Continue Reading »

flickr / IRSGlover

“If they don’t serve the crime, you haven’t done the crime,” is the current message that the EU’s current anti-money laundering rules send to those in a position to launder the proceeds of tax evasion. It is a crime to launder the proceeds of tax evasion if the tax evader you help, gets caught and goes to prison for more than a year, 11months and its fine. For those considering whether or not tax evasion is a serious crime, it is worth pointing out that a Christian Aid study found that even with a very conservative estimate the money lost by developing countries to tax evasion by multinational companies was equal to US$160 billion. If this US$160 billion was supplemented to developing countries budgets with allocation unchanged it would be enough to save the lives of 1000 children every day.

It is important that the Financial Action Task Force’s (FATF) recommendation that tax crimes be made a money laundering predicate offence (an offence as a result of which proceeds have been generated that may become the subject of an offence) is adopted worldwide. However, this will be much more effective if, in addition to being defined as serious crimes, tax crimes are interpreted to mean all tax evasion and not the more slippery definition of tax fraud used by some secrecy jurisdictions to protect their parasitic business model.

Such professionals and industries who might deliberately or accidentally handle criminal cash are known in EU/FATF speak as covered institutions, a list which includes bankers, lawyers, and accountants. However, important groups, such as nominees, are missing from the list.

Continue Reading »

flickr / Gobierno Federal

Most attention at this week’s G20 summit focused on the euro crisis and the perilous state of the global economy. But the G20’s final communiqué and background papers indicate that financial transparency is integral to its high-level agenda.

The communiqué from Mexico highlighted 13 jurisdictions that have failed to meet the required standards of tax information exchange.

More significantly, world leaders gathered at the Los Cabos beach resort “expected” the Global Forum, an organisation composed of 108 countries overseen by the OECD designed to ensure international co-operation on tax matters, “to quickly start examining the effectiveness of information exchange practices.”

This is welcome given flaws identified by the OECD’s Global Forum Peer review process. These flaws, which include the withholding of relevant information by accountants and lawyers representing individuals and companies suspected of tax evasion and the failure to identify the individuals who control assets, contributes to continued rampant tax evasion and aggressive avoidance which globally is estimated to be worth $3.1 trillion (5.1% of global GDP).

Continue Reading »

Continue Reading »

flickr / akav

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.”

Continue Reading »

flickr / United Nations Photo

Lisa Ann Elges of Task Force coordinating committee member Transparency International praised the latest draft of the G20′s “Future We Want” document on Monday for including a goal of anti-corruption. Indeed, as climate change becomes a greater problem that requires mobilization of finances, the current level of corruption will threaten any form of assistance, aid, and prevention.

After the 2009 cyclone Aila, for instance, Khadija Begum of Bangladesh complained to Transparency International that the builders constructing her new home, financed by foreign aid, sold the iron and concrete they were given and, instead, constructed a wall-less home of tin and sand. Elges worries that the estimated $100 billion required annually for battling climate change by 2020 will have a comparable effect if finances are not protected.

She continues,

Climate finance flows need to be made visible and understandable. At present, data is hard to come by and difficult to compare. A 2011 study by Publish What You Fund spotlighted bewilderingly low standards of aid information provided by donors. The only data found on one of France’s top aid recipients, Cote d’Ivoire, was about a project commemorating thirty years of research on chimpanzees. Information provided by Austria purported that the fourth largest recipient of funding from the country’s aid agency was the government of Austria.

Continue Reading »

Continue Reading »

flikr / Embassy of Equatorial Guinea

The U.S. Department of Justice filed a 118-page lawsuit this week regarding the alleged corrupt practices of Teodoro Nguema Obiang, son of the President of Equatorial Guinea.  The lawsuit, among other things, requested that a U.S. judge confiscate many of Obiang’s lavish possessions because they were obtained using the proceeds of alleged corruption.  The DOJ’s investigation discovered strong evidence that the Obiang family participates in an array of illicit activities, such as accepting and requiring bribery payments, logging public forests for personal profit, and laundering money through U.S. financial institutions and shell companies.

Four NGO’s, including Human Rights Watch, Oxfam America, Open Society Foundations and Global Witness, met with President Obiang to discuss the allegations June 15^th.  In response to the allegations as well as widespread national corruption and human rights abuses in Equatorial Guinea, the four organizations unanimously pushed for the President to reform the country’s weak laws, subsequently closing the door on future abuses comparable to those alleged of him and his family.  The following is taken from an article from The Independent on the lawsuit,

As recently as last year, when the US government launched a very public bid to claw back money laundered through its financial system by crooks and corrupt foreign politicians, Obiang was able to spend some $7,620,452 on himself. Purchases chronicled by the lawsuit include a $1.2m Piaget watch, a $532k Ferrari, and $494k on dozens of items of Jackson’s former belongings, which were sold at auction in California.

Continue Reading »

Continue Reading »

Transparency International Chair Huguette Labelle wrote a great article in The Huffington Post today. As the G20 meets in Los Cabos, Mexico today, world leaders will try and solve global issues. Financial transparency has always been on the agenda, but world leaders have at times struggled to act. Labelle writes,

At the November 2010 Seoul summit, the agreed plan covered a broad swath of action: from tackling financial crimes like money laundering and bribery, to improving protection for people exposed to reprisals if they blow the whistle on problems such as dodgy bank loans.

Importantly, the plan if implemented would bring badly needed improvements to regulation of the international financial system, with more transparent management of public finances, more transparency on financial vehicles, such as trusts, misused to conceal their true nature and their owners, better oversight of illicit cross border financial flows, stronger watchdogs and greater cooperation between officials. It would also help countries dealing with corruption, allowing faster recovery of stolen assets and sanctioning of corrupt officials.

The whole article is definitely worth reading, here.

Despite declaring that, “the era of banking secrecy is over”, the G20 has been slow to back up its words with action. Despite repeating in its statements all the way back to 2009 that tax havens and illicit financial flows harm developing and developed countries alike, the G20 has stopped short of implementing measures that would actually curtail them, like automatic exchange of tax information, country-by-country reporting, or increasing incorporation transparency through beneficial ownership.

Continue Reading »

Continue Reading »

Global Witness

Task Force coordinating committee member Global Witness released Grave Secrecy today, a report telling the story of companies which were used to launder the proceeds of corruption, tax evasion and other crimes.  The report shows how shell companies based the UK, Bulgaria, and New Zealand were used to launder corrupt money originating from Kyrgyzstan’s AsiaUniversialBank.

The report gives tailored recommendations to countries, the European Union and the Financial Action Task Force on what steps they can take to help fix these costly problems.  The report outlines how a lack of beneficial ownership information, off-shore secrecy jurisdictions and weak anti-money laundering and anti-corruption laws enable money laundering, and how the national and international actors can fix them.

Global Witness’ new report, Grave Secrecy, shows how companies can be used as cover to launder the proceeds of corruption, tax evasion and other crimes.  It is so easy to set up a company in a way that hides the owner’s identity that criminals, terrorists and corrupt politicians can easily move money around the world with impunity.  Hidden company ownership facilitates state looting, denying the citizens of poor countries the chance to lift themselves out of poverty and leaving them dependent on aid.

Continue Reading »