French banks to leave tax havens
Financial Times, October 2, 2009

U.S. sees tips rise on tax cheats
Reuters, October 1, 2009

FOCUS: Greek Economy In Focus Ahead Of Oct 4 Elections
Dow Jones, October 2, 2009

New deal to curb tax evasion via hidden accounts
Today’s Zaman, October 2, 2009

PM says Bermuda unfairly targeted
BBC, October 2, 2009

US hails resignation of Kenya anti-graft chief
Reuters, October 2, 2009

SFO seeks BAE bribery prosecution
The Guardian, October 2, 2009

Former Peru president gets six years for bribery
The Irish Times, October 2, 2009

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Those who campaign for tax justice are often challenged about why having a record of the beneficial ownership of companies on public record matters.

Well, let’s use a real example to demonstrate this, reported in the Guardian today concerning an issue I have commented ion before, the ownership of Leeds United, which ahs been unknown since the company was ‘taken over’ by Ken Bates (or maybe not, as it now transpires) four years ago. As they note, Ken Bates has just changed his evidence on ownership to a court in Jersey where there is a long running legal dispute about the club:

The revelation by Bates that he made “an error” when he said he jointly owned Forward, and the Château Fiduciaire letter, means the ownership of Leeds, still one of English football’s potential giants, is undeclared. The Yorkshire club apparently belongs to the holders of 10,000 shares in a company registered in the Cayman Islands, administered in Geneva by trustees who refuse to reveal the owners’ identity.

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AFP is reporting that all French banks have committed to closing all of their subsidiaries located in jurisdictions on the OECD grey-list. From AFP:

PARIS — All French banks will begin taking steps in March to close their branches and subsidiaries in countries deemed to be tax havens by the OECD, the deputy head of the French banking federation said on Thursday.

“French banks have taken the decision to commit to the closure of their subsidiaries and branches that are on the OECD grey list in March 2010,” he said after a meeting with French President Nicholas Sarkozy.

Countries on the grey list, drafted by the Organisation for Economic Cooperation and Development, have taken steps to improve their banking and tax data transparency but have yet to fully meet OECD standards.

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Video from the annual Task Force conference is now becoming available on our YouTube channel at the following playlist:

Highlights include Francis Fukuyama’s introduction of Senator Carl Levin:

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GFI has been known to repeat (and then repeat again) that for every $1 of aid that enters the developing world through the front door, $10 escapes out the back in illicit financial flows (for my explanation of these flows and their the magnitude, see: 10 times ODA, but what is that in Apple Pies?).  While many people grasp the enormity of this number, few seem to appreciate what this means or how these flows can affect development.  Some people even go so far as to say, “Why should we care?  That money wasn’t going to build a well or buy vaccines for children.”

The truth is: it does matter.  And the macroeconomic reasons for “mattering” are going to be the topic of this blog (and a few others to come).

Reason 1: Illicit Financial Flows reduce the growth potential of developing countries by diverting domestic savings away from investment.

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Illicit financial flows exit developing countries through two broad channels—as unrecorded capital flows from a country’s external accounts (captured by the World Bank Residual model) and trade mispricing (captured by the Direction of Trade statistics or DOTS model). GFI’s study Illicit Financial Flows from Developing Countries: 2002-2006 points out that some researchers have questioned the use of the trade mispricing model to capture illicit flows. They argue that data issues underlying the recording of partner country exports and imports introduce enough “noise” so that the trade mispricing model is unable to capture illicit flows. I was therefore not surprised to hear cynical remarks about the quality of bilateral trade statistics at a recent World Bank conference (Understanding the dynamics of the flows of illicit funds from developing countries, September 14-15).  Here, I point out the reasons why most economists reject such arguments for not studying trade mispricing as a conduit for illicit financial flows from developing countries.

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Tax Experts in Demand as Governments Take a Harder Line on Transfer Pricing
A.E. Feldman, Blog, September 30, 2009

Senior MEP calls for crackdown on EU tax havens
The Parliament, September 30, 2009

INTERVIEW-Bahamas not planning to change offshore laws -PM
Reuters, September 30, 2009

Banks refuse to dilute exclusive clients’ club Singapore’s private banks retain high entry barriers as business booms
The Business Times, September 30, 2009

Link between freedom and economic prosperity
New Zimbabwe, September 30, 2009

ANALYSIS – Indonesia’s corruption fight weakened by new law
Reuters, September 30, 2009

U.K.’s Biggest Banks Probed Over Tax Issues by FSA
Bloomberg, September 30, 2009

Gov’t Takes Terrorism & Money Laundering Fight A Notch Up
BVI Platinum News, September 30, 2009

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On Sunday (Oct 4), the German Federal Ministry for Economic Cooperation and Development and the Norwegian Ministry of Foreign Affairs are sponsoring a side-event titled “Tax Evasion and Revenue Policy in Development Finance” at the Annual Meetings of the World Bank Group and the International Monetary Fund in Istanbul, Turkey.

The seminar, which features GFI Director Raymond Baker among others, will take place between 10:00am and 12:00pm in Room Taxim at the Istanbul Convention Centre.

For more information on the event and to view an agenda, click here…

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Isle of Man urged to brace itself for tax attacks
Iom Today, September 29, 2009

News Analysis: The UBS Endgame
Tax Analysts,September 29, 2009

OECD Tax Official Calls G-20 Summit ‘Outstanding Success’
Tax Analysts, September 29, 2009

‘Dirty money detector’ at Swiss-Italian border
World Radio Switzerland, September 29, 2009

Roman Polanski and the UBS link
First Post, September 29, 2009

G20 takes welcome step to stop banks fuelling corruption
Global Witness, September 29, 2009

World Bank Forecasts 10 Million Becoming Poor in Latin America
Bloomberg, September 29, 2009

Indonesia passes controversial graft court bill
Reuters, September 29, 2009

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FT.com / Entrepreneurship – Tax crackdown defended.

A leading adviser on research and development tax credits has leapt to the defence of HM Revenue & Customs (HMRC), claiming its officers are right to crack down on those trying to exploit the system.

Peter Denison-Pender, managing director of Alma Consulting, refuted claims made by accountancy Grant Thornton earlier this month that tax inspectors were being unfairly tough with companies seeking R&D tax credits.

“HMRC is not the bad guy here,” Denison-Pender said. “All they are doing is clamping down on production masquerading as research.”

Good for him.

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Task Force member Global Witness has released the following statement lauding the G20′s action on AML standards at last week’s summit in Pittsburgh:

G20 takes welcome step to stop banks fuelling corruption

Summit communiqué calls for stronger anti-money laundering standards to help curb illicit flows of looted state funds from developing countries

The G20 has urged an international watchdog on anti-money laundering laws to prioritise the fight against corrupt funds, a move warmly welcomed by anti-corruption group Global Witness today.

Anti-money laundering laws, which should prevent banks accepting illegally-earned funds, are the key defence against the movement of state funds that have been looted by corrupt government officials. So they are vital in tackling poverty in developing countries.

The inter-governmental body that sets the standard for anti-money laundering laws, and evaluates each country to check if its laws are up to scratch, is the Financial Action Task Force (FATF). Since 2001 it has been heavily focused on using the anti-money laundering laws as a bulwark against the movement of terrorist finance. This has largely been effective: banks are now checking to ensure their customers are not on terrorist watch lists. But until now there has been little comparable political will to ensure that banks avoid the proceeds of corruption.

“The G20’s call for a focus on corruption provides some of the necessary political will that has been lacking. Our investigations have shown that banks do not always take this seriously enough, and one reason is that they are not hearing a strong message from governments that they must do so. The taskforce meets in Paris next month; that meeting will be a decisive next step in this process, as it will now have to decide how to make the anti-money laundering laws more effective,” said Anthea Lawson, a campaigner for Global Witness.

“State looting has a devastating effect on developing countries. Efforts to lift people out of poverty and lessen dependence on aid are undermined by banks’ keenness to do business with corrupt officials. Let’s be clear: corruption could not occur without the help of the international financial system – the amounts being stolen are too big to keep under the mattress,” Lawson added.

Contact: Amy Barry on +44 (0)7980 664397 or Anthea Lawson on +44 (0)7872 620 855

Notes to editors:

1. The G20’s communiqué from its Pittsburgh summit on Friday said: “We ask the FATF to help detect and deter the proceeds of corruption by prioritizing work to strengthen standards on customer due diligence, beneficial ownership and transparency.” (Paragraph 42 of main text)

2. ‘Customer due diligence’ is the process that banks must undertake to identify who they are dealing with and the source of their funds. ‘Beneficial ownership’ refers to the need for banks to identify the ultimate owner of the funds, as opposed to the shell companies and/or trusts which may be used to obscure the owner’s identity. ‘Transparency’ refers to the need for more information to be made available about the beneficial ownership of such corporate vehicles, which are used to hide all forms of illicit money, whether they be corrupt, evading tax, or the proceeds of other forms of criminal activity.

3. Earlier this year a Global Witness report, Undue Diligence: How banks do business with corrupt regimes, detailed how major banks including Barclays, HSBC, Deutsche Bank and Citibank were facilitating corruption through doing business with dubious customers in corrupt, natural resource-rich states. It showed how the current laws are ambiguous about how far banks must go to identify the real person behind a series of front companies and trusts; fail to be explicit about how banks should handle natural resource revenues when they may be fuelling corruption; and may permit a bank to fulfil the letter of its legal obligations, yet still do business with dubious customers.

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Richard Murphy notes that HMRC has launched a new web-form which allows you to report tax evasion online.  Strangely, though, the form times out if you haven’t finished within 15 minutes – a relatively short amount of time given the length of the form.  I understand the logic of timing out a webpage after a certain amount of time – perhaps an hour or so – but 15 minutes is a little ridiculous.

Nevertheless, it’s nice to see HMRC taking a proactive approach.

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