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Mar
28

The Link between Tax and Development is Scrutinized by the UK Parliament

María José Romero

flickr / UK Parliament

Latindadd and other civil society organisations recently sent their contributions to the UK parliamentary inquiry into tax in developing countries. In its call, the International Development Committee of the UK parliament highlighted that “developing countries lose an estimated $ 160 billion each year through tax avoidance by multinational companies (including those based in the UK)” and the important role of the extractive industries, “where payments to governments are often not disclosed and may not contribute to development or poverty reduction.”

The Committee used Zambia as a case study due to its aid dependence (18% of the Government’s budget), high poverty levels (64% of the Zambian population live below the poverty line) and the large mining sector.

The Committee received thirty-two written comments – some of them from civil society organization, which are part of the tax justice community – and listened the arguments of representatives from Action Aid, Christian Aid and the Centre for Trade Policy and Development in Zambia.

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Mar
23

Audio: Taxcast by TJN, March Edition

Tax Justice Network

In TJN’s In March’s Taxcast: Apple i-tax dodging, reclaiming Arab Spring country assets, the rich country club of the OECD and the ABCs of setting up letterbox companies. It’s child’s play! Audio below:

What’s the Taxcast?

Taxcast is an entertaining and informative 15 minute monthly podcast with the latest news, research and analysis of events in tax evasion, tax avoidance and the shadow banking system.

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Mar
23

Friday’s Top Stories

EJ Fagan

Tax Evasion Possibly Biggest Drain of Money From Africa
Voice of America, March 22, 2012

Chinese interest in Golden State vineyards
Wines-Info, March 23, 2012

Remarks at the Transparency International-USA’s Annual Integrity Award Dinner
Secretary of State Hillary Clinton, March 22, 2012

Clinton Defends FCPA, As US Chamber Lobbys For Changes To Law
The Wall Street Journal (blog), March 23, 2012

Aveos’s ownership is a mystery
The Montreal Gazette, March 23, 2012

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Mar
22

EU Transparency Proposal Threatened by Imaginary Laws

Alex Marriage

EU Country-by-country reporting rules are now being discussed by member states and the European parliament. But one of the clearest flaws in the European Commission’s (EC) proposal to increase corporate and government accountability has been ignored. Namely, the EC has included an exemption meaning companies would not have to disclose payments in countries where criminal law prohibits such disclosure. Effectively this poses the question “Should the law apply in places where it is most needed, where governments are determined to pass laws to hide their own wrongdoing?”

However no one has been able to produce evidence that any country in the world has a secrecy  law  that applies to the type of information that would be covered by the EU country-by-country proposal. Opponents of transparency have given examples like Angola, but this is spurious as although there is a confidentiality clause for oil contracts it does not apply where regulators from the country where a foreign company is from demand disclosure. Revenue Watch Institute and Columbia University School of Law studied 140 resource contracts and found in all cases that companies disclosed all information required by regulators in their home country. So the EU’s transparency bill is being knocked off course not by secrecy laws but by imaginary laws. If such secrecy laws don’t exist the EU should not be encouraging countries to create them. Governments can easily be tempted to act quickly to make legal changes. For instance, elements in the South African Government moved to neuter the police anti-corruption unit when it started to unearth high level corruption.

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Mar
21

Corruption in Eastern Europe, Communism, and the European Union

Ann Hollingshead

flickr / European Parliament

Eastern Europe has been wracked with corruption scandals over the past few weeks. In Hungary, Transparency International released a report about the cozy relationship between business and government in the country, and warns that the government’s internal checks and balances are breaking down. In Slovakia, Smer-Social Democracy party took over the government in part due to a massive corruption scandal. Earlier this year, two ex-ministers of Romania were jailed on corruption charges and Romania’s former prime minister became the country’s first head of government to be convicted of corruption.

The truth is, though, that corruption in Eastern Europe is not a new problem. In fact, our friends at Transparency International have been warning the world about these problems for years. Most scholars blame the “long hangover” left by communism in these ex-Soviet states:

Under communism corruption was considered by many a necessary part of life. Small ‘gifts’ of sweets, alcohol and other goods were taken to doctors or civil servants to get proper or quick services. Waiting periods of months for imported or scarce goods could be shortened considerably by offering officials ‘gifts’ or money.

Studies have repeatedly shown that people living in former communist states see corruption in all levels of society, from business to the school system to police and government, but often most strongly in the health sector and the judiciary.

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Mar
21

We’ve Been Nominated as a “Leading Force” on Transfer Pricing by TPWeek

EJ Fagan

The Task Force on Financial Integrity and Economic Development has been nominated by Transfer Pricing Weekly as a “leading force on global transfer pricing development.” Nominated alongside us were partner organization ActionAid, as well as The United Nations, the OECD, U.S. President Barack Obama, Indian Finance Minister Pranab Mukherjee, among others. From TP Weekly:

Taskforce on Financial Integrity and Economic Development
For its work to curtail the mispricing in trade imports and exports and its promotion of: country-by-country accounting of sales, profits, and taxes paid by multinational corporations; beneficial ownership in all banking and securities accounts; automatic cross-border exchange of tax information; and harmonisation of predicate offences under anti-money laundering laws.

On behalf of the Task Force, I can say that we are honored to even be mentioned in such a prestigious group. The winner will be decided by an online vote. Please help us achieve this by voting here.

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Mar
20

Op-Ed: Fighting Financial Crime – at Home and Abroad

EJ Fagan

Global Witness’s Robert Palmer wrote the following Op-Ed in the Frankfurther Rundschau, a German-language paper. He writes about the importance of following illicit money, how difficult it can be to do so, and how the new FATF rules can make a difference. A translated excerpt below:

The Financial Action Task Force (FATF) is a group of bureaucrats from the rich and emerging economies who get together three times a year to set the global rules designed to curb the flow of dirty money through the world’s financial system. Their revised approach will do more to crack down on tax crimes and the spread of nuclear weapons, all of which depend on illicit transactions for procurements and payments.

Yet despite two years of painful negotiations, there are still two glaring holes in the system.

The first is that although most countries in the world have anti-money laundering rules in place – largely thanks to FATF’s embarrassing habit of naming and shaming recalcitrant governments – these laws are too often ignored. Just think how easy it was for billions of dollars of North African dictators’ funds to end up in western banks. If FATF’s rules had been enforced, the Gaddafi, Mubarak and Ben Ali regimes would have been unable to hide their country’s wealth in private foreign bank accounts. In Germany, €10 billion of Libyan money was frozen, most of which was state funds, which given the highly autocratic nature of Gaddafi’s regime are likely to have been under the personal control of the Supreme Leader and his cronies. In addition we know that at least one German bank held €2m belonging to one of Gaddafi’s sons. What due diligence could the bank that held this €2m possibly have done to reassure themselves that this money was not corrupt?

You can read the complete Op-Ed, in German, here.

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Mar
19

Audio: Africa’s Odious Debts: How Foreign Loans and Capital Flight Bled a Continent

EJ Fagan

Task Force Economist Advisory Board member Dr. Léonce Ndikumana launched his book, Africa’s Odious Debts: How Foreign Loans and Capital Flight Bled a Continent, today at the Brookings Institute. The presentation included Task Force Raymond Baker as a panelist. Overall, it was a detailed and nuanced discussion in front of a large, influential crowd at Brookings. Audio below:

Africa’s Odious Debts: How Foreign Loans and Capital Flight Bled a Continent

New research indicates that trends in the misappropriation of foreign loans to African countries are even greater than previously projected. In fact, it is estimated that more than half of the money borrowed by African governments in recent decades was misdirected the same year, transferred in many cases to private accounts in offshore tax secrecy jurisdictions. In Africa’s Odious Debts: How Foreign Loans and Capital Flight Bled a Continent(Zed Books, 2011), Léonce Ndikumana and James K. Boyce reveal these intimate links between foreign loans and capital flight, exploring the human cost of fund transfers as well as mechanisms to promote more responsible international financial systems.

View more details on Brookings.edu

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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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Latest Press Releases

G20 Communiqué Acknowledges Broken Financial System, But Leaves Clear Solutions on the Table

Financial Transparency Coalition · November 16, 2014

BRISBANE—With the release of the Brisbane communiqué, G20 leaders have acknowledged the cracks in our financial system, yet they haven’t acted ...

This weekend, G20 leaders should roll up their sleeves and work on common sense measures to curb illicit cash

Financial Transparency Coalition · November 14, 2014

BRISBANE—While G20 leaders are poised to address many of the vehicles that are integral to allowing almost one trillion dollars to flow ...

Luxembourg Leaks Show that Corporate Secrecy is Alive and Well

Financial Transparency Coalition · November 6, 2014

WASHINGTON D.C. — Newly leaked documents detailed by the International ...