At the event, President Obama called open government “the essence of democracy.” Well put, sir.

Even more exciting, though, is the President’s commitment to the EITI or the Extractive Industries Transparency Initiative (EITI) through the OGP. The EITI is a voluntary framework under which governments publicly disclose their revenues from oil, gas, and mining assets. Likewise companies make parallel disclosures regarding payments they are making to obtain access to these resources. This data provides an important point of comparison and fosters integrity and accountability. Through the OGP, the United States has noted it is committed to implementing the EITI to “ensure that taxpayers are receiving every dollar due for extraction of our natural resources.” This is important because the U.S. is a major developer of natural resources and “collects approximately $10 billion in annual revenues from the development of oil, gas, and minerals on Federal lands and offshore.”  

President Obama is no stranger to transparency in extractive industries. In July of last year President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act–also known as the “financial overhaul bill”—into law.  And one provision of the bill created the Energy Security Through Transparency (ESTT) Act, which requires companies listed on the U.S. stock exchange to disclose payments to governments for oil, gas, and mining.  They will provide this information in their SEC filings and it will be publicly available. Senator Cardin, has said, “This provision is a critical part of the increased transparency and corporate responsibility that we are striving to achieve in the financial industry. . . We now have the tools to help people in resource-rich countries hold their leaders accountable for the money made from their oil, gas and minerals.”

Collin Swan, a former legal intern with Global Financial Integrity, noted in a previous Task Force blog that the “new commitment shows that the White House recognizes the ESTT amendment as an extension of a global movement in favor of similar disclosure requirements within extractive industries worldwide.” And the White House applauded the ESTT amendment for setting “a new standard for corporate transparency.”

With these two pieces—the EITI and the ESTT—the U.S. has taken a major step forward in promising transparency on both ends of the spectrum: in the public sphere and in the private domain.  Of course, the EITI must be implemented globally to be the most effective. The OGP is a promising forum for this progression, though. Through their OGP declarations, Indonesia has committed to being a fully compliant member of the EITI by 2012 and Norway has supported the EITI since it was founded 10 years ago, but has promised to follow-up on implementation under OGP.

There is still much work to be done in this arena, but we can be cautiously optimistic about the progress we saw today. And it is encouraging to see the United Statestaking a leadership role in this arena. President Obama deserves credit for not just talking about transparency and good governance, but also for taking action. Today, I feel just a little extra pride in being an American, and seeing our leaders living up to America’s ideals. As the President has said, it is our ideals that can light the world.

The next day John Keegan, my favorite historian of World War II, had a piece in the Daily Telegraphspeculating on the things America would do in reaction. Religious tolerance would be sacrificed to the necessity for security. Educational opportunities would be restricted for Muslims. Freedom of movement might be limited for whole classes of people. I wrote a rejoinder to Keegan, published two days later also in the Telegraph, arguing that if these things happened the terrorists would be the winners. In the months and years that followed, flawed leadership did cause America to make mistakes. Abu Ghraib, water boarding and Guantanamo remain scars on our national character. But by far, most Americans did not turn to intolerance. There was and is a core of decency and respect for others that remains evident across this land.

My heart, like that of many Americans, goes out to the people of Norway. We share the grief of your nation in the loss of life of government officials and tragically compounded in the loss of so many young people. Already politically sensitive, they had across their 76 individual skills and personalities more than 3,000 years of cumulative contributions to make to their country and their world. Among them were future doctors, scientists, engineers, business leaders, parliamentarians, perhaps a prime minister, perhaps even a Nobel Prize winner in his or her own right. The snuffing out of such promising lives is so senseless. Nearly every family will be touched directly or through acquaintances by this horrible act.

Norway’s tragedy will lead some to question the openness of the society. But it is that very openness that is the country’s greatest strength. Norway is the most liberal democracy in the world, it has the most transparent economy in the world, and it enjoys the highest standard of living in the world. I respectfully suggest that these characteristics of the society are not coincidental, but rather, complementary. They work together to give Norway, that is a country with a small population, an outsized influence on the world stage. Norway is looked up to as having gotten right the balance between the government and the people, the necessary kinship between freedom and prosperity.

Prime Minister Jens Stoltenberg is setting the right tone. This experience will not undermine the country’s democracy, nor its values, nor its commitment to a better world.

From afar, Norway is regarded by many as the brightest beacon among nation-states. Grieve, yes, and never forget this loss, but keep that brilliant beacon shining for all humankind.

This article was originally published in The Huffington Post on 29 July 2011

Baker says that Norway should “Move forward with what it thinks is right, and what it thinks the standards should be for the whole world. In a word, lead. On this issue of transparency in extractive industries, lead, and the whole world will follow.”

The video lasts 15 minutes.

OSLO, Norway – Global Financial Integrity Director Raymond Baker delivered remarks today on the importance of transparency in the extractive industries at the “Global Investors for Financial Transparency” meeting in Oslo, Norway. Mr. Baker focused on the importance of country-by-country reporting requirements for oil, gas, and mining companies. Attendees included high-level Norwegian and EU elected officials, regulators, investors, and representatives of the Oslo Stock Exchange.

The meeting was organized and financed jointly by the Norwegian Ministry of Foreign Affairs, the Revenue Watch Institute, and Publish What You Pay Norway. Norway is the world’s 5^th largest exporter of oil and gas and owns one percent of the world’s stocks.

Speakers at the event included:

• Jose Correia Nunes, Head of Unit Economic Governance and Budget Support in the EU Commission
• Roger Schjerva, Norwegian State Secretary in the Ministry of Finance
• Ingrid Fiskaa, Norwegian State Secretary in the Ministry of Foreign Affairs
• Ben Cardin, United States Senator
• Raymond Baker, Director, Global Financial Integrity
• Karin Lissakers Director, Revenue Watch Institute
• Bennet Freeman, Senior Vice President for Sustainable Research Calvert Investments
• Giuseppe van der Helm, President, Eurosif
• Jeanett Bergan, Director, Responsible Investments KLP

Mr. Baker will travel to Germany and Spain this week to meet with members of the Task Force on Financial Integrity and Economic Development’s Partnership Panel following today’s meeting.

Note to regional editors: To request an interview with Mr. Baker this week, contact Monique Danziger at +1 202 293 0740 or mdanziger@gfip.org.

###

Contact:

Monique Perry Danziger
mdanziger@gfip.org
+1 202 293 0740 ext. 222

——-

The Task Force on Financial Integrity and Economic Development addresses inequalities in the global financial system that penalize billions of people, and advocates for improved transparency and accountability.

Global Financial Integrity is a coordinating committee and founding member of the Task Force on Financial Integrity & Economic Development .

For additional information please visit http://www.financialtaskforce.org.

BAE Systems is a defense contractor with products and services for air, land, and naval forces, including electronics, intelligence, weapons, among many others.  It’s a British company, but over half of its $12 billion annual sales in its land and armaments business is with the United States. According to the Stockholm International Peace Research Institute, BAE is the largest armaments company in the world.

But BAE’s accomplishments seem all the more…noteworthy…given its colorful history.

In 2008 the Financial Times uncovered BAE paid £20 million to John Brendencamp, who was involved in supplying arms to the Zimbabwean army.  BAE made these alleged payments through a subsidiary in the British Virgin Islands, a secrecy jurisdiction.  The evidence strongly suggested these payments were in direct violation of the arms sanctions against Zimbabwe. At the time, BAE was under investigation in several other countries for bribery.

Just a year later the Sunday Independent revealed that BAE was legally shifting assets to Ireland, which is about 50% of the UK’s, to lower its tax bill. But here’s the best bit: what sort of entity was BAE using as the asset-shifting medium? A charitable trust.  For homeless people.

BAE was unable to provide details about the charitable trust’s activities, but noted “When dividend payments are due, or when residual funds become available under this financing … those funds will be paid to Arbutus Homeless Person’s Trust, which will then distribute them to its chosen charities.” At that point, no dividends had been paid.

Five years earlier, a small group of peace campaigners, called the Campaign Against Arms Trade (CAAT) accused BAE of espionage. Norway’s Ministry of Finance banned BAE from the Government Pension Fund because they develop central components for nuclear bombs. The defense contractor came under intense criticism for its development and sales of cluster bombs, which pose a huge threat to civilians because they contain “bomblets,” which don’t explode until much after the initial attack.

In 2010 BAE paid $50 million in fines to Britain for making payments to a government official in Tanzania. The same year, the company paid $400 to settle charges brought by the U.S. Department of Justice who claimed the company violated the Foreign Corrupt Practices Act (FCPA), which makes it illegal to pay bribes to foreign officials.

Listing all these transgressions, I’d get bored if I wasn’t so furious.

Today, the defense contractor agreed to pay a fine of nearly $80 million to settle an arms export controls case with the U.S. Department of State. It is the largest fine the Department has ever given. BAE faces 2,500 alleged violations, including: “unauthorized brokering of U.S. defense articles and services, failure to file annual broker reports, and failure to report the payment of fees or commissions.”

Something doesn’t add up here. BAE can make billions in contracts with the U.S. government, but at the same time hold a long, long (long!) list of violations of U.S. laws? Maybe $80 million seems like a big fine to the folks at State, but that’s chump change for BAE.

In a very recent article Nicholas Wagoner, a student at South Texas College of Law and Professor Drury Stevenson argue the SEC should use debarment from future government contracts, which is an allowable, but unused sanction for FCPA violations. “Debarment,” they reason “offers a far more potent deterrent than fines and penalties, as multinational contractors that conduct business with the U.S. are much less likely to view the sanction as merely a cost of doing business.”

So here’s my question. What about companies that have repeatedly paid for making bribes to foreign officials, spied on peace groups, sold weapons to dictators in violation of international sanctions, falsified government documents, and violated U.S. arms export controls? Can they get debarred?

NEW DELHI – India and Norway today signed a revised tax treaty for exchange of information between the two countries to prevent flows of black money and check tax evasion.

“This (the agreement) will replace the existing convention signed between the two countries on the same subject on December 31, 1986,” an official statement said.

Read more…

NEW DELHI: India and Norway are all set to expand the scope of their double taxation avoidance agreement (DTAA) to facilitate greater information exchange on potential cases of tax evasion. After changes to the Indo-Swiss tax treaty this would be the second such treaty that would be reworked to ensure smooth flow of information on tax-related issues.

This amended tax treaty will allow the income tax authorities to access information on bank accounts of Indians easily, but only in specific cases. The tax treaty was amended on the lines of Paris-based Organisation for Economic Cooperation and Development (OECD) Model Tax Convention that does not provide for roving enquiry, or fishing expeditions as they are commonly called.

Read more…

Prepared for IBIS, NCA, CRBM, Eurodad, Forum Syd and the Tax Justice Network

The report, entitled ‘Investments for Development: Derailed to Tax Havens: A report on the use of tax havens by Development Finance Institutions,’  looks at a critical area in the development activities of many European countries – the role of the Development Finance Institutions that they own in funding private sector investment in developing countries.

Development Finance Institutions (DFI) invest their capital in developing countries for the express purpose of advancing development in those places by promoting investment in local business. In this respect their activities can be compared to that of the European Investment Bank (EIB) and International Finance Corporation (IFC) – a part of the World Bank. At the end of 2008 the DFIs that were members of the European Development Finance Institutions network (EDFI) had combined funds invested of about €16.7 billion.

However, the business models of the DFIs has been subject to much criticism. Their investments have moved away from those areas normally associated with poverty relief – such as agriculture – and into areas like finance, hotels and telecoms. The DFIs have in many cases ceased to invest directly but do instead invest through funds over which they appear to have little control. And many of their investments are now routed through tax havens – and issue which attracted international attention when Norway banned their fund from investing, at least temporarily, in this way after the report of their  Commission on Capital Flight from Developing Countries attacked this practice in their report “Tax Havens and Development”.

The new IBIS report looks at these issues and suggests a new Code of Conduct for Development Finance Institutions to replace the one they have themselves recently proposed.

The Code is robust, and promotes transparency, accountability and a focus on local management of the investment Development Finance Institutions make.

Photo: Darrel Rhea/DesignRhea, Flickr

Some estimates suggest that illegal fishing causes an­nual financial losses of up to USD 23.5 billion. Much of this activity is carried out by large industrial fishing ves­sels which operate internationally. It results in a major loss of revenue and the effects on coastal states and the poorest countries, in particular, can be seen throughout the world.

Illegal fishing (or illegal, unreported and unregulated fishing, often referred to as IUU fishing) ignores nation­al jurisdictions and international agreements to manage marine resources. The effects on coastal states and their communities can be seen throughout the world. Developing countries are especially hurt, since illegal fishing deprives these communities an important pos­sibility to develop their economy. This activity exists where governance is weak and where states fail to meet their international responsibilities. It puts pressure on fish stocks, marine wildlife and habitats; distorts mar­kets and subverts labour standards; is a threat to food security; and creates a market for illegal fish. In addi­tion, the products and proceeds of illegal fishing have to be laundered into the legal market.

The Ministerially-led High Seas Task Force on IUU-fishing on the high seas wrote the following in a report in 2006:

IUU fishing is a high reward, low risk activity. For every illegal fisher that is apprehended, another one will appear. In the Southern Ocean, for example, organised syndicates play cat and mouse with authori­ties. The movements of patrol boats are monitored by spies and reported to the illegal fleet. Communication between vessels of the same fleet is kept to a mini­mum to avoid detection. If an interdiction is inevitable, older, less valuable, vessels are sacrificed to protect more valuable ones. Ownership structures involving multiple front companies are used to keep details from boat crews as well as authorities. Operational instruc­tions for the illegal fleet are passed down through front companies with vessel masters often not knowing who their real employers are.

And the Australian Institute of Criminology writes in their report, “A national study of crime in the Australian fishing industry,” that:

Systematic criminal involvement in the international traffic of illegally sourced fish products is facilitated by networking between different crime groups, as and when the need arises. A wide range of criminal activities may be associated with the illegal trade, including the concealment of financial transactions and profits. These crimes include violence, corruption, fraud, and money laundering, with the transfer of the proceeds of crime across networks and national borders through such methods as transfer pricing and underground banking.

In the UN fisheries resolutions adopted in 2008 and 2009 it is expressed concerns about links between international or­ganized crime and illegal fishing, and the General Assembly encourage inter­national forums and organizations to conduct studies into the issue.

The transnational nature of illegal fishing and the in­volvement of organized criminal groups is a complicat­ing factor for law enforcement agencies trying to inves­tigate these matters. It is important not to focus solely on direct enforcement at sea in efforts to understand illegal fishing, but to use criminal intelligence led investigations as well. It is important to take a “follow the money” approach, because the proceeds of illegal fishing activities tend to end up in tax havens.

As a consequence, Norway has established an advisory group against organized IUU-fishing for the purpose of establishing a closer cooperation between various law enforcement agencies. The project is a network of professional analysts from the Directorate of Fisheries, Norwegian Coast Guard, Police, the Taxation Department, the Customs Department and the Norwegian Coastal Administration.

Gunnar Stølsvik will be making a special presentation, titled “Illegal Fishing and Tax Evasion,” this Wednesday at 9:15am at the 2010 annual Task Force on Financial Integrity & Economic Development conference in Bergen, Norway. A live-stream of the presentation will be available here…

The Bryggen quarter in Bergen, Norway | Photo: techectomizer, Picasa

In just four short weeks the Task Force will host its second annual conference, and we want you to be there!  Titled Achieving Transparency: A Dialogue for Action, the 2010 annual conference of the Task Force on Financial Integrity and Economic Development will take place at the Radisson Blu Hotel Norge in beautiful Bergen, Norway from September 28-29, 2010.

The current financial crisis evidences the same lack of transparency in the global financial system that has affected developing countries for decades. Concrete, practical means exist for enhancing transparency to the benefit of rich and poor nations alike.

Speakers and panelists will address the Task Force’s five recommendation areas for achieving financial transparency: country-by-country reporting, knowledge of beneficial ownership, automatic exchange of tax information, curtailment of trade mispricing, and harmonization of predicate offenses among FATF countries. Breakout sessions will focus on upcoming projects and specific areas of concern within illicit financial flows, including a new financial integrity index, corruption, Millennium Development Goals, the G20 process, Africa’s concerns about illicit outflows, and more. Together, speakers and participants will contribute ideas for an action agenda aimed at achieving transparency, a plan that will guide the Task Force’s further programs!

In addition to being able to engage in discussions with area experts, participants will also hear from and speak with current (and future) global leaders such as Erik Solheim of Norway, Eva Joly of France, Mallam Nuhu Ribadu of Nigeria, and Rafael Espada of Guatemala.

Register today and view a copy of the agenda.  You can also check out speeches, presentations, and videos from last year’s conference in Washington, DC by clicking here…

The registration deadline is Tuesday, September 7^th, so mark your calendars!  Questions? Send me an email at cclough@financialtaskforce.org.

I look forward to seeing you in Bergen!