Sometimes you need more than words. Let’s try graphics instead. Illicit Financial Flows: Explained on Prezi.
There’s very little our lawmakers won’t do to show their patriotism. And this week Senator Marco Rubio took the prize when he introduced a bill that would exempt American winners of Olympic medals from federal taxes on their cash prizes.
In case you haven’t heard yet: when an Olympian wins a gold, silver, or bronze medal, he or she receives a cash prize of $25,000, $15,000, or $10,000, respectively. At the moment, Olympians pay taxes on those prizes just as they would on any other income. Under the Olympic Tax Elimination Act, they would not.
As someone who was once an aspiring Olympian in a completely obscure sport—you’d probably think that I’m in support of this proposal.
The fact that President Obama has pledged his support of this bill might lead you to believe that this bill is a shining symbol of bipartisanship in this time of great political discord.
It is more tax delusions parading as a symbol of support.
Whether they intend to or not, proponents of Rubio’s proposal have used the Olympic medal tax cut to perpetuate some of the really disgusting misconceptions about our U.S. tax system.
Illegal poaching and trade of wildlife is a massive problem for developing countries, particularly those inAsia. Often these products find their way across boarders—stuffed into suitcases, packed into trucks, and occasionally carried. Protected and endangered species are killed and sold for their organs, flesh, bones, skin, and scales, which are turned into tonics, ornaments, meat, and traditional medicines.
Of course this is an environmental problem. Many of these animals are endangered or protected. Of all the illegal wildlife product seizures inAustralialast year, two-thirds were traditional medicines containing ingredients from endangered species. But this is also a development problem and a security one, too.
Global Financial Integrity (GFI) has estimated that the illegal trade in wildlife, excluding fishing, among residents of developing countries generates about US$8-10 billion annually.
There’s been a lot of speculation about what secrets Mitt Romney is hiding in his tax returns. The economist in me feels fairly certain that, given the immense damage this issue has done to his presidential bid and assuming the campaign has done a cost-benefit analysis, there must be something pretty shocking lurking below the surface.
We already know Mitt Romney has as much as $8 million invested in at least 12 Cayman Island funds and another investment, worth between $5 million and $25 million, shows up on securities records as domiciled in the Caymans.
Some have argued we should ignore Romney’s personal finances because they lie in the hands of “competent experts,” not Romney himself. As Daniel Foster argues: “who cares if Romney has clever accountants?” To say that Romney is not responsible for his personal finances because underlings runs the show is akin to saying the President is not responsible for the Treasury department for the same reason. At the end of the day, the buck must stop somewhere.
Senator Carl Levin (aka “Watchdog of America”) is at it again. Yesterday morning the Senate’s Permanent Subcommittee on Investigations, which Senator Levin (D-MI) chairs, held a hearing to investigate HSBC, the UK-based bank and Europe’s largest financial institution, which has allegedly systematically (and knowingly) lapsed its anti-money laundering systems and allowed suspicious transactions into the United States. According to the subcommittee’s investigative report released Monday, HSBC systematically ignored warnings and failed to stop illegal behavior many times between 2001 and 2010. The report found HSBC accepted deposits intoU.S. branches from Mexican drug cartels, Saudi Arabian banks with terrorist ties, and Iranians looking to circumvent financial sanctions.
To me, the most shocking part of all this is not that it happened. Quite the contrary. HSBC—along with its other large bank counterparts—has already been known to aid American citizens evade taxes and knowingly accept deposits from politically exposed persons inNigeria, violating about a billionUKlaws. So I can’t say I’m surprised.
What shocked me here is not the fact that it happened. And it’s not even that the bank acted subversively when it thought no one was looking. It’s that since 2010, when U.S. officials started—publicly—scrutinizing HSBC’s anti-money laundering controls and ordered a “look back” of thousands of old transactions, the bank not only failed to clean up its act, but—according to an investigation by Reuters—continued to overlook persistent lapses in AML compliance. During the look back, bank managers allegedly specifically “buried” many suspicious cases. According to former employees, the managers focused single-mindedly on “clearing out the paperwork as fast as possible,” handled the reports “like a factory,” and hired “gullible, poorly trained, and otherwise incompetent personnel who were incapable of recognizing blatantly suspicious money laundering activities.” How’s that for diligence?
Remember the scene in Office Space when Peter, Michael, and Samir accidentally steal $300,000? They realize they can’t give it back without admitting they stole it in the first place, so they think the only way out is to keep the cash and launder the funds. But three law abiding guys don’t really know how to launder money,, so they try looking up “money laundering” in the dictionary, hoping for a clue of how to do it.
They don’t find an answer and give up on the idea. Bu then again, the dictionary doesn’t exactly give you a step by step guide and those were the days before the prevalence of internet. If the guys had had Google, they may have had better luck.
Today if you Google money laundering you might come across Global Witnesses new handout An Idiots Guide to Money Laundering. It’s a satirical, yet accurate, illustration of how the average person might launder illicit funds.
Everyone knows athletes cheat. Cheating has existed for as long as sports themselves. During the ancient Olympic Games in Greece, officials placed pedestals inscribed with athletes’ names at the entrance of the stadium. The names were not of great athletes, but of those who violated the rules of the Games, in order to punish them into perpetuity. In today’s version of public dishonor, our media nationally broadcasts the names and crimes of steroid-injecting baseball players, blood-doping cyclists, and plotting figure-skaters.
Not all athletes cheat—even those who have the opportunity to. I would know. For three years, I lived at the Olympic Training Center in New York, where I lived and trained year-round for the sport of sprint kayaking. Surrounded by some of the country’s finest athletes taught me a lot about who athletes are and how they think. Honor was paramount to every one of them—whether they were bobsledders or speed skaters, ski jumpers or rhythmic gymnasts. Everyone wanted to achieve their best performance, everyone wanted to make the team or win the race, but no one wanted to cheat.
The reality I see on the news is often difficult to reconcile with my memories of the decent, strong, driven people who cared about the sweat and honor on the road to victory more than the glory of a gold medal.
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.
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.”
Corruption is notoriously difficult to measure. It’s not just because it is an illicit activity. In part it’s because the concept itself is undefined and relative. Transparency International found a (brilliant) way around this when they began surveying each nation’s public perception of corruption, rather than trying to define a concrete set of corrupt activities.
So what is corruption?
Transparency International uses the following working definition of corruption: “the abuse of entrusted power for private gain.” I imagine that’s vague on purpose.
So how do we define specific corrupt activities? Corruption isn’t just bribe paying, although that’s often it. It’s not just in business relationships, but also political, social, and even athletic ones. Corruption isn’t necessarily illegal, although it’s often so. And in some cases, while it may be illegal, it isn’t always enforced, which makes it legal in practice.
In December of 2011, nearly a year after South Sudan voted overwhelmingly in favor of independence from its northern neighbor, I asked a very important question. Will South Sudan defy the resource curse?
The “resource curse” is the tragic phenomenon that countries well-endowed with natural resources tend to have slower economic growth and poorer development than those without. According to an analysis of developing countries by Jeffrey Sachs and Andrew Warner, the more an economy relies on mineral wealth, the lower its growth rate. Countries with significant natural resource endowments also tend to have an increased likelihood of experiencing war and violence and a decreased likelihood of having a democratic system of governance.
South Sudan faces many predispositions that make it susceptible to the curse. First and foremost it holds over 75% of what was the united country’s 500,000 barrels per day of crude oil output. As a new nation coming from 50 years of conflict and marginalization, South Sudan is exposed to a variety of other exacerbating factors, including weak, ineffectual institutions and government inefficiency and mismanagement. The country derives nearly 98% of its budget from oil, which is another red flag. A government which is dependent on oil revenue has little accountability to its citizens through taxation.
Yesterday Switzerland’s parliament approved a much-anticipated tax information exchange agreement with Germany. The country has made similar agreements with Britain and Austria and is already in talks with Italy to make a similar deal.
Under the agreement, Swiss banks will make anonymous advance payments to German tax authorities for undeclared money. Germany stands to make big gains: lawmakers already plan to levy a retroactive tax of 21 to 41 percent on their citizens with undeclared accounts. With holdings of an estimated 222 billion euros ($291.8 billion) in Swiss accounts, about 60 percent of which are undeclared, German citizens can expect to pay up big time. That is, if the agreement even passes German parliament. There is significant opposition to the agreement, lead by the Social Democrat, who believe it is “too soft” because it would allow Switzerland to preserve most client confidentiality.
A few years ago, such a thing might have garnered international headlines. But in many ways this news came and went without much of a to-do. The reason for this is the abruptly shifted paradigm in Swiss banking. After years of pressure from the U.S., UK, and other European countries, the tide has shifted strongly in Switzerland. And now these deals seem more like a matter of course than a revolution.