and network with other concerned citizens.

Here are some upcoming public presentations:

  • March 13th, Georgetown University – Global Financial Integrity’s Heather Lowe will appear on a panel to discuss the Foreign Corrupt Practices Act. Details here.
  • March 14th, Georgia Institute of Technology – Task Force Director Raymond Baker will talk about his life, and the growing global struggle against inequality in a speaker series at his alma mater. Details here.
  • March 19th, Brookings Institute – Task Force Economist Advisory Panel member Dr. Léonce Ndikumana will present his new book, Africa’ Odious Debts. A panel discussion will follow. Details here.

As always, you can view these events and dozens more on the Task Force Event Calendar, available here.

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Mar
9

Friday’s News Digest

EJ Fagan

Africa: Gloves come off in diplomatic feud between South Africa and Nigeria (analysis)
Daily Maverick (South Africa), March 8, 2012

Senate Approves Bill Targeting Offshore Tax Havens
The American Banker, March 8, 2012

Tax Havens and Tax Loopholes = Tax Evasion
Policyshop (blog), March 9, 2012

The Merits of a Corporate Tax Overhaul
Economix, March 9, 2012

Vatican Makes Money Laundering List Of U.S. State Department
Reuters, March 8, 2012

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Mar
9

A Setback in Fighting Tax Avoidance in India: Vodafone vs. Union of India

Pooja Rangaprasad

In a judgment having far-reaching consequence, a three judges bench of the Supreme Court of India, in the case of Vodafone International Holdings BV v. Union of India, has set aside the Mumbai High Court judgment, which had required Vodafone to pay capital gains tax worth US$2.5 billion to the Government of India for a transaction that had seen the company acquire 67 per cent stake in Hutchison Essar (a mobile phone operator in India) in 2007. Vodafone, the second largest telecom operator in India, had challenged the tax bill over its US$11.5 billion deal to buy Hutchison Whampoa Ltd.’s Indian mobile business in 2007, and appealed to the Supreme Court (SC) after losing the case in the Mumbai High Court.

Vodafone’s main argument was that the Government of India cannot levy taxes because the transaction was made between non-Indian companies outside the country; the deal was between Vodafone International Holdings BV – a Dutch subsidiary of Vodafone – and CGP Investments Ltd., a Cayman Islands company, which held the Indian telecom assets of Hutchison. Indian tax authorities, however, held that the transaction was taxable because the assets acquired by Vodafone are based in India.

The below diagram taken from here illustrates how this transaction was structured, enabling the transfer of shares of an Indian company to take place outside India.

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Mar
9

Newly Published: The Hidden Trillions: Secrecy, Corruption, and the Offshore Interface

Richard Murphy

I’m delighted to see a paper with the above title by Tax Justice Network’s John Christensen has been published in the Journal of Crime, Law and Social Change. As the abstract says:

This paper considers the role of secrecy jurisdictions in creating a supply-side stimulus for corrupt practices and explores the use of the newly created Financial Secrecy Index as a tool for assessing and ranking such jurisdictions.

Secrecy jurisdictions are a prominent feature of international financial markets, providing a combination of low or zero tax rates, lax regulation, weak international judicial cooperation, and—above all—legalised secrecy facilities.

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Mar
8

Law Enforcement Should Be Able to Act Against Banks that Aid Tax Evasion

EJ Fagan

Update 5:09 - The amendment passed via unanimous consent today. Now, the House of Representatives needs to follow suit.

Today is an important day for the tax justice movement in the United States. The U.S. Senate will consider an amendment (SA 1818, Levin-Conrad) that will allow the Department of Treasury to take action against foreign financial institutions that, “significantly impede U.S. tax enforcement.” The Senate should pass this amendment.

Article 311 of the Patriot Act allows Treasury to take measures against foreign financial institutions or jurisdictions that it finds to be, “of primary money laundering concern.” This amendment would extend that same authority to foreign institutions that assist in U.S. tax evasion. The link makes sense – the Financial Action Task Force (FATF) made the same connection last month – by any reasonable standard. Foreign banks are currently afraid of ending up in Treasury’s cross-hairs regarding money laundering, and should be equally scared of finding themselves in the same spot regarding tax evasion.

The provision should be a no-brainer. This is a tool required by authorities to enforce existing laws. Treasury could use it to do things like prohibiting U.S. banks accepting wire transfers or credit cards from foreign banks who are found to actively assist in tax evasion. These types of penalties effectively all but eliminated many of the shell banks used by transnational criminal and terrorist organizations following the 9/11 attacks.

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Mar
8

Investing in Women is an Economic Imperative

Sarah Bracht

During the last century there have been many successes in women’s’ rights movements, but there remains a lot of work to be done in accomplishing gender equality. In the book Half the Sky: Turning Oppression into Opportunity for Women Worldwide, authors Nicholas Kristof and Sheryl WuDunn retell an experience had by Bill Gates during a speaking engagement in Saudi Arabia.  Women made up roughly one fifth of the audience during his presentation and were not only separated, but also partitioned off from the men in the room – ranking 131 out of 135 in the World Economic Forum’s 2011 Global Gender Gap Report, Saudi Arabia has a long way to go towards gender equality.   Near the end of the presentation,

“a member of the audience noted that Saudi Arabia aimed to be one of the top ten countries in the world in technology by 2010 and asked if that was realistic.  ‘Well, if you’re not fully utilizing half the talent in the country,’ said Gates, ‘you’re not going to get too close to the top ten.”

Gates’ comment touches on an important aspect of gender issues.  Not only is gender equality a basic human right, it is a necessary component of economic development, and growing economies must invest in human capital.  According to the World Economic Forum’s report,

“The most important determinant of a country’s competitiveness is its human talent – the skills, education and productivity of its workforce – and women account for one-half of the potential talent base throughout the world.”

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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 ...