South Africa is the first African country to join the Task Force. Its experience, expertise and influence as both a regional and international power will be of great benefit to The Task Force as it works to promote greater transparency and fairness in the international financial system.

The issue of illicit financial flows is particularly important in Africa as a 2010 report [1] calculated that from 1970-2008, US$854 billion left the continent as a result of this underground economy. Furthermore, a 2011 report [2] found that the continent lost US$79 billion in revenue to tax evasion in 2010 alone.

These illicit capital outflows represent money that could contribute significantly toward poverty alleviation and economic development both in Africa and elsewhere.

Launched in January 2009, the Task Force on Financial Integrity and Economic Development is a unique global coalition of civil society organizations and governments, which advocates for greatly improved transparency and accountability in the global financial system. Task Force membership is organized by the following component groups: a Coordinating Committee, composed of international Civil Society organizations, [3] the Partnership Panel, an Economist Advisory Council, and Allied Organizations.

The Partnership Panel’s mandate is to facilitate meetings with other government officials, provide information on discussions and conferences that are relevant to the Task Force, and strategize on how to best promote Task Force goals within governments, multilateral organizations, and other institutions. In turn, the Task Force helps support efforts by member governments to stem their own illicit financial flows by providing data, expertise and proven policy prescriptions.

The Task Force advocates five recommendations for addressing the current global financial crisis, each one focusing on transparency and extending initiatives that have already begun to be put into place:

• Curtailment of mispricing in trade imports and exports;
• Country-by-country accounting of sales, profits, and taxes paid by multinational corporations;
• Require that the beneficial ownership of companies, trusts and foundations be readily available on public record;
• Automatic cross-border exchange of tax information on personal and business accounts;
• and Harmonization of predicate offenses under anti-money laundering laws across all Financial Action Task Force cooperating countries.

###

Notes to Editors:

[1] Global Financial Integrity report, “Illicit Financial Flows from Africa: Hidden Resource for Development” (available online here).
[2] Tax Justice Network report, “The Cost of Tax Abuse” (available online here). (PDF)
[3] The Task Force Coordinating Committee comprises Christian Aid, Eurodad, Global Financial Integrity, Global Witness, Tax Justice Network, Tax Research LLP, Transparency International, and the Secretariat for the Leading Group on Innovative Financing for Development.

Contact:

Dietlind Lerner
dlerner@financialtaskforce.org
+1 202.577.3455

Nick Mathiason
nmathiason@financialtaskforce.org
+44 7799.3486.19

Front Page Image:  Some rights reserved by coda

Marking the end of the Year of the Forest, the Annual Transparency Report published by a coalition of NGOs working across Europe, Africa and Latin America assesses the amount of information available to citizens in seven forest-rich tropical countries (Cameroon, the Democratic Republic of Congo, Ecuador, Ghana, Guatemala, Liberia and Peru). The report includes measures of how governments deal with threats from mining and agricultural plantations, the way in which deals are done and whether forest-dependent communities have enough say over how their forests are being managed. It finds that governmental commitments to improve transparency in the forest sector are not being acted on.

“The rights of people living in the forest can only be effectively protected if laws, policies and other basic information such as logging contracts and concession maps are widely available to them,” said Joseph Bobia, of Réseau Ressources Naturelles, a forest campaign group based in the Democratic Republic of Congo. “Governments need to provide this information in a timely and transparent way. Only this way will civil society be able to hold them to account.”

Governments have announced a range of commitments to improve transparency over forest sector management. These include: better and earlier public consultation, public disclosure of key documents, and support to small landowners to protect their forests. In addition, four of the seven forest-rich countries covered in the report now have Freedom of Information laws that include commitments to providing information on forest sector management. Worryingly however, very few of these commitments are being acted on and in the case of the freedom of information laws, not one forest authority is meeting its obligations.

“These additional commitments currently amount to no more than statements of intent,” said David Young, forest campaigner at Global Witness. “More and better information must be published immediately. Until this happens, forest-dependent communities cannot know whether their forests are being managed in their interests, or those of a select few.”

The report also raises concerns that commercial interests for land, mining, oil and agricultural plantations are still taking precedent over the need to protect forests and the communities that depend on them. All too often government bodies compete to strike a deal with a favoured investor, rather than working together in the interests of preserving forests.

“With only 20 percent intact natural forest remaining globally, it is vital that governments manage forests in the public interest,” continued Young. “Local civil society are fighting hard to extract better commitments from their governments, and have shown determination and imagination in doing so. But while there have been some improvements, not one forest authority has made a wholehearted change towards more openness. What do they have to hide?”

ENDS

For more information, please contact:

• UK: David Young, Global Witness: +44 7854 047826 dyoung@globalwitness.org
• Cameroon: Samuel Nguiffo, Centre pour l’Environment et le Developpement (CED);+237 2222 3857, snguiffo@yahoo.fr, snguiffo@cedcameroun.org
• DRC: Joseph Bobia, Réseau Ressources Naturelles (RRN);josephbobia@rrnrdc.org
• Ecuador: Sigrid Vásconez, Grupo Fundación para el Avance de las Reformas y Oportunidades (Grupo FARO); +593 22456367 ext 18, svasconez@grupofaro.org
• Ghana: Willie Laate, Center for Indigenous Knowledge & Organisational Development (CIKOD); +233 244 028649, wilraby@yahoo.com
• Guatemala: Victor Lopez, Asociación de forestería comunitaria de Guatemala Ut’z Che’ (Ut’z Che’); +502 574 03514, vitillescas@gmail.com
• Liberia: Jonathan Yiah, Sustainable Development Institute (SDI); +231 88 6426271,jyiah@sdiliberia.org
• Peru: Hugo Che Piu Deza, Derecho Ambiente y Recursos Naturales (DAR);hchepiu@dar.org.pe

Notes to editors:

[1] The Annual Forest Sector Transparency Report card is published as an interactive database at www.foresttransparency.info. Global Witness has been working on forest transparency and illegal logging for over 15 years. Read more about our work on forests atwww.globalwitness.org/forests

[2] The United Nations Year of the Forest 2011 closing ceremony takes place on 9 February 2012. See http://www.un.org/en/events/iyof2011/

[3] There were some improvements in six countries:

• In Peru, a new Forest and Wildlife Law establishes a decentralised and integrated system of forest resource use, included issues of governance, transparency and access to information; and a new Law of Right to Prior Consultation reinforces legal commitments and international conventions regarding the rights of indigenous peoples.
• In Liberia a National Benefit Sharing Trust Board was formally constituted with multi-stakeholder representation, including communities and civil society organisations. The Board will play a crucial role in ensuring equitable and effective use of forest revenue distributed to affected communities.
• In Cameroon, the Government committed in August 2011 to regular public disclosure of over fifty key documents in a bilateral Voluntary Partnership Agreement ratified with the European Union to improve forest law enforcement governance and trade.
• In Ghana, a draft new Forest Policy was released for comment in October. It includes the commitment to “Institute transparency, equity and legalize public participation in sustainable forest and wildlife resources management”.
• In Ecuador, the Ministry of Environment published a model of forest governance that recognises the importance of transparency and monitoring.
• In Guatemala a new forest law passed by congress, and which was promoted by civil society, will increase support to small landholders, including those with less secure tenure, to conserve and manage their forests and to promote agroforestry practices.

[4] The report card is part of Global Witness’ Making the Forest Sector Transparent project, funded by the UK Department for International Development Governance and Transparency Fund, http://www.dfid.gov.uk/Working-with-DFID/Funding-opportunities/Not-for-profit-organisations/Governance-and-Transparency-Fund-GTF-/ .

Global Financial Integrity

WASHINGTON, DC – Global Financial Integrity (GFI) today applauded the introduction of a bill, which would close several major tax loopholes and curtail abusive tax haven secrecy.

The Cut Unjustified Tax (CUT) Loopholes Act, which was introduced in the U.S. Senate today by Senators Carl Levin (D-MI) and Kent Conrad (D-ND), contains several provisions to permanently close offshore tax loopholes, raise revenue, and increase transparency and accountability for multinational enterprises.

“Enactment of the CUT Loopholes Act would be a huge step forward,” said Raymond Baker, director of GFI. “It would scrap several egregious offshore tax loopholes—eliminating incentives to send money and jobs overseas, help level the playing field between small businesses and multinational corporations, increase information and transparency for corporate investors, and strengthen law enforcement and tax collection abilities.”

According to the Joint Committee on Taxation and the Office of Management and Budget, the CUT Loopholes Act would reduce the deficit by at least $155 billion over the next decade with $130 billion of that reduction being attributable to the bill’s offshore tax provisions.

Significant provisions of the legislation would:

• Stop companies run from the United States from claiming foreign status and dodging U.S. taxes on their foreign income (§103) by treating foreign corporations that are publicly traded or have gross assets of $50 million or more and whose management and control occur primarily in the United States as U.S. domestic corporations for income tax purposes.
• Require annual country-by-country reporting (§111) by SEC-registered corporations on employees, sales, financing, tax obligations, and tax payments.
• Strengthen John Doe summons (§115) by streamlining the process used by the IRS to issue summons to a class of persons, such as the clients of an offshore bank, accounting firm, or law firm, while strengthening court oversight.
• Strengthen penalties (§§121-122) on tax shelter promoters and those who aid and abet tax evasion by increasing the maximum fine to 150% of any ill-gotten gains.

GFI was particularly pleased to note the section on country-by-country reporting.

“The country-by-country reporting provision adds a layer of pro-investment, best practices accountability to this bill,” said Mr. Baker. “For investors, the more information available about a company’s business practices and balance sheets, the better. This reporting requirement would also help anti-corruption and economic development efforts in developing countries by creating more transparency with respect to whether a multinational is contributing to the tax base of the developing countries in which it operates, or whether it is engaging clever accounting tricks to move that money to tax havens.”

A full summary of the legislation can be found here.

###

Notes to Editors:

1. Click here to read Sen. Levin’s and Sen. Conrad’s press release on the legislation
2. Click here to read a full summary of the legislation.
3. Click here for more information on country-by-country reporting.
4. Click here to read the Financial Accountability & Corporate Transparency (FACT) Coalition’s statement on the legislation.

Contact:

Clark Gascoigne
+1 202 293 0740 ext. 222
cgascoigne@gfintegrity.org

__________

Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system.

For additional information please visit www.gfintegrity.org.

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Study Recommends Policies Be Implemented to Address Trade Mispricing, Money Laundering, Tax Evasion

MEXICO CITY / WASHINGTON, DC – Crime, corruption and tax evasion cost the Mexican economy US$872 billion between 1970 and 2010 according to a new report from Global Financial Integrity (GFI), a Washington, DC-based research and advocacy organization. The illicit financial outflows, which averaged a massive 5.2% of GDP, grew significantly over the 41-year period studied from just US$1 billion in 1970 to US$68.5 billion in 2010.

“This is a devastatingly large amount of money for any developing country to lose,” said Raymond W. Baker, director of GFI. “$872 billion is gone, which could have been used to develop the Mexican economy, to invest in education, to build roads, or to fight the drug cartels. The negative ramifications are huge for everyday Mexicans.”

The study, which was authored by Dr. Dev Kar, GFI lead economist, saw illicit outflows explode from an annual average of US$3.0 billion in the 1970s, to US$10.4 billion in the 1980s, to US$17.4 billion in the 1990s, and US$49.6 billion in the decade ending 2009.

Underground Economy

Moreover, illicit outflows were found to drive the domestic underground economy, which includes—among other things—drug smuggling, arms trafficking and human trafficking. Thus, illegal capital flight was found to contribute to a deterioration in governance. Likewise, growth in the underground economy was also shown to drive illicit flows, creating “a snowballing effect whereby both the underground economy and illicit flows continue to grow at an increasing rate unless policy measures and institutions intervene,” according to Dr. Kar, who worked as a senior economist at the International Monetary Fund before joining GFI.

Trade Mispricing and NAFTA

The report concluded that policymakers should focus on measures to curtail trade mispricing, a form of trade based money-laundering, which skyrocketed in the years after NAFTA came into effect and which was shown to account for 73.7% of total illicit financial outflows over the 41-year time period.

The study recommends three policy measures to reduce trade mispricing:

• Require the utilization of computer software to detect export and import prices that are clearly out of line with international norms; (49)
• Require that the parties conducting a sale of goods or services in a cross-border transaction sign a statement in the commercial invoice certifying that no trade mispricing has taken place in an attempt to avoid duties or taxes and that the transaction is priced using the OECD arms-length principle; (51) and
• Undertake additional measures to curb abusive transfer pricing. (51)

Further Policy Recommendations

In addition to recommending policies to curtail trade mispricing, the report recommends four additional policy actions to reduce illegal capital flight from Mexico:

• Expand double tax avoidance agreements with other jurisdictions; (53)
• Require automatic cross-border exchange of tax information with other jurisdictions on personal and business accounts; (54)
• Maintain macroeconomic stability, which includes maintaining low budget deficits, low external debt levels, and low and stable inflation rates; (56) and
• Take steps to reign in the role of offshore financial centers (OFCs) and banks. (59)

Destination of Illicit Outflows

While the report cannot specifically breakdown into which jurisdictions illicit outflows from Mexico are deposited, the study does indicate that a majority of Mexican capital outflows, which include both licit and illicit capital, end up in U.S. banks. The large spike in illicit outflows following the implementation of NAFTA would imply that much of those outflows were indeed headed for the United States. This suggests that U.S. policymakers have a significant role to play in curtailing the flow of illicit money out of their southern neighbor.

In addition to the U.S., tax havens in the Caribbean and Europe were the second and third largest recipients of Mexican capital outflows.

Drug Cartels and National Security Risk

A large portion of drug cartel activity is conducted in cash, and none of those cash transactions are detected in GFI’s data, which is one of the reasons why the organization believes its figures to be extremely conservative. That said, drug cartels like many criminal enterprises also utilize legitimate commercial transactions to launder their profits. In fact, the Los Angeles Times reported last month that Mexican drug cartels were utilizing trade-based money laundering techniques to move their money across the U.S.-Mexico border. Those kinds of business transactions would show up in the organizations data, however it cannot be determined exactly how much of the trade mispricing in GFI’s report is attributable to the activities of drug cartels.

As such, the organization believes that this has serious implications for national security.

“The ease with which money can be laundered across the U.S.-Mexico border via trade mispricing poses a major national security risk to both the United States and Mexico,” said Mr. Baker. “Drug traffickers, like kleptocrats, terrorists and tax dodgers, all gain from anonymous shell companies, tax haven secrecy, and nefarious trade mispricing tactics. Taking steps to address these issues would curtail a number of societal ills.”

###

Notes to Editors:

• Download an embargoed full copy of the report in English here [PDF - 3.56MB] and in Spanish here [PDF - 3.52MB].
• A media tip-sheet is available to journalists for download in English here [PDF - 197KB] and in Spanish here [PDF - 122KB].
• Download this press release as a PDF in English here [PDF - 387KB] and in Spanish here [PDF - 101KB].
• Press briefings will be held in Mexico City and in Washington, DC on Monday January 30, 2012. The Mexico City press briefing will take place at the Hilton Mexico City Reforma Hotel on Monday, January 30, 2012 at 11am CST. To RSVP for the Mexico City press briefing, contact Clark Gascoigne at cgascoigne@gfintegrity.org. The Washington, DC briefing event will take place at 1319 18th Street NW, Suite 200, Washington, DC at 10am EST on Monday January 30, 2012. To RSVP for the Washington, DC launch event, contact EJ Fagan at efagan@gfintegrity.org.

Contact:

English:

Mexico City/Washington, DC:

Clark Gascoigne
cgascoigne@gfintegrity.org
+1 202 293 0740 x222 (office)

Washington, DC:

EJ Fagan
efagan@gfintegrity.org
+1 202 293 0740 x227

En español:

Mexico City:

Emilene Martínez
emilene17@gmail.com
+52 1 55 6010 0835

_____________________________

Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system.

For additional information please visit www.gfintegrity.org. 

Follow us on: Twitter | Facebook | YouTube

World leaders’ inability to articulate a narrative beyond a long, hard march out of economic malaise ultimately caused by politicians’ and regulators’ failure to adequately supervise the financial system is resulting in widespread disillusionment with mainstream politics that threatens to undermine faith in democracy. World leaders need to respond quickly, and the finance community must play its role.

Raymond Baker, director of the Task Force on Financial Integrity and Economic Development, said: “There is money in the global financial system that, if accessed and used wisely, could go a long way to mop up deficits and reinvigorate the global economy. That treasure trove includes the $3.1tn of tax, equivalent to 5.1% of global GDP, which is illegally evaded in 145 countries, covering 98.2% of the world’s population, as well as the billions that go missing due to corruption. Developing countries alone have lost $903bn in illicit outflows during 2009.

“Tax havens play a facilitating role in moving illicit money around the globe. These secrecy jurisdictions act as cover from international tax authorities. Disturbingly, the obstacles placed by the global financial system that would allow individual countries to track down and repatriate this cash are prohibitively burdensome. This is why the Task Force on Financial Integrity and Economic Development believes a new age of financial transparency and accountability is required.”

The Task Force believes five key reforms would lay the foundations for this:

1. The rapid introduction of multilateral automatic tax information exchange between tax agencies in every single jurisdiction. This would ensure money illegally held offshore was easily identified and accounted for.

2. The introduction of new levels of financial transparency requiring the public disclosure of the ultimate human beneficiaries of companies, trusts and foundations. This is needed to prevent the further subversion of countries’ tax bases whether by high net worth individuals, businesses, corrupt politicians, criminals or terrorists. It is also required to restore faith in the rule of law and the democratic process as the current non-disclosure of beneficial ownership is corruption’s best friend.

3. The global introduction of country-by-country reporting so that every company has to publicly state financial details relating to its turnover, profits, costs, employees and taxes in every jurisdiction it operates in where its revenues exceed $5m. It is astounding that in the 21st century, it is impossible for citizens in many resource-rich nations to establish whether their country has got a fair deal from its oil, gas or minerals.

4. Concerted international action needs to be taken to ensure the hundreds of billions of dollars lost to exchequers by companies artificially inflating their costs and deflating profits through intra-company transactions – known as transfer mispricing – is identified, contained and reduced.

5. The harmonisation and codification of money-laundering laws to a restrictive level – and their proper enforcement. Even the City of London shows brazen disregard for rules to stop money laundering, according to a report last June by the UK’s Financial Services Authority.

Contact:

Dietlind Lerner
dlerner@financialtaskforce.org
+1 202.577.3455

Nick Mathiason
nmathiason@financialtaskforce.org
+44 7799.3486.19

Notes to Editors:

1. The Task Force on Financial Integrity and Economic Development is a coalition of 50 governments and leading NGOs including Christian Aid, Eurodad, Global Financial Integrity, Global Witness, Tax Justice Network and Transparency International.
2. The Cost of Tax Abuse by the Tax Justice Network published in November found that $3.1tn of tax, equivalent to 5.1% of global GDP, which is illegally evaded in 145 countries, covering 98.2% of the world’s population.
3. A report by Global Financial Integrity published in December found that the developing world lost $903bn in illicit outflows in 2009.

‘It’s great that Mr Miliband has recognised that tax haven secrecy is damaging people in the UK, by providing a cover for people and companies to hide their wealth and avoid paying the taxes that are so urgently needed,’ said Dr David McNair, Christian Aid’s Principal Adviser on Economic Justice.

‘But we hope the Labour leader will also recognise that financial secrecy has devastating effects on public services and people’s lives across the world, especially in poor countries.

‘Christian Aid estimates that tax dodging costs poor countries $160 billion a year, which is much more than they receive in aid. So they, too, need action to shed light on offshore accounts and other wealth which may be liable for tax.

‘This is an international problem and it demands international solutions, starting with a global end to tax haven secrecy.

‘It would be fantastic to see the Labour party join the campaign to End Tax Haven Secrecy, demanding that G20 countries commit to a global deal under which all tax havens have to reveal that information to all tax authorities. Only then will tax dodgers have nowhere to hide.’

In 2011, Christian Aid and its partners delivered a petition to G20 chair Nicolas Sarkozy, which was signed by 40,000 people, and 52 organisations from more than 20 countries.

Dr McNair added: ‘As a first step, we encourage Mr Miliband to do all he can to reverse the UK’s shameful deal with Switzerland, one of the most globally harmful of all tax havens, which effectively rewards offshore tax evaders and undermines the global call for tax haven transparency.’

- Ends -

To arrange an interview with David McNair or for more information, please contact Rachel Baird on 0207 523 2446 or rbaird@christian-aid.org

Notes to Editors:

1. Christian Aid works in some of the world’s poorest communities in nearly 50 countries. We act where the need is greatest, regardless of religion, helping people build the lives they deserve.

2. Christian Aid has a vision, an end to global poverty, and we believe that vision can become a reality. Our report, Poverty Over, explains what we believe needs to be done – and can be done – to end poverty.  Details at http://www.christianaid.org.uk/Images/poverty-over-report.pdf

3. Christian Aid is a member of the ACT Alliance, a global coalition of 100 churches and church-related organisations that work together inhumanitarian assistance and development.  Further details athttp://www.actalliance.org

4. Follow Christian Aid’s newswire on Twitter:http://twitter.com/caid_newswire

5. For more information about the work of Christian Aid visitwww.christianaid.org.uk

Proposals to Amend Foreign Bribery Law Could Significantly Undermine Human Rights, Commerce, U.S. Standing in the World

WASHINGTON, DC – Earlier today more than 30 civil society and business groups, including human rights and anticorruption organizations, sent a letter to every member of the U.S. House of Representatives and U.S. Senate expressing their opposition to any efforts to amend the world’s flagship anticorruption legislation, the U.S. Foreign Corrupt Practices Act (FCPA).

The signatories, who include, among others¹, Amnesty International, Calvert Investments, Citizens for Responsibility and Ethics in Washington, EarthRights International, Global Financial Integrity, Global Witness, Human Rights Watch, International Corporate Accountability Roundtable, Jubilee USA Network, Open Society Policy Center, Oxfam America, Revenue Watch Institute and Transparency International-USA are concerned that Members of Congress in both the House and Senate are considering introducing legislation that would weaken the decades old law.

The organizations stated in their correspondence that any narrowing of the law, which serves as the model for other international anticorruption conventions and foreign anticorruption laws, would have a negative effect on global commerce, human rights, and the standing of the U.S. in the world.

We believe that any amendments to more narrowly define key terms of the FCPA would constrain the ability of the Department of Justice and the Securities and Exchange Commission to effectively enforce the FCPA, limit the potential liability of companies violating the FCPA to a greater degree than is already provided under the maximum sentencing provisions of the Act, and thereby significantly undermine the statute as a tool to curb corruption. 

Our constituencies are strongly opposed to any effort to open up this legislation.  Even the perception that the U.S. commitment to combating bribery is waning would weaken the global fight against corruption.  As leaders in the public interest community dedicated to advancing human rights and curbing corruption, we therefore urge you to halt any attempt to introduce amendments to the FCPA.

“Given that this is an anticorruption law, Members of Congress looking to amend the FCPA should consult with anticorruption and human rights organizations before considering the introduction of legislation,” said Global Financial Integrity Director Raymond Baker, who signed the letter on behalf of GFI. “It is critical that legislators comprehend that there is far more at stake than a local constituent’s short term bottom line.”

“It is important for Congress to understand that changes to the FCPA can send the wrong message and weaken the enforcement of anticorruption laws around the world,” added Claudia J. Dumas, President and CEO of Transparency International – USA, who also signed the letter and noted that the Department of Justice is working on guidance on the FCPA’s enforcement provisions.

“These proposals could deliver a devastating blow to the fight against human rights abuses and corruption across the globe,” said Simon Taylor, founding Director at Global Witness. “Lawmakers should not underestimate the level of support for the FCPA. Efforts to undermine it will be extremely damaging to the reputations of those involved,” he concluded.

1. The full list of organizations includes: the Advocates for Human Rights, Amnesty International, Asia Initiatives, Calvert Investments, Caux Round Table, Center for Corporate Policy, Citizens for Responsibility and Ethics in Washington (CREW), Crude Accountability, EarthRights International, EG Justice, Financial Accountability and Corporate Transparency (FACT) Coalition, Foreign Policy in Focus, Free the Slaves, Freedom House, Friends of the Earth – US, Global Financial Integrity, Global Rights, Global Witness, Human Rights Watch, International Corporate Accountability Roundtable, Jubilee USA Network, Just Foreign Policy, Main Street Alliance, New Rules for Global Finance Coalition, Open Society Policy Center, Oxfam America, Public Citizen, Publish What You Pay United States, Revenue Watch Institute, Tax Justice Network – USA, Transparency International – USA, United to End Genocide, and U.S. PIRG.
2. The full letter to members of the U.S. House of Representatives can be read here.
3. The full letter to members of the U.S. Senate can be read here.

Journalist Contacts:

Clark Gascoigne
cgascoigne@gfintegrity.org
+1 202-293-0740 ext.222

Stefanie Ostfeld
sostfeld@globalwitness.org
+1 202-621-6674

The report find that sudden surges and stops in cross-border financial flows, which have been increasing in frequency, risk generating new financial crises in both rich and poor countries.

A report by the Bretton Woods Project, Time for a new consensus, “explains the drawbacks, especially for development, of policies to deregulate the movement of money across borders, and makes suggestions for a new pragmatic approach to regulation of financial flows to ensure stability and development.” It argues that these flows should be managed more effectively in both source countries (like the US and UK) and recipient countries (like Brazil and Turkey).

Peter Chowla, Bretton Woods Project programme manager, said:

“The massive storm brewing in Europe makes it all the more important that countries prepare themselves for dangerous economic shocks, especially risk aversion by investors and capital flight. Developing countries need to put in place pragmatic, preventative regulations that can help prevent financial speculators wreaking havoc.”

A second report, published jointly by the Bretton Woods Project and Peru-based network Latindadd, Breaking the Mould, examines policies in Argentina, Brazil and Costa Rica to show how capital account regulations can help not only achieve financial stability, but also prevent unwarranted appreciation of the exchange rate and increase the ability to use monetary policy effectively. It finds that regulations on financial flows have a role in supporting broader development goals like employment creation and poverty reduction.

Jorge Coronado, an expert consultant for Latindadd, said: “The Latin American experience provides important lessons for Europe and the rest of the world. Development goals are best achieved by combining sensible regulation of finance with progressive economic policies. ”

Juan O’Farrell of the Bretton Woods Project said: “With Brazil joining Argentina in scepticism of too much reliance on volatile capital markets, Latin America is staking out a strong position in the G20 that excessive globalisation of finance is too dangerous.”

For information:

Peter Chowla, +44 (0) 7877 596 893 / pchowla@brettonwoodsproject.org

Juan O’Farrell, +44 (0) 203 122 0728 / jofarrell@brettonwoodsproject.org

Notes to editors

A preview of Time for a new consensus is available at
http://brettonwoodsproject.org/art.shtml?x=569411

A preview of Breaking the Mould is available at:
http://brettonwoodsproject.org/art.shtml?x=569425

Time for a new consensus explains the drawbacks, especially for development, of policies to deregulate the movement of money across borders. It also looks at the potential advantages of regulating flows, despite the assumption of international institutions such as the IMF and World Trade Organisation (WTO), as well as in the European Union and rich country governments, that this will be harmful. It argues that a new consensus around prudential and pragmatic capital account policies and their enforcement can facilitate financial stability, sustainable growth, and social development.

Breaking the Mould looks in depth at capital account regulations implemented in Argentina, Brazil and Costa Rica. While in Argentina the capital account regulations implemented since the 2001 crisis are part of a comprehensive policy ‘toolkit’ which represents a U-turn from 1990s financial liberalisation, in Brazil and Costa Rica the measures implemented come as isolated policies responding to a particular context of high capital inflows stimulated by low interest rates in rich countries. The report argues that the policy changes in these three countries are just first steps in the shift towards capital account regulations that work for the people. In order to increase the effectiveness and development impact of capital account management techniques they have to be implemented early on as part of a comprehensive policy framework and not just as last resort, as advocated by the IMF.

Some new, but limited, thinking on these risks has emerged from the Bank of England and from the IMF in recent weeks. However, the Eurozone crisis will make consideration of regulation of cross-border financial flows even more important, as any country leaving the Eurozone will have to design policies to prevent massive capital flight. These policies are currently forbidden under the EU’s Lisbon Treaty.

On Monday, 12 December, the Bank of England published two new financial stability papers:

• FS Paper No 13, Reform of the International Monetary and Financial System, by Oliver Bush, Katie Farrant and Michelle Wright.
• FS Paper No 12, The future of international capital flows, by William Speller, Gregory Thwaites and Michelle Wright.

Report Finds Developing World Lost US$8.44 Trillion over the Decade 2000-2009

Global Financial Integrity

WASHINGTON, DC – Developing countries lost US$903 billion in illicit financial outflows in 2009 despite the massive slowdown in economic activity which rocked world markets in late 2008, finds a new study by Global Financial Integrity (GFI), a Washington-based research and advocacy organization.

“Illicit Financial Flows from Developing Countries over the Decade Ending 2009,” which estimates the developing world lost US$8.44 trillion over the decade ending in 2009, is GFI’s annual update on the amount of money flowing out of developing economies via crime, corruption and tax evasion, and it is the first of GFI’s reports to include data for the year 2009.

“This is a breathtakingly large sum at a time when developing and developed countries alike are struggling to make ends meet,” said GFI Director Raymond Baker.  “This report should be a wake-up call to world leaders that more must be done to address these harmful outflows.”

While US$903 billion marks a drop from the US$1.55 trillion¹ that illicitly flowed out of the developing world in 2008, the study finds the decrease is almost entirely attributable to the global financial crisis rather than any governance improvements or economic reforms.

The study, which was co-authored by GFI Lead Economist Dev Kar and GFI Economist Sarah Freitas, tracks the amount of illegal capital flowing out of 157 different developing countries over the 10-year period from 2000 through 2009, and it ranks the countries by magnitude of illicit outflows. According to the report, the 20 biggest victims of illicit financial flows over the decade are:

1. China ……………………………………… $2.74 trillion
2. Mexico …………………………………….. $504 billion
3. Russia …………………………………….. $501 billion
4. Saudi Arabia …………………………… $380 billion
5. Malaysia …………………………………. $350 billion
6. United Arab Emirates………………. $296 billion
7. Kuwait …………………………………….. $271 billion
8. Nigeria ……………………………………. $182 billion
9. Venezuela ………………………………. $179 billion
10. Qatar ………………………………………. $175 billion
11. Poland …………………………………….. $162 billion
12. Indonesia ………………………………… $145 billion
13. Philippines ……………………………… $142 billion
14. Kazakhstan …………………………….. $131 billion
15. India ………………………………………… $128 billion
16. Chile ………………………………………. $97.5 billion
17. Ukraine ………………………………….. $95.8 billion
18. Argentina ……………………………….. $95.8 billion
19. South Africa ……………………………. $85.5 billion
20. Turkey…………………………………….. $79.1 billion

For a complete ranking of average annual illicit financial outflows over the decade by country, please refer to Table 5 of the report’s appendix.

The report also reveals the top victims of illegal capital flight in 2009.  The top 20 countries suffering the highest illicit outflows in 2009 were:

1. China ……………………………………… $291 billion
2. Saudi Arabia …………………………… $82.3 billion
3. Poland ……………………………………. $66.3 billion
4. Malaysia ………………………………… $46.8 billion
5. Mexico …………………………………… $34.6 billion
6. Nigeria ………………………………….. $33.4 billion
7. Russia ……………………………………. $23.4 billion
8. Indonesia ……………………………….. $20.5 billion
9. United Arab Emirates ……………… $19.5 billion
10. Venezuela ………………………………. $18.8 billion
11. Iran ………………………………………. $18.1 billion
12. Azerbaijan ……………………………… $14.3 billion
13. Chile ……………………………………… $13.1 billion
14. South Africa …………………………… $12.9 billion
15. Vietnam ………………………………… $12.5 billion
16. Philippines ……………………………… $12.1 billion
17. Argentina ………………………………. $11.7 billion
18. Thailand ………………………………… $10.8 billion
19. Romania ……………………………….. $10.0 billion
20. Ukraine …………………………………. $9.8 billion

To schedule an interview with GFI spokespersons on this report, contact Clark Gascoigne at +1 202 293 0740, ext. 222 or cgascoigne@gfintegrity.org. On-camera spokespersons are available in Washington, DC.

For more information on the report, visit http://iffdec2011.gfintegrity.org.

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Footnotes:

1. GFI’s previous annual study of illicit financial flows out of developing countries, “Illicit Financial Flows from Developing Countries: 2000-2009,” published in January 2011, found that US$1.44 trillion had flown out of developing economies in 2008.  Due to revised/improved World Bank and IMF data, GFI’s new report estimates that US$1.55 trillion is a more accurate measurement of illicit financial outflows in 2008.

Notes to Editors:

• The full embargoed report can be downloaded here [PDF 2.90 MB].
• A tip-sheet for journalists can be downloaded here [PDF 155 KB].

Contact:

Clark Gascoigne
cgascoigne@gfintegrity.org
+1 202 293 0740, ext. 222

__________

Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system.

For additional information please visit www.gfintegrity.org. 

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Global Financial Integrity

WASHINGTON, DC – Global Financial Integrity (GFI) will tonight present Senator Carl Levin (D-MI) with the organization’s 2011 annual Award for Exemplary Leadership in acknowledgement of his untiring efforts on behalf of financial integrity in the U.S. and abroad.  Sen. Levin will accept the award this evening at a gala dinner hosted by GFI in his honor at The Army and Navy Club in Washington, DC.

“We are thrilled to honor Sen. Levin’s many distinguished contributions in pursuit of transparency and accountability in our financial system,” said GFI Director Raymond Baker. “For many years, Senator Levin has been at the forefront of both foreign and domestic anticorruption and tax justice efforts.”

“As chairman and ranking member of the U.S. Senate Permanent Subcommittee on Investigations, Sen. Levin has played a pivotal role in exposing many of the biggest financial fraud schemes of the past decade. He led efforts to investigate offshore abuse in the collapse of Enron, exposed rampant money-laundering facilitation on behalf of foreign dictators at Riggs National Bank, and more recently, held hearings revealing how both UBS and LGT Bank helped thousands of wealthy Americans evade paying taxes to the IRS,” added Mr. Baker.

In the current Congress, GFI notes that Senator Levin has sponsored three pieces of legislation which would promote financial integrity.  They are:

1. The Stop Tax Haven Abuse Act (S. 1346);
2. The Incorporation Transparency and Law Enforcement Assistance Act (S. 1483); and
3. The Equal Access to Tax Planning Act (S. 139).

Senator Levin is the third person to receive this honor from GFI.  The award was first given in December 2009 to then-retiring New York District Attorney Robert M. Morgenthau.  Eva Joly, chairperson of the European Parliament’s Development Committee, received the 2010 award.

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Contact:

Clark Gascoigne
cgascoigne@gfintegrity.org
+1 202 293 0740 ext.222

______________

Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system.

For additional information please visit www.gfintegrity.org. 

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