Learn About Illicit Financial Flows
Key Terms

Latest

May
15

Tuesday’s Top Stories from Global Financial Integrity

Kyle Hunter

EU Pledges Campaign Against 1 Trillion Euros in Tax Evasion
Bloomberg, May 15, 2012

ExxonMobil vs. Dodd-Frank
Businessweek, May 10, 2012

Forecasting the Future of FCPA Enforcement
Law.com (blog), May 9, 2012

Analysis: Nigeria president unlikely to risk oil graft crackdown
Reuters, May 13, 2012

Nigeria: Oil Subsidy Report – President Jonathan’s Litmus Test on Fight Corruption
Vanguard (Nigeria), May 12, 2012

Continue Reading »

May
11

Jeopardizing Justice: President Obiang’s Brazen Attempt to Foil French Law

Joseph Kraus, Ph.D.

flickr / Pablo Manriquez

What do you do when your eldest son, already well-known for his reckless spending and extravagant lifestyle, becomes the focus of a corruption investigation in France?

Well, if you’re the world’s longest-ruling leader, President Teodoro Obiang Nguema of Equatorial Guinea, you brazenly attempt to thwart justice and the rule of law by appointing him to a position at UNESCO, a position that comes with a convenient perk: diplomatic immunity.

One doesn’t survive in power for 33 years without having a few tricks up the sleeve.

Over the past year, French authorities have become rather fond of President Obiang’s eldest son, Teodoro Nguema Obiang Mangue (commonly referred to as “Teodorín”). During that time, they have twice stopped by the six-story, $100 million mansion where he stays in Paris. In September 2011 they seized 11 of his luxury cars, valued at more than $5 million. On February 14, 2012 they revisited the mansion and stayed for ten days, eventually hauling away three truckloads of valuable artwork, furniture, and antiquities reportedly valued at more than 40 million Euros. In April 2012, a French prosecutor approved an international arrest warrant for Teodorín on charges of money-laundering. The case is part of a broader corruption investigation into the alleged ill-gotten gains of three African Heads-of-State, including President Obiang.

Continue Reading »

May
9

Can Economic Growth Make Corruption Worse?

Ann Hollingshead

flickr / Nir Nussbaum

When we talk about economic growth and corruption, it is often in one direction: corruption hurts economic growth. One of the major reasons for this is that corruption increases risk and uncertainty for businesses and investors and provides a distinct disincentive for their investments. Lower investment levels lead to less economic growth.

Less frequently, we say economic growth is an antidote to corruption. But this is also almost certainly true. The reasoning is somewhat complex and indirect, though. Economic growth does not directly ameliorate corruption. Rather, economic growth leads to better access to education, awareness of rights, empowerment of citizens, and then sometimes leads to improvements in human development indicators and therefore less corruption.

There may also be one other direct link. In a recent paper studying the relationship between economic growth and corruption in India, Bhattacharyya and Jha (2011) argue “economic growth creates additional resources which allow a country or a state to fight corruption effectively.”[1]

Continue Reading »

May
9

If you don’t know how to fix it, please stop breaking it

Alice Harrison

flickr / MREBRASIL

“If you don’t know how to fix it, please stop breaking it,” was the press headline when Severn Suzuki addressed heads of states in Rio de Janeiro in 1992. She was twelve years old, at what was then the world’s biggest-ever political gathering. In an impassioned critique of unfettered industrialism, Severn lamented the decline of the natural world, and the many injustices that man has wrought upon it. “I’m fighting for my future,” she said.

Two decades have since passed and a child could still give the same speech. Perhaps they will, in one month when world leaders will again descend on Brazil. The UN Rio+20 Conference on Sustainable Development will serve as both an appraisal of progress (or regress) made during those twenty intermittent years, and a renewed study of how best to tackle poverty and forge the transition to a green economy.

Sustainability is one of those clumsy words that is flung about but eludes most of us. At its core, it means preserving our planet so that future generations can live safely and happily on it. One of the triumphs of the 1992 UN Earth Summit was that for the first time world leaders jointly and publicly acknowledged that sustainability was not a conundrum for environmentalists alone, but required serious thought about we how develop economically and socially.

Continue Reading »

May
9

These Islands Aren’t Just a Shelter From Taxes — Robert Morgenthau

Clark Gascoigne
Tax Haven Secrecy Facilitates Transnational Crime, Financial Fraud and International Terrorism, Writes Robert Morgenthau in the New York Times
Robert Morgenthau

David Shankbone/Flickr*

On Sunday, The New York Times published an op-ed by Robert Morgenthau, the legendary former Manhattan District Attorney, who oversaw law-enforcement in the world’s financial capital for more than three decades.  Mr. Morgenthau, who retired from public life in late-2009, highlights the systemic risks posed by tax haven secrecy around the world.

Tax havens, with little to no taxes, of course, facilitate tax avoidance and tax evasion in countries like the U.S., but it is the secrecy they provide that is the real problem.  As Mr. Morgenthau, a member of Global Financial Integrity’s Advisory Board, explains:

The favorable tax rates encourage corporations to avoid paying American taxes by structuring complicated international transactions, like Apple’s “Double Irish With a Dutch Sandwich,” recently described by The New York Times. But it’s not just the low tax rates that make these jurisdictions attractive to those following the rules. The secrecy of offshore jurisdictions allows some individuals and corporations to engage in outright tax fraud, costing America at least $40 billion each year.

And that secrecy makes offshore tax fraud almost impossible for law enforcement to detect. When I was the Manhattan district attorney, we learned of offshore accounts only through whistle-blowers, cooperators and serendipity.

And this secrecy is not just about tax fraud.  Indeed, as Morgenthau puts it:

The secrecy laws in these tax havens are at the root of serious crimes: fraud, money laundering and international terrorism.

Continue Reading »

May
7

New Report: The End of Bank Secrecy? An Evaluation of the G20 Tax Haven Crackdown

Niels Johannesen and Gabriel Zucman

flickr / theamazingyen

In 2009, leaders of the world’s 20 most powerful nations gave the impression that offshore tax evasion would no longer be tolerated. The London G20 threatened tax havens with economic sanctions unless they agreed to exchange bank information. High-level international pressure forced commitments from all tax havens to cooperate. The G20 declared: “the era of bank secrecy is over.”

Three years later, bank secrecy is not over and many tax havens are thriving. In fact, the fight against offshore tax evasion has backfired. Information exchange agreements – the main policy tool that G20 countries use to curb tax evasion – have proven to be largely ineffective.

Each year, the UK’s Her Majesty’s Revenue and Customs automatically receives millions of reports from British banks about the amount their customers earnt in interest and dividends. This information makes tax evasion via UK bank accounts very hard.

Continue Reading »

May
4

The European Parliament wants stronger measures against tax evasion

Alex Marriage

flickr / Oxfam International

The European Parliament voted through a resolution calling for measures against tax evasion. The resolution was passed with an overwhelming 538 votes in favour, and only 73 against and 32 abstentions. The resolution of 19 April goes far in echoing Eurodad’s demand in calling for Automatic Information Exchange (AIE), Country-By-Country Reporting (CBCR), a mandatory Common Consolidated Corporate Tax Base (CCCBT) amongst other useful suggestions.

Single EU tax base for companies

The resolution calls for a mandatory Common Consolidated Corporate Tax Base (CCCTB) This would create a single European standard for what income is taxable and what is exempt. Taxable income would then be split between the countries where the company operates on the basis of the real economic activity that takes place within those countries (calculated by looking at staff levels and other factors). Compulsory CCCTB would be a major step in the fight against transfer pricing abuse ensuring more income is taxed where it is actually made. The European Commission has a proposal to introduce CCCTB on a voluntary basis for countries and companies an approach which would make tax competition worse, unlike the mandatory approach Parliament asks which would improve the situation.

Continue Reading »

May
4

Investing in financial intermediaries: a way to fill the gaps in public climate finance?

Diana Hulova

flickr / NASA Goddard Photo and Video

Large amounts of money are needed to address the impacts of climate change. If we succeed in limiting global warming to 2°C, this will still require as much as US$275 billon. A new report released by Eurodad calls into question the latest desperate initiative of donors to fill the gaps in public climate finance: investing in the private sector with the aim of leveraging additional funds.

Rich countries promised to mobilise resources to help developing countries deal with climate challenges. However, they are failing to meet their commitments. According to the World Resource Institute’s preliminary analysis of the Copenhagen’s Fast Start pledges, not more than half of the US$30 billion pledged to be provided between 2010-2012 has been accounted for, and it is not yet clear how much of this money has been or will be delivered.

The report published by Eurodad focuses on financial intermediaries, one of the main tools to leverage private funds. According to many Development Finance Institutions (DFIs), financial intermediaries, such as banks, insurance companies or private equity funds have the ability to use public money to overcome the barriers to private investments in developing countries and leverage substantial amounts of private money. For instance, the public money that is invested in a local bank should make the institution stronger and more profitable, hence attracting more private capital.

Continue Reading »

May
3

Reuters exposé: Out of Control at HSBC

Robert Palmer

flickr / Kansir

Reuters published a fascinating report today, ‘Out of Control at HSBC’. It draws on leaked documents from a number of criminal investigations into the bank that assert the bank violated U.S. anti-money laundering laws.

The report confirms what Global Witness has been saying for several years: despite a global system of anti-money laundering laws, banks in practice fail to carry out their obligations to combat financial crime.

According to prosecutors, the bank intentionally broke the law. HSBC created an operation that was a “systematically flawed sham paper-product designed solely to make it appear that the Bank has complied” with the US anti-money laundering regulations. It will be interesting to see how HSBC responds to this.

According to the documents that Reuters have seen, the bank failed to review thousands of internal anti-money laundering alerts and so did not file suspicious activity reports.

Continue Reading »

May
3

Could Tax Benefits Be Contributing To The Tech Company Patent Wars?

EJ Fagan

flickr / mcwetboy

Tech companies have been racing to acquire as many patents as possible. Last month, Microsoft announced that it had reached a monster deal with AOL, buying 925 patents from Facebook for $1 billion, and then quickly reaching a deal to share the patents with Facebook for a cool $550 million. Many, many more examples of all the top tech companies – Yahoo, Apple, Google, Motorola, RIM – buying and selling huge numbers of patents have proliferated. Many of these patents are frivolous. For example, Apple patented ‘smartphone multitasking’ and ‘swipe to unlock‘ years ago. Nevertheless, the companies have rushed to create as many patents as possible.

Why is this fight going on? The headline reason is to avoid lawsuits. These certainly happen, and are on the mind of tech executives dishing out huge sums of money to acquire libraries of patents. They are probably the biggest factor behind the tremendous value placed upon patents. But I think there is another potential, not mutually exclusive, explanation out there: tax avoidance.

The New York Times expose on Sunday showed that Apple uses patents as a key cog in its tax avoidance apparatus. In part by moving patents overseas, claiming royalties from those patents as income in offshore tax havens, and not repatriating the profits back to the United States, Apple is able to get its global effective tax rate down to 9.8%. They saved $2.4 billion in U.S. taxes in 2011 according to one estimate. Wal-Mart, a company making plenty of money, but trading and owning more physical assets than intellectual property, couldn’t get their rate lower than 24%. Not all of that can be attributed to profit shifting via patent, but the New York Times report makes it clear that patents are central,

Continue Reading »

May
3

Foreign Bribery and Wal-Mart: Not a Victimless Crime

Ann Hollingshead

flickr / karathepirate

The fallout from the scandal surrounding the discovery that Wal-Mart headquarters suppressed an internal investigation when it discovered its Mexican subsidiary had been systematically paying bribes has been swift and significant. According to an investigative piece in the New York Times, Wal-Mart used bribes not only to obtain permits for its stores, but to reduce the time required for those permits, from months to days or weeks. The public outcry to denounce the corporation has been loud.

But not everyone has joined the opprobrium. Many have said, either implicitly or explicitly, that Wal-Mart was doing business the way business needs to be done and that ultimately Mexico came up better off for Wal-Mart’s presence, both for the consumers and its thousands of employees. For example, an article by Holman Jenkins in the Wall Street Journal argues this point. He notes:

Indeed, Wal-Mart will likely be more severely mauled now for failing to act on its own inquiry than for any bribery its Mexican affiliate may have engaged in.

It’s an outcome that will fill many with ambivalence. Mexico’s failure to provide itself with better governance hardly seems a reason to deprive Mexicans of the benefits of Wal-Mart. Just the opposite: Multinational investment is usually seen as a fillip to development, and development as the antidote to corruption, environmental recklessness, human-rights abuse and all the debilities poor countries are thought to be prone to.

This is partly true. At least the part about economic development being an antidote to corruption certainly is.

Continue Reading »

May
1

New research shows how far we are from corporate ownership transparency

Rosie Sharpe

flickr / J. Stephen Conn

The Open Government Partnership – 55 countries which all claim to want to be more transparent, effective and accountable – recently met in Brazil.  Increasing corporate accountability is one of their five ‘grand challenges’.  However new research by the information provision group OpenCorporates highlight the scale of the challenge: governments are not doing very well on making even the most basic of company details available, let alone the more detailed ownership information that’s actually required to prevent corrupt politicians, terrorists and arms traffickers from moving dirty money around the world.

OpenCorporates scored each country on six criteria, including whether information on directors and shareholders is available and whether it is possible to carry out free searches online.  The average score of the Open Government Partnership countries was just 21 out of 100, even though the criteria against which they were being judged were pretty basic.  Several major countries, including Spain, Greece and Brazil, scored zero, meaning no company information is available at all without payment or registration.

The OpenCorporates research looked at whether information on the legal owners of companies was available.  This is an important first step.  But what’s really needed is for information on the beneficial owners of companies – the people who pocket any profits – to be made available, as advocated by Global Witness and others.  You might think that the legal owners of a company would be the people who’d get such profits, but this isn’t necessarily the case as the legal owners may be ‘nominees’ paid to front the company for someone else, or another company rather than a real live human being.  Being able to find out who is behind a company would help prevent criminals from hiding their identity in order to move dirty money around the world, and would be no extra burden to those carrying out legitimate business. This last point has been emphasized by a leader in the pro-business Economist newspaper supporting greater transparency over corporate ownership.

Continue Reading »

Pg 50 of 185 First...1020...49505152...6070...Last
Latest Press Releases

European Commission’s Tax Transparency Package keeps tax deals secret

Financial Transparency Coalition · March 18, 2015

The European Commission’s new measures to combat secret tax deals made between multinational companies and governments cannot be called ...

The world can’t afford to exclude developing countries from new anti-tax evasion system

Financial Transparency Coalition · March 16, 2015

BRUSSELS—Weeks after the shocking revelations of wide-spread tax evasion at HSBC’s Swiss branch, a new report from a European Commission expert ...

Leaked HSBC Records Shed Light on Culture of Corruption in the International Banking System

Global Financial Integrity · February 9, 2015

WASHINGTON, DC – Leaked HSBC documents revealed today by the International Consortium of Investigative Journalists (ICIJ) highlight a culture of corruption in the ...