Financial Transparency Coalition http://www.financialtransparency.org Fri, 01 Aug 2014 01:42:44 +0000 en-US hourly 1 http://wordpress.org/?v=3.7.3 Recent Efforts to Regulate Bitcoin Fall Flat http://www.financialtransparency.org/2014/07/31/recent-efforts-to-regulate-bitcoin-fall-flat/ http://www.financialtransparency.org/2014/07/31/recent-efforts-to-regulate-bitcoin-fall-flat/#comments Fri, 01 Aug 2014 01:42:44 +0000 http://www.financialtransparency.org/?p=25276 regulating and taxing the digital currency, Bitcoin. Specifically, the EU is looking to impose a Value Added Tax (VAT) on trades in bitcoin. Meanwhile, its plans to regulate the digital currency—whether imminent or not—are still unclear. Bitcoin presents short- and long-term risks to financial crime. Like tax havens and other jurisdictions with lax laws on beneficial ownership, Bitcoin presents criminals with an opportunity to keep their money and their transactions secret. Specifically, Bitcoin users don’t need to present an ID to receive a Bitcoin address—or key—so they are not necessarily tied to a flesh and blood person. This means Bitcoin transactions unidentifiable as long as the user takes care to anonymize his or her IP address. In the United States law enforcement officials have early and often expressed deep concerns about the digital currency. Both the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury and the U.S. Department of Justice have released official statements regarding the regulation of virtual currencies. FinCEN has also already imposed money laundering controls on Bitcoin usually reserved for traditional wire transfer services, like Western Union. These controls include bookkeeping requirements and mandatory reporting for transactions of more than $10,000.]]> This week several analysts reported that the European Union is considering regulating and taxing the digital currency, Bitcoin. Specifically, the EU is looking to impose a Value Added Tax (VAT) on trades in bitcoin. Meanwhile, its plans to regulate the digital currency—whether imminent or not—are still unclear.

Bitcoin presents short- and long-term risks to financial crime. Like tax havens and other jurisdictions with lax laws on beneficial ownership, Bitcoin presents criminals with an opportunity to keep their money and their transactions secret. Specifically, Bitcoin users don’t need to present an ID to receive a Bitcoin address—or key—so they are not necessarily tied to a flesh and blood person. This means Bitcoin transactions unidentifiable as long as the user takes care to anonymize his or her IP address.

U.S. officials have early and often expressed deep concerns about the digital currency. Both the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury and the U.S. Department of Justice have released official statements regarding the regulation of virtual currencies. FinCEN has also already imposed money laundering controls on Bitcoin usually reserved for traditional wire transfer services, like Western Union. These controls include bookkeeping requirements and mandatory reporting for transactions of more than $10,000.

It’s high time that the European Union follows suit with this, probably minimal, effort. While the European Central Bank has noted the dangers of the currency, the European Union has yet to pass any specific regulations on digital currency. Although it looks like that may change. A spokesperson for the European Commission’s financial services commissioner said this of the EU’s considerations: “It’s imperative to move quickly on this issue [...] The potential for money laundering and terrorist financing is too serious to ignore.”

In fact, the global approach to regulating digital currency has been unilateral, piecemeal, and spotty at best. A recent U.S. survey of forty foreign jurisdictions found that only a very few nations have any specific regulations applicable to Bitcoin. According to the survey, one notable exception to this finding was China. In a joint Notice issued at the end of 2013, the Chinese central bank and four other government ministries and commissions declared that Bitcoin “does not have the same legal status as currency, and cannot be used as circulating currency in the market.”

There are reasons that worldwide regulations on Bitcoin have been unilateral and spotty. At the Financial Innovators Summit at 10 Downing Street, one participant suggested the UK lead an international approach to regulating digital currency. Tom Robinson, co-founder of Elliptic, responded that such a move would be too difficult and would take far too long to envision and implement. He suggested the UK follow in the footsteps of the United States and “make their own decisions.”

Developing nations stand to lose a great deal from the rise of digital currency. And yet this is also the group of nations that does not have the power and capacity to track illicit activity in digital currencies and regulate their transactions. In fact, the piecemeal approach to regulating digital currency is reminiscent of the problems with the recent OECD regulations on automatic tax information exchange. An international framework that thoughtfully includes developing nations is imperative on both issues.

Developed nations need an international framework, too, though. While I mainly am interested in the creation of comprehensive and universal financial regulations because of its impact on economic development, that doesn’t mean that developed countries can’t pursue these universal standards out of self-interest.

An international approach is the only approach that will effectively mitigate the risk for crime and money laundering posed by digital currency. Any one nation that imposes regulations on digital currency will not substantially reduce the currency’s cross-border risk for financial crimes. And in world where crime is increasingly transnational, the world’s financial regulations will only be as strong as its weakest link. Without an international framework for regulating digital currency any unilateral effort is doomed to fail.

]]>
http://www.financialtransparency.org/2014/07/31/recent-efforts-to-regulate-bitcoin-fall-flat/feed/ 0
INFOGRAPHIC: Automatic Exchange of Information Shouldn’t Leave Countries Behind http://www.financialtransparency.org/2014/07/28/infographic-automatic-exchange-of-information-shouldnt-leave-countries-behind/ http://www.financialtransparency.org/2014/07/28/infographic-automatic-exchange-of-information-shouldnt-leave-countries-behind/#comments Mon, 28 Jul 2014 14:02:19 +0000 http://www.financialtransparency.org/?p=25209 The Organization for Economic Cooperation and Development (OECD) is moving towards implementing a new tool for catching tax evaders: automatic exchange of financial information (AEOI). While the name might sound a bit confusing, the idea is pretty simple. Governments in the system will share financial information with each other at designated intervals, enabling authorities to find individuals and corporations that are stashing assets in foreign countries.

While it’s a welcome initiative, we have serious concerns about the OECD’s efforts thus far to include developing countries. Developing countries are some of the hardest hit by tax evasion and other types of illicit financial flows, and much of the money that leaves often finds its way into bank accounts in the US or Europe. It’s imperative that a global information exchange is written with all countries in mind.

The infographics below spells out some of our concerns:

AIEinfographic

]]>
http://www.financialtransparency.org/2014/07/28/infographic-automatic-exchange-of-information-shouldnt-leave-countries-behind/feed/ 0
Debate in Delaware on Tackling Anonymous Companies http://www.financialtransparency.org/2014/07/25/debate-in-delaware-on-tackling-anonymous-companies/ http://www.financialtransparency.org/2014/07/25/debate-in-delaware-on-tackling-anonymous-companies/#comments Fri, 25 Jul 2014 16:28:23 +0000 http://www.financialtransparency.org/?p=25263 Last November, a former special agent for the Treasury Department, John Cassara, wrote an op-ed for the New York Times with the headline “Delaware, Den of Thieves?” Cassara described how the state of Delaware (along with Wyoming and Nevada) has become “nearly synonymous with underground financing, tax evasion and other bad deeds facilitated by anonymous shell companies”. He told of his frustration as a law enforcement officer trying to get information out of Delaware about the real owners and controllers of companies registered in the state. This week, a debate has started in Delaware about its role as a corporate secrecy haven. One-half of the members of the Delaware State Legislaturehave sent a letter to the Delaware Congressional Delegation, urging them to support bipartisan federal legislation introduced by Senators Levin (MI-D) and Grassley (IA-R) to deal with anonymous companies.]]> This post originally appeared on the blog of Global Witness, a member of the FTC.

2249160733_6bc814fbb1_z

Last November, a former special agent for the Treasury Department, John Cassara, wrote an op-ed for the New York Times with the headline “Delaware, Den of Thieves?” Cassara described how the state of Delaware (along with Wyoming and Nevada) has become “nearly synonymous with underground financing, tax evasion and other bad deeds facilitated by anonymous shell companies”. He told of his frustration as a law enforcement officer trying to get information out of Delaware about the real owners and controllers of companies registered in the state.

This week, a debate has started in Delaware about its role as a corporate secrecy haven. One-half of the members of the Delaware State Legislaturehave sent a letter to the Delaware Congressional Delegation, urging them to support bipartisan federal legislation introduced by Senators Levin (MI-D) and Grassley (IA-R) to deal with anonymous companies.

To understand why this is such a big deal, it’s important to understand the extent to which Delaware is a global hub for company formation. More than 1 million companies are incorporated in Delaware, which is more than the actual number of living residents. That number includes 50% of all publicly-traded companies in the U.S. and 64% of the Fortune 500. This is no accident; Delaware law grants attractive tax arrangements and other measures that attract businesses to incorporate there. These measures have paid off – in 2011 alone, Delaware collected roughly $860 million in taxes and fees from these companies – about a quarter of the state’s total budget.

But there’s a shadow side to Delaware’s status as an incorporation hub. Around the world, drug dealers, dictators and arms dealers use networks of shell companies with hidden ownership to launder their ill-gotten gains and evade authorities – allowing them to cause harm to millions of people around the world.

And, while stories about secret shell companies often conjure up images of tropical locales, the reality is that U.S. states – with comparatively strong rule of law and attractive U.S. ‘branding’ that offers an air of legitimacy – are very popular locales for dodgy deals. A recent World Bank report found that the U.S. was the favorite destination of corrupt politicians trying to set up such shell companies. Another academic study found that U.S. states ranked among the easiest jurisdictions in the world to form a company without revealing the identity of who ultimately owns or controls it – with Delaware being one of the easiest of all.

For example, a Delaware anonymous company was at the center of a corruption scandal involving the former Prime Minister of Ukraine. In 2006, Pavel Lazarenko was sent to jail in the United States for laundering tens of millions of dollars of money that rightfully belonged to the Ukrainian people.  How did he do this? In part by using anonymous companies incorporated in Delaware and California. In fact, Lazarenko used one of these companies to funnel money into the United States to buy himself a $7 million house in California.

Now it’s not just corruption investigators raising questions about Delaware’s part in this global money web.  Delaware-based organizations were instrumental in bringing this issue to the attention of the state legislators who are now calling on the Congressional delegation to support federal action.

Led by the Delaware chapter of Americans for Democratic Action, 13 state-based organizations including labor, good government and social justice groups issued a statement raising concerns about the of use of anonymous companies to set up dirty deals in their state’s back yard, and calling on the state to strengthen its own transparency laws. Today’s letter to the Congressional delegation takes that initiative one step further by showing that local lawmakers want Delaware’s Members of Congress to be partners in this effort as well.

This stirs up a bit of a dilemma for Delaware’s Congressional Delegation.  On the one hand, lawmakers such as Senator Chris Coons are known on Capitol Hill for their commitment to tackling poverty in the Global South, especially in Africa.  Shutting down anonymous companies would be a huge contribution to anti-poverty efforts by greatly reducing the ability of corrupt officials to line their pockets by siphoning off resources from the poorest countries in the world.

On the other hand, the Delaware delegation as well as some Delaware officials, working through organizations such as the National Association of Secretaries of State, have also been the most vocally opposed to what we believe are the meaningful reforms needed to collect and disclose information about who really owns and controls the companies involved in these crimes and scandals.

In contrast, other global hubs for company formation, such as the UK, are moving forward to create public registries of beneficial ownership information, with the support of government officials and business organizations alike.

The status quo isn’t working, and millions around the world are suffering as a result.  All this activity shows plenty of people – around the world and in Delaware – believe that support for entrepreneurship and innovation CAN go with transparency for government and business; it doesn’t have to be an either/or equation. Now that citizens and local lawmakers in Delaware are speaking up, will Delaware’s national officials show leadership on this issue in response?


Image used under Creative Commons license / Flickr User: Jim Bowen

]]>
http://www.financialtransparency.org/2014/07/25/debate-in-delaware-on-tackling-anonymous-companies/feed/ 0
Nigeria Has Potential, But Needs to Stomp Out Illicit Financial Flows First http://www.financialtransparency.org/2014/07/25/nigeria-has-potential-but-needs-to-stomp-out-illicit-financial-flows-first/ http://www.financialtransparency.org/2014/07/25/nigeria-has-potential-but-needs-to-stomp-out-illicit-financial-flows-first/#comments Fri, 25 Jul 2014 14:03:09 +0000 http://www.financialtransparency.org/?p=25234 2363479089_f08f0f2033_zA new report out from the McKinsey Global Institute claims that Nigeria could be the next hotspot for economic growth and development. The firm says that, by 2030, the west African nation could become one of the world's leading economies. And it's true; Nigeria has seen an economic surge in recent years, thanks to massive oil exploitation, a burgeoning financial sector, and a huge population. In April, Nigeria even leapfrogged South Africa on its way to becoming Africa's biggest economy. But even with annual GDP growth at 7%, millions of Nigerians suffer from poverty. With an average life expectancy of just 52 years and 46% of the population living below the national poverty line, a huge undertaking lies ahead if Nigeria wants to not only grow, but grow equally.]]> 2363479089_f08f0f2033_zA new report out from the McKinsey Global Institute claims that Nigeria could be the next hotspot for economic growth and development. The firm says that, by 2030, the west African nation could become one of the world’s leading economies.

And it’s true; Nigeria has seen an economic surge in recent years, thanks to massive oil exploitation, a burgeoning financial sector, and Africa’s largest population. In April, Nigeria even leapfrogged South Africa on its way to becoming the continent’s biggest economy.

But even with annual GDP growth at 7%, millions of Nigerians suffer from poverty. With an average life expectancy of just 52 years and 46% of the population living below the national poverty line, a huge undertaking lies ahead if Nigeria wants to not only grow, but grow equally.

One of the most significant burdens to a country as large, diverse, and resource-rich as Nigeria is illicit financial flows–money that’s illegally earned, transferred or utilized. This exiting of money is due to a number of different factors, including corporate tax evasion, trade misinvoicing (the act of under- or over-valuing goods so that a business can move money into or out of a country undetected) or grand corruption and embezzlement.

Between 2005 and 2010, Nigeria lost, on average, roughly US$20 billion every year to illicit financial flows, according to data from FTC member, Global Financial Integrity:

Twenty billion dollars is roughly four percent of Nigeria’s total GDP. That’s almost seven times the amount allocated for education spending in the 2014 Nigerian budget. Instead of revenue to spend on roads, schools, and hospitals, Nigeria and countries across the globe are seeing huge sums of money flow out of their economies and into anonymous companies and hidden bank accounts in tax havens.

Earlier this year, the United States Justice Department announced that it froze more than US$458 million embezzled by former Nigerian dictator, General Sani Abacha. Gen. Abacha and his associates used anonymous companies in the British Virgin Islands, Jersey, and the UK to loot an estimated US$3-5 billion from government coffers.

When you can hide the identity of the beneficial owner–the person who’s really behind the company–tracking down illicit money takes time. Gen. Abacha died 16 years ago. With open public registers of beneficial ownership, authorities, journalists, and concerned citizens would have a much easier time following the money.

So it’s true that Nigeria is growing at an unbelievable pace. But what would that growth look like if billions of dollars weren’t leaving illicitly every year? This isn’t just a problem for Nigerian citizens, either. Bankers, accountants, and lawyers in financial centers in the US and Europe are some of the most willing enablers of illicit money, anonymous companies, and hidden bank accounts.

We often hear predictions about the next big economy to break through, but until illicit financial flows are tackled, the next big breakthrough will always be just out of reach.


Image used under Creative Commons license / Flickr User: AirPanther

]]>
http://www.financialtransparency.org/2014/07/25/nigeria-has-potential-but-needs-to-stomp-out-illicit-financial-flows-first/feed/ 0
How to Include Developing Countries in the OECD’s Standard for Automatic Tax Information Exchange http://www.financialtransparency.org/2014/07/24/how-to-include-developing-countries-in-the-oecds-standard-for-automatic-tax-information-exchange/ http://www.financialtransparency.org/2014/07/24/how-to-include-developing-countries-in-the-oecds-standard-for-automatic-tax-information-exchange/#comments Fri, 25 Jul 2014 03:28:18 +0000 http://www.financialtransparency.org/?p=25254 released the full version of its new standard for automatic tax information exchange. Under the standard, governments would collect data from financial institutions on investment income, financial assets, and account balances paid to non-resident accountholders. On an annual basis, participating governments would exchange that information automatically with other jurisdictions. In a statement, OECD Secretary-General Angel Gurria said the launch “moves us closer to a world in which tax cheats have nowhere left to hide.” This impetus for this new standard came from a mandate by G20 nations and the OECD will formally present the plan to the next meeting of the world’s leaders in September. The standard also follows from a great deal of bilateral and multilateral progress made by the United States and European Union on automatic tax information exchange. For any of these efforts to have a real impact on economic development and reductions in poverty, it must translate to action in the developing world. That’s because tax revenues are, and will continue to be, the world’s most sustainable source of development funds. Yet if these systems and agreements exist only between developed nations and tax havens—and until developing countries participate in a similar system or agreements of their own—the progress we’ve made will have little effect on economic development and acute poverty.]]> This week, the Organization for Economic Cooperation and Development released the full version of its new standard for automatic tax information exchange. Under the standard, governments would collect data from financial institutions on investment income, financial assets, and account balances paid to non-resident accountholders. On an annual basis, participating governments would exchange that information automatically with other jurisdictions.

In a statement, OECD Secretary-General Angel Gurria said the launch “moves us closer to a world in which tax cheats have nowhere left to hide.”

The impetus for this new standard came from a mandate by G20 nations and the OECD will formally present the plan to the next meeting of the world’s leaders in September. The standard also follows after a great deal of bilateral and multilateral progress made by the United States and European Union on automatic tax information exchange.

For any of these efforts to have a real impact on economic development and reductions in poverty, it must translate to action in the developing world. That’s because tax revenues are, and will continue to be, the world’s most sustainable source of development funds. Yet if these systems and agreements exist only between developed nations and tax havens—and until developing countries participate in a similar system or agreements of their own—the progress we’ve made will have little effect on economic development and acute poverty.

In theory, the world’s leaders understand this. For example, in its meeting last year, the G8 promised to develop “a single truly global model for multilateral and bilateral automatic tax information exchange building on existing systems.” In a statement on the subject, the leaders noted that it is “important that all jurisdictions, including developing countries, benefit from this new standard in information exchange [emphasis mine].”

The story is not straightforward, but in some ways the OECD’s new standard does leave developing countries behind. On the one hand, there are a number of developing countries—including Argentina, Colombia, India, and Mexico—in the group of “early adopters” who intend to begin implementing the Common Reporting Standard in the next couple years.

On the other hand, the OECD standard leaves open the possibility for countries to participate by signing bilateral agreements, rather than a single multilateral agreement. As Porter McConnell, Manager of the Financial Transparency Coalition, has noted, this possibility opens “the door to further exclusion.” In large part, this would occur as wealthy nations, who have more political clout and resources, to sign agreements with each other and tax havens. Developing nations, particularly small ones, may find themselves left out.

Some have argued that developing countries do not have adequate resources, software systems, or skilled staff to fully participate. Gurbachan Singh, a tax lawyer in Singapore, put it this way: “Some developing countries lack the administration to deal with it. In places like Indonesia you may have a tax officer but not a proper tax office.” Even the director of the OECD Centre for Tax Policy and Administration, Pascal Saint-Amans, has said that “Most (developing countries) are not yet ready and most of them don’t want [automatic tax information exchange.]”

By extension, they argue, it is appropriate to leave developing countries out of this conversation.

Yet exactly the opposite is true – developing nations who are not ready to fully implement the Common Reporting Standards should be given the flexibility to do so in a way that recognizes their constraints. For example, the OECD could allow developing nations to join on a “non-reciprocal” basis. That is, the OECD could, in the beginning, allow developing nations to receive, without requiring them to supply, tax information. To ensure compliance later, the OECD could negotiate a timetable for those nations to being exchanging that information on their own non-residents.

In fact, the OECD has already granted non-reciprocity provisions for tax havens. The fact that they have not done so for developing countries is “disappointing,” as Pooja Rangaprasad of the Financial Transparency Coalition and the Centre on Budget and Governance Accountability in Delhi put it. Rangaprasad added: “Developing countries would potentially benefit greatly from being able to receive information from developed economies and tax havens, rather than the other way around.”

]]>
http://www.financialtransparency.org/2014/07/24/how-to-include-developing-countries-in-the-oecds-standard-for-automatic-tax-information-exchange/feed/ 0
The July TaxCast: Google, the EU, and the OECD http://www.financialtransparency.org/2014/07/24/the-july-taxcast-google-the-eu-and-the-oecd/ http://www.financialtransparency.org/2014/07/24/the-july-taxcast-google-the-eu-and-the-oecd/#comments Thu, 24 Jul 2014 19:58:24 +0000 http://www.financialtransparency.org/?p=25245 TJNlogoThe Tax Justice Network an FTC member, just released the July installment of TaxCast, a podcast featuring a detailed look at the previous month's tax news. In the Tax Justice Network’s latest podcast: What really happened at the Google shareholder meeting vote on a proposal for ethical tax principles? Plus: we discuss what the new tax haven-friendly EU Commission President might do (or not do), anti-democratic moves in Hong Kong from the big four accountancy firms, and: forget the OECD’s global tax reform – developing countries can and are doing it for themselves. But will the new BRICS Development Bank do any better? And much more…]]> TJNlogoThe Tax Justice Network an FTC member, just released the July installment of TaxCast, a podcast featuring a detailed look at the previous month’s tax news.

In the Tax Justice Network’s latest podcast:

What really happened at the Google shareholder meeting vote on a proposal for ethical tax principles? Plus: we discuss what the new tax haven-friendly EU Commission President might do (or not do), anti-democratic moves in Hong Kong from the big four accountancy firms, and: forget the OECD’s global tax reform – developing countries can and are doing it for themselves. But will the new BRICS Development Bank do any better? And much more…

The TaxCast is produced by Naomi Fowler for the Tax Justice Network. To subscribe, email naomi@taxjustice.net.

You can listen via the embed below, or watch on YouTube.

]]>
http://www.financialtransparency.org/2014/07/24/the-july-taxcast-google-the-eu-and-the-oecd/feed/ 0
Fourth installment of illicit finance journalism program now accepting applications http://www.financialtransparency.org/2014/07/23/fourth-installment-of-illicit-finance-journalism-program-now-accepting-applications/ http://www.financialtransparency.org/2014/07/23/fourth-installment-of-illicit-finance-journalism-program-now-accepting-applications/#comments Wed, 23 Jul 2014 14:39:09 +0000 http://www.financialtransparency.org/?p=25227 5937479085_9d52310535_zIllicit financial flows affect countries all over the world. Unfortunately, developing countries seem to suffer the greatest due to illicit outflows. Sub-Saharan Africa, for example, loses roughly 5.7% of its overall Gross Domestic Product every year to illicit flows, according to research from FTC member Global Financial Integrity. Along with advocating for strong policy changes, it’s important that a robust and informed press investigates cases of tax evasion, corruption, and harmful tax practices that rob governments of much needed revenue.]]> 5937479085_9d52310535_zIllicit financial flows affect countries all over the world. Unfortunately, developing countries seem to suffer the greatest due to illicit outflows. Sub-Saharan Africa, for example, loses roughly 5.7% of its overall Gross Domestic Product every year to illicit flows, according to research from FTC member Global Financial Integrity.

Along with advocating for strong policy changes, it’s important that a robust and informed press investigates cases of tax evasion, corruption, and harmful tax practices that rob governments of much needed revenue.

The Illicit Finance Journalism Program (IFJP), a project spearheaded by the Tax Justice Network, the Centre for Investigative Journalism, and partly funded by the FTC, works to create strong ties between journalists covering these issues throughout the world by bringing journalists, researchers, and campaigners together in London for a four-day training course.

The course offers a grounding in the history and scale of the offshore world, as well as equipping journalists and campaigners with accountancy skills and the tools to investigate tax abuse. The IFJP is overseen by some of the finest investigators in the world and runs twice a year.

Past participants have gone on to investigate and trace illicit flows in their own countries and report on them in the media. Since the program began in March 2013, over 60 journalists, researchers, and campaigners have participated.

Below is a small selection of stories produced by past IFJP participants:

The next four-day course beings on November 4. To see the full details of the course, and how to apply, click here.


Image used under Creative Commons license / Flickr User: Adam W

]]>
http://www.financialtransparency.org/2014/07/23/fourth-installment-of-illicit-finance-journalism-program-now-accepting-applications/feed/ 0
OECD Common Reporting Standard Not Crafted with Developing Countries in Mind http://www.financialtransparency.org/2014/07/22/oecd-common-reporting-standard-not-crafted-with-developing-countries-in-mind/ http://www.financialtransparency.org/2014/07/22/oecd-common-reporting-standard-not-crafted-with-developing-countries-in-mind/#comments Tue, 22 Jul 2014 15:54:30 +0000 http://www.financialtransparency.org/?p=25220 WASHINGTON, D.C. - On Monday, the Organization for Economic Cooperation and Development (OECD) released detailed guidelines on the common reporting standard for automatic exchange of financial information. The plan inches closer to implementation of a global standard but continues to keep developing countries looking in from the outside.

Rather than offer a period of non-reciprocity, where developing countries could simply receive financial data, the only mention of non-reciprocity agreements is catered to tax havens.

“Recognition of the benefits of non-reciprocity provisions for tax havens and not for developing countries is disappointing,” said Pooja Rangaprasad of the Financial Transparency Coalition and the Centre on Budget and Governance Accountability in Delhi. “Developing countries would potentially benefit greatly from being able to receive information from developed economies and tax havens, rather than the other way around.”

But it seems that nothing in the standard—right down to the cost of purchasing the OECD document online—was put forth with developing countries in mind.

“Accessing the document is a perfect illustration of why this process needs to include low income countries from the start; it costs $73 to download the document—not an insignificant sum for a cash-strapped government, and a prohibitive amount for a citizen watchdog group,” said Porter McConnell, Manager of the Financial Transparency Coalition. “It’s hardly a convincing sign that the automatic exchange standard is ‘ready for implementation’ or open to everyone.”

OECD officials characterized the announcement as a move towards “a world in which tax cheats have nowhere left to hide,” but the details present a different picture. While a multilateral agreement for information exchange is one option put on the table, the OECD leaves room for countries to opt for bilateral agreements, opening the door to further exclusion.

Just as the scope of countries involved shouldn’t be limited, neither should the types of illicit flows addressed with the data. The same system that helps tax evaders keep their money out of reach also enables the corrupt and the criminal to move money into anonymous companies and hidden bank accounts, perpetuating the problem of illicit financial flows.

“Around a trillion dollars left the African continent in illicit flows over the past thirty years. The only way sums like that can be brought back into developing country economies, to create jobs and be taxed properly for roads and schools, is by including developing countries in information exchange from the outset,” said McConnell. “The current guidelines don’t do enough to upset the old guard of financial secrecy, or challenge jurisdictions that have made their millions through sheltering illicit money.”

###

Notes to Editors:

[1] For further information or to request interviews please contact:
Christian Freymeyer: +1.410.490.6850 / cfreymeyer@financialtransparency.org

[3] The Financial Transparency Coalition (FTC) works to address opacity in the international financial system, which creates inequalities that harm billions of people. The Coalition consists of over 150 civil society organizations, 13 governments, and dozens of experts across the globe.

]]>
http://www.financialtransparency.org/2014/07/22/oecd-common-reporting-standard-not-crafted-with-developing-countries-in-mind/feed/ 0
Can the Vatican Bank be a Moral Leader in Transparency? http://www.financialtransparency.org/2014/07/17/can-the-vatican-bank-be-a-moral-leader-in-transparency/ http://www.financialtransparency.org/2014/07/17/can-the-vatican-bank-be-a-moral-leader-in-transparency/#comments Fri, 18 Jul 2014 02:49:10 +0000 http://www.financialtransparency.org/?p=25204 In its list of Most Influential People this year, TIME magazine called Pope Francis a “moral leader in word and deed.” In the commentary on this accolade, President Obama said this of the pope: “His Holiness has moved us with his message of inclusion, especially for the poor, the marginalized and the outcast. But it has been his deeds, his bearing, the gestures at once simple and profound — embracing the sick, ministering to the homeless, washing the feet of young prisoners — that have inspired us all.”

When it comes to poverty and inequality, Pope Francis has truly been both a champion and a moral leader. The pope does not just speak about the injustice of inequality, the travesty of poverty, or the moral imperative to bring economic development and inclusion to the developing world. Over his lifetime, he has emphatically observed these values in his own life, forsaking many of the luxuries typically afforded to men in his positions. He has also consistently urged Christians and Priests to do the same; that is, to practice what you preach.

By extension, we might expect that the bishop of Rome should govern his state, Vatican City, in a way that is consistent with these principles. With Pope Francis’ record in mind—and understanding the deep connection between financial transparency and poverty worldwide—we might expect that the Vatican should be a beacon of transparency in an otherwise opaque world.

In fact this is not the case. As such, it remains one area of poverty where the pope remains reactive, rather than proactive.

The financial system—both politically and practically—in the Vatican City is unusual to say the least. The primary financial institution in the Vatican City is the Institute for Works of Religion (IOR), also known as Vatican Bank. It is directed by a private CEO, but he reports to a committee of cardinals and, ultimately, to the pope.

For decades IOR has experienced regular corruption scandals and has been connected to and involved in cases of money laundering, tax evasion, and other suspicious financial activities. IOR and two of its high level officials also faced money laundering allegations in 2009 and 2010 when Italian authorities discovered several suspicious transactions. In another recent case, financial police in Sicily revealed that a Roman Catholic priest living in Rome, whose uncle was convicted of Mafia association, used a Vatican Bank account for money laundering.  According to investigators, the priest’s father illegally obtained $350,000 dollars from the regional government of Sicily for a non-existent fish breeding company and then transmitted the funds to his son as a “charitable donation.”

Pope Francis has shown a clear intention to clean up this financial grime. Vatican Bank now has a commission to brief the pontiff on the bank’s operations and ensure it adheres to the Church’s mission. Last year, Pope Francis issued new regulations for IOR on financial transparency. The Vatican’s Pontifical Commission also passed laws designed to bring the Bank into compliance with international anti-money laundering laws and to prevent terrorist financing. Since last year, bank officials have closed 3,000 suspect accounts.

Cardinal Pell, the current Prefect of the Secretariat for the Economy, noted that these reforms reflect an ambition to “to become something of a model for financial management rather than a cause for occasional scandal.”

Indeed, this is the right way to think about it. As a moral leader, in words and deeds, Pope Francis has a duty to serve as this example. It is heartening to see that the Vatican has shown clear initiative and intention toward reform. We can only hope that in the end these reforms are not merely reactive to avoid scandal, but will one day actually prove meaningful enough to make the Vatican Bank a moral leader in transparency.

]]>
http://www.financialtransparency.org/2014/07/17/can-the-vatican-bank-be-a-moral-leader-in-transparency/feed/ 0
New Thomson Reuters Foundation Media Program to Investigate Illicit Finance, Tax Abuse http://www.financialtransparency.org/2014/07/17/new-thomson-reuters-foundation-media-program-to-investigate-illicit-finance-tax-abuse/ http://www.financialtransparency.org/2014/07/17/new-thomson-reuters-foundation-media-program-to-investigate-illicit-finance-tax-abuse/#comments Thu, 17 Jul 2014 19:31:11 +0000 http://www.financialtransparency.org/?p=25195 6198428500_15e8067a95_zAre you an ambitious journalist in Africa with an interest in probing illicit finance, money laundering, and tax related abuses? Or, perhaps, you represent an outstanding, independent media organization based in Africa with a desire and reputation for exposing financial crime and corruption? Either way, the Thomson Reuters Foundation is launching a new three-year program assisting African media on the reporting of illicit finance and tax abuse, and they are hoping that you will apply.]]> This post originally appeared on the blog of Global Financial Integrity, a member of the FTC.

Thomson Reuters Foundation Seeks Applications from African Media for Illicit Finance Training and Assistance Program by July 28th

6198428500_15e8067a95_zAre you an ambitious journalist in Africa with an interest in probing illicit finance, money laundering, and tax related abuses? Or, perhaps, you represent an outstanding, independent media organization based in Africa with a desire and reputation for exposing financial crime and corruption?

Either way, the Thomson Reuters Foundation is launching a new three-year program assisting African media on the reporting of illicit finance and tax abuse, and they are hoping that you will apply.  According to the TR Foundation:

African economies lose huge sums of money every year through practices such as tax evasion and avoidance, often carried out by large companies. However, this phenomenon receives little attention and is rarely the subject of in-depth investigation.

Thomson Reuters Foundation believes that African media has a vital role to play in bringing this issue to light and exposing tax abuse where it is taking place. We also believe that collaboration between journalists and media organisations across borders is essential when reporting on money flows between countries.

We are seeking outstanding journalists and ambitious, independent media organisations to join us in this new project.

Illicit financial flows are a major problem for Africa. GFI research finds that (in constant 2005 U.S. dollars) Sub-Saharan Africa suffered US$419.1 billion in illicit outflows between 2002-2011. Indeed, as a percent of GDP,  Africa suffered higher illicit financial outflows than any other region in the world.

The economic problem is so severe that it is swamping out all legal inflows of capital and resources into the continent. Our May 2013 joint report with the African Development Bank found that, after adjusting all legal net recorded transfers of capital (such as investment, foreign aid, debt relief, exports, imports, remittances, etc.) to Africa  for illicit financial outflows, the continent still suffered between US$597 billion and US$1.4 trillion in net resource outflows over the period from 1980 through 2009.

Even at the most conservative estimates (seen in the table above), vastly more money is flowing out of Africa than is flowing in. No wonder the continent continues to struggle with a development problem.

Still, stories about illicit financial flows remain significantly under-reported across the continent, so we are thrilled that the Thomson Reuters Foundation is undertaking this program to assist local and regional media in exposing the most damaging economic problem facing Africa.

If you’re an African journalist interested in the program, you can learn more about it and apply here.  Be sure to get your application in by the July 28th deadline!


Image used under Creative Commons license / Flickr User: GlobalX

]]>
http://www.financialtransparency.org/2014/07/17/new-thomson-reuters-foundation-media-program-to-investigate-illicit-finance-tax-abuse/feed/ 0