By Heather Lowe, October 30, 2014
Everyone Should Be Able to Determine with Whom They Are Doing Business, Writes GFI’s Heather Lowe
On Monday of this week, the Financial Action Task Force (FATF), the body setting international anti-money laundering standards, published new Guidance on Transparency and Beneficial Ownership, detailing a variety of ways in which countries can comply with FATF Recommendations 24 and 25 (which relate to transparency and beneficial ownership of legal persons and arrangements) and sending the message that complaining about the difficulty of compliance is no longer an option. FATF consulted with the Organization for Economic Cooperation and Development (OECD) on this publication, recognizing that identification of the beneficial owners of legal entities and arrangements is not only a money laundering issue, but a fundamental element of the OECD’s new multilateral automatic exchange of financial information. What neither FATF nor the OECD appears to have yet grasped, however, is that beneficial ownership – knowing who is ultimately behind a company – is a matter of sound business practice. Everyone should be able to determine with whom they are doing business.
That lack of understanding was evident on page 21 of the Guidance, where FATF made it clear that it was supportive of countries choosing to create publicly accessible registries for information, as the UK is in the process of creating. FATF stated that:
“although this is not required by the FATF Recommendations, some countries may be able to provide public access to information through a searchable online database.”
The rationale behind this, they say, is that it:
“would increase transparency by allowing greater scrutiny of information by, for example, the civil society, and timely access to information by financial institutions, DNFBPs and overseas authorities.”
While we civil society folks appreciate what appears to be an attempt by FATF to demonstrate that they have heard civil society’s drumbeat on this issue, unfortunately what this shows is that they have not yet understood the variety of reasons for that drumbeat.
By Tom Cardamone, October 2, 2014
A Quarterly Newsletter on the Work of Global Financial Integrity from June through September 2014
Global Financial Integrity is pleased to present GFI Engages, a quarterly newsletter created to highlight events at GFI and in the world of illicit financial flows. We look forward to keeping you updated on our research, advocacy, high level engagement, and media presence. The following items represent just a fraction of what GFI has been up to since May, so make sure to check our new website for frequent updates.
U.S.-Africa Leaders Summit
The big news this quarter was the U.S.-Africa Leaders Summit held in Washington, D.C. in early August, which brought together leaders from fifty African nations with President Obama, and included a ground-breaking announcement that a joint high-level working group on illicit financial flows would be formed. GFI participated in the summit’s Civil Society Forum as well as several additional side events, and were proud to partner with the Open Society Foundations (OSF) and other organizations to host the event “Resources for the Future: Partnering with Civil Society for Transparency and Accountability in Africa,” which celebrated the role of civil society in advocating for transparency and accountability in Africa and discussing ways to make further progress. The high-caliber roster of speakers are too numerous to list here, but included Vice President Joseph Boakai of Liberia; George Soros, founder of OSF; Mo Ibrahim, founder of the Mo Ibrahim Foundation; and Mojanku Gumbi, a trustee of the Thabo Mbeki Foundation. The public event was followed by an African-U.S. civil society working session.
By Tom Cardamone, September 30, 2014
GFI Calls for a Sustainable Development Goal (SDG) to Halve Illicit Flows from Trade Misinvoicing by 2030
As I noted in yesterday’s post, the momentum toward global action on illicit flows by the international community (i.e. the United Nations, OECD, G20, etc) has grown substantially over the past three years. Indeed, last October, the World Bank Group noted that “there is little doubt that [illicit] flows have a pernicious impact on development” and the UN group working on development financing said that “domestic resource mobilization is being severely undermined by illicit financial flows.” And, in January, the African Union stated that “it is imperative to curtail illicit financial flows [to ensure] the efficient and effective use of resources.”
But, while there is an understanding of the problem and a willingness to act, there is no broad consensus on what should be done. The opportunity that presents itself comes from a once-in-a-generation confluence:
- the international community agreeing on the need to reduce illicit financial flows (IFFs), and
- 2) the fact that the Post-2015 development agenda is open for debate.
The political will already exists to address the IFF challenge in concrete ways. Now, the question is: what does a SMART (i.e. Specific, Measurable, Achievable, Relevant, Time-bound) SDG target on illicit flows look like?
By Tom Cardamone, September 29, 2014
GFI Participates in High Level OECD Side-Event on Curbing Illicit Flows during UN General Assembly Meetings
On September 24th, tucked away in a quiet conference room in the basement of the UN General Assembly building, an extraordinary conversation took place on the future of global development. But, despite the gathering of representatives from the OECD, UN, World Bank, USAID and the Mexican, Australian, and Nigerian governments, the event received exactly zero media coverage.
Titled “Curbing Illicit Financial Flows for Domestic Resource Mobilization and Sustainable Development in the Post-2015 Era,” the focal point of the two-hour discussion was how the international community could, as the program description put it, “identify concrete international actions needed” to curtail illicit financial flows out of developing country economies. While other events were given more airtime and other issues may require more immediate attention, some ideas presented at the panel could be transformational in terms of how countries address the scourge of illicit flows and how the development agenda is funded.
By Clark Gascoigne, September 23, 2014
GFI’s Current Methodology Finds Illicit Outflows from China Totaled US$1.08 Trillion from 2002-2011, Not US$2.83 Trillion from 2005-2011
With the anti-corruption drive underway in China, our estimates of illicit financial flows have been in the news a lot lately. This is for good reason; there is a ton of illicit money gushing out of China.
But, if you have been reading multiple stories on this topic, you might be a little confused about the precise scale of the problem facing China.
Prominent outlets such as the Financial Times, the South China Morning Post, and China Daily, among others, have all reported over the past week that:
“The US-based non-profit group Global Financial Integrity estimates illegal flows out of China amounted to $2.83tn between 2005 and 2011.”
While other major sources such as Businessweek and the Heritage Foundation have stated:
“Between 2002 and 2011, $1.08 trillion of illicit funds were spirited out of China, estimates Washington (D.C.)-based nonprofit Global Financial Integrity.”
These estimates are widely different. Some of these outlets must be incorrect in their reporting, right?
By Stefanie Ostfeld, Global Financial Integrity, August 25, 2014
Four Delaware Citizens Publish Letters in The News Journal of Delaware Urging their Congressional Delegation to Curb Anonymous Company Abuse
Our campaign to stop criminals using anonymous companies to cover their tracks is getting traction in some unexpected places.
Last month we wrote about how politicians in Delaware were starting to speak out about their state’s role as a corporate secrecy haven. Half of the state legislators had sent a letter to the Delaware Congressional Delegation, urging them to support bipartisan federal legislation introduced by Senators Levin (MI-D) and Grassley (IA-R) to deal with anonymous companies.
A few weeks ago we were invited to speak about this issue at a community forum organized by the Delaware chapters of Americans for Democratic Action and the National Association of Social Workers. I was on a panel with two Delaware state legislators, the head of a local social justice organization and the Deputy Secretary of State of Delaware.
Now we’re starting to see ordinary citizens from Delaware speak out as well. This week there have been a number of letters to the editor in the Delaware News Journal.
By Grace Zhao, August 22, 2014
U.S. Laws Enable the Outflow of Illicit Money from China, which Totaled US$1.08 Trillion from 2002 to 2011
Corrupt politicians, fugitive officials, and leaders on the lam have found a new safe haven to call home—the United States of America.
Interestingly enough, despite the sometimes contentious relationship between the two countries, the U.S. has now become the destination of choice for China’s “economic fugitives” running from corruption charges in their home country according to China Daily and the International Consortium of Investigative Journalists.
Many of these fugitives are known as “naked officials”, those who have moved their assets and family abroad to avoid regulations and scrutiny. Much of the time, these are high ranking leaders who have decided to move their wealth abroad should a corruption investigation arise.
By Max Heywood, Global Financial Integrity, August 12, 2014
Lionel Messi’s Tax Troubles Should Increase Pressure on Politicians to Curb the Abuse of Anonymous Companies
The ongoing prosecution of football super star Lionel Messi for alleged tax evasion made global headlines last week. Messi and his father Jorge are accused of evading 4.2 million euros (US$5.6m) in tax on sponsorship earnings in court documents submitted by the prosecutor.
The alleged tax evasion scheme was based on using a web of anonymous shell companies registered in tax havens such as Belize and Uruguay, as highlighted by our colleagues at Global Witness. These shell companies were linked to other anonymous companies in what the prosecutor calls “convenience jurisdictions” such as the UK and Switzerland.
