By Michele Fletcher, July 16, 2014
Reforms Will Need to Be Further-Reaching and Institutionally Minded if China Hopes to Truly Curb Corruption and Illicit Financial Flows
The coverage of China’s financial sector has been quite the roller coaster of late: from President Xi Jinping’s anti-corruption campaign to bad loan collateral to CCTV’s exposure of the Bank of China’s “money laundering” schemes, it’s hard to discern the emerging country’s financial status.
However, one thing remains eminently clear: China has a deeply systemic illicit financial flow problem. It comprises both the individuals singled out in Xi’s purge (and a myriad of those who are not) as well as the corporations that facilitate this illegal behavior. According to our research, China remains the largest exporter of illicit money, with over a trillion dollars flowing illegally out of the country from 2002-2011:
By Michele Fletcher, June 20, 2014
The Transatlantic Trade and Investment Partnership seeks to unite U.S. and EU markets: a gigantic trade deal uniting over 800 million consumers across the United States and the European Union, and yet all its important documents remain shielded...
By Grace Zhao, June 20, 2014
Capable and effective institutions and the rule of law benefit all sustainable development goals.
This is one of the arguments brought up by a number of NGOs, including Global Financial Integrity, in an open letter to the UN’s Open Working Group. Scroll down to read the open letter.
The Open Working Group is a 30-member group of the General Assembly of the UN that is responsible for preparing sustainable development goal proposals. As the deadline for the Millennium Development Goals approaches, an action plan for post 2015 has started. The Open Working group was established in January 2013 to draft a series of objectives for the post 2015 development agenda.
The Open Working Group has proposed 17 Sustainable Development Goals to be obtained by 2030, one of which is Goal 16.
By Tom Cardamone, June 16, 2014
GFI Calls for the Adoption of a Sustainable Development Goal (SDG) Aimed Strictly at Halving Illicit Financial Flows from Trade Misinvoicing by 2030
Since the beginning of the year, the UN’s Open Working Group (OWG) has been wrestling with a nearly herculean task: to winnow a set of roughly 200 suggested Post-2015 sustainable development goals (SDGs) down to about a dozen. The process will culminate with the list being presented to the UN General Assembly (UNGA) during its annual meeting in September. The UNGA will then have one year—until the next UNGA meeting—to consider and, perhaps, amend the list. By September 2015, the international community’s roadmap toward sustainable development will be set in stone for the next 15 years. Simply put, there is a lot riding on what the OWG does in the next three months.
The current list of potential OWG recommendations covers the gamut from reductions in corruption to significant improvements in clean water, education and health care. While Global Financial Integrity (GFI) is pleased to see that the OWG has included a target to reduce illicit financial flows (IFFs)—which are estimated at close to $1 trillion annually—we believe the language as currently drafted is flawed.
As written, the IFF target (goal 16.3) is coupled with numerous other issues—including reductions in organized crime, human trafficking, and drug smuggling—making it unwieldy, unmeasurable and, as a result, unachievable. We believe a concise SDG target on IFFs will have a far greater chance of being proposed by the OWG and approved by the General Assembly.
By Michele Fletcher, June 11, 2014
Boko Haram developed from social unrest, poverty, and a strong disillusionment with the corruption of the Nigerian government. Today, the same factors make Boko Haram lethal.
Nigeria’s rampant corruption has left the nation unequipped to deal with security concerns, especially along porous borders through which Boko Haram receives immense support. A look at one of their videos reveals an immense amount of weaponry that is not only costly, but very difficult to obtain.
Boko Haram is capitalizing on the destitute and weak areas in the north of Nigeria to extract money from civilians, as well as financial opacity to receive funding from international criminal networks, and channel it towards arms acquisition from abroad: one of many examples of the inextricable link between financial concerns and national security.
By Michele Fletcher, June 10, 2014
On Wednesday, representatives from the Senate, European Embassies of Luxembourg, the Netherlands, and anti-corruption NGOs, including GFI’s Tom Cardamone, gathered in the U.S. Senate’s Kennedy Caucus Room to discuss the growing dangers of illicit financial flows in Europe as major contributors to the European financial crisis.
U.S. Senator Jeff Sessions (R-AL) spoke about his experience with Russia’s systematic aggression in the Balkan areas, and advised they take a stronger stance against Russian encroachment. Dependence on American financial and military hegemony in the region is not a sustainable security solution, he added. Sessions, who also served as Attorney General of Alabama, urged that Central and Eastern Europe push for anti-corruption and transparency laws.
I am convinced that prosperous and open societies make the world better. The values of financial integrity are exactly what we need.
All agreed that financial integrity is the linchpin of stability and security. Hon. Becky Norton Dunlop, Vice President of the Heritage Foundation, said:
Ensuring transparency is key to dealing with corruption.
This is not just a Republican issue. This is not just a Democratic issue; this is an issue for all Americans.
The crisis in Crimea was preventable, argued Natasha Srdoc, Chairman of the Adriatic Institute for Public Policy. Regional stability is greatly undermined by Western European banks promoting fraudulent transactions in the Balkans. Had Ukraine formally broken its ties to Russia and joined the EU, it could have deterred Russia from annexing Crimea. Yet joining the EU may also have exposed the corruption schemes of Ukrainian elites, including that of former President Viktor Yanukovych and former PM Pavlo Lazarenko, whose own anonymous shell company was based in Wyoming.
By E.J. Fagan, May 29, 2014
In his official first act after winning the biggest democratic election in world history, Indian Prime Minister Narendra Modi announced the formation of a Special Investigative Team (SIT) to probe illicit financial flows, or ‘black money’ as they are commonly referred to in India.
Illicit financial outflows are a massive problem for India. GFI research finds that India lost $343.9 billion to illicit outflows from 2002-2011:
By Brian LeBlanc, May 23, 2014
It can be tough to impose economic sanctions against Russian citizens if you can’t find their money. Russia’s very complex relationship with tax havens could make this more difficult.
It is also tough to try to pinpoint exactly how much Russian money is being held in tax havens due to the fact that a lot of it isn’t reported to Russian officials/international organizations like the IMF (that’s the whole point of hiding your money in a tax haven).
The amount that is actually reported is pretty jaw-dropping. Approximately 61% of Russia’s $403 billion in outward Foreign Direct Investment (FDI) is held in tax havens:
Just to be clear, FDI is any amount of investment in a entity which gives the investor some control over that entity’s operations. So, if a Russian billionaire incorporates an entity in Cyprus (often these entities in tax havens are just bogus “shell” entities), and invests $1,000,000 into the entity, that will show up in the FDI statistics.