By Heather Lowe, May 29, 2015
This was a very exciting week for lawyers who are sports enthusiasts – the Department of Justice indicted fourteen FIFA officials, alleging that they are part of what one could conclude from reading the indictment is a massive, multifaceted, bribery ring. Informal allegations have been made before, and the whispers that FIFA is synonymous with bribery and corruption have been growing louder over the years. But this week the Department of Justice shouted it from the mountain top (or, perhaps more accurately, in front of a lot of the international press corps, which was probably more effective).
There are a number of interesting facets to the case that is now before us. The first is that for a case about bribery, a charge of bribery seems to be conspicuously absent. The Defendants were indicted for a “pattern of racketeering activity,” including charges of violating the Travel Act in aid of racketeering, money laundering, money laundering conspiracy, wire fraud, wire fraud conspiracy, and other charges that do not expressly include bribery. Why is that?
By Tom Cardamone, March 18, 2015
The “Zero Draft” of the Financing for Development Conference Outcome Document Should be Improved to Aim to Halve Illicit Flows from Trade Misinvoicing
On Monday, the United Nations released a so-called “Zero Draft” of the Financing for Development (FfD) Conference Outcome Document. Simply stated, this draft lays out the current political consensus on a vast array of development issues including how to address the growing problem of illicit financial flows (IFFs). It is by no means the final word on IFFs—or any other issue for that matter—but it gives a good indication where things are heading.
The draft proposes three specific steps to address IFFs, including:
- Developing “a proposal for an official definition of IFFs”,
- Developing “a proposal to publish official estimates [of IFF] volumes and breakdown,” and
- An international effort to “substantially reduce” the flow of IFFs.
These measures go a long way toward addressing a problem that has captured the attention of the development community over the last few years. For example, in 2013 the World Bank noted that “there is little doubt” that IFFs have a caustic effect on development, and last year the African Union noted that “it is imperative to curtail” illicit flows.
By Joseph Spanjers, January 20, 2015
As a Percent of GDP, Sub-Saharan Africa Suffers the Largest Illicit Outflows of Any Region in the World
Global Financial Integrity’s (GFI) latest annual report on illicit financial flows–released just last month–estimates the volume of illicit financial outflows from the developing world from 2003 to 2012. It is the first report to estimate these flows for 2012, when they reached a record US$991.2 billion.
Already, this US$991.2 billion figure is being cited quite a bit; it is the main figure cited in many of the articles of we’ve seen on the report in the media. Take, for example, this story in The Guardian, this article from Reuters, or this piece in The Wall Street Journal. It’s the big, flashy, almost-trillion dollar number.
However, I’d like to draw your attention to a different figure, one that emphasizes even more clearly the implications of illicit financial flows on development: 5.5.
By Joseph Spanjers, November 21, 2014
Mexico and Bangladesh Voice Support for a Clear Target on Curbing Illicit Financial Flows on the Sustainable Development Agenda
The United Nations is in the process of forming the post-2015 development agenda. These proposed Sustainable Development Goals (SDGs) will eventually replace the Millennium Development Goals (MDGs) that were agreed upon for 2000-2015. As with the MDGs, the SDGs will inform which development issues take priority in the coming years.
Sustainable Development Goal 16.4, as is currently proposed by the UN’s Open Working Group, calls on the international community to:
“by 2030 reduce illicit financial and arms flows, strengthen recovery and return of stolen assets, and combat all forms of organized crime.”
Global Financial Integrity (GFI) applauds the Open Working Group for considering illicit financial flows in its proposal. Though Goal 16.4 is definitely a start in the right direction, it is not exclusively focused on illicit financial flows, nor is it measurable in the least. GFI proposes the following as an alternative:
“by 2030, reduce illicit financial flows related to trade misinvoicing by 50%.”
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 Michele Fletcher, July 18, 2014
More Transparency and Accountability Are Needed, if Tanzania Is to Truly Benefit from its New-Found Gas Reserves
Tanzania’s new-found gas reserves are valued at an estimated $20 billion. Many look at these prospects with optimism, as this revenue may help Tanzania achieve its goal of becoming a middle-income country by 2025. But for others, the situation is more precarious.
Tanzania has been in the same situation when it became a major source of gold not even two decades ago. Today, though Tanzania is still the third largest exporter of gold, there is widespread agreement that the mining sector did not produce the revenue it should have, nor was the effect of the growing industry felt in the population. Tanzania still stands 152nd out of the 182 countries on the Human Development Index, despite having exported billions of dollars worth of gold throughout the past two decades. The value of Tanzania’s mining exports grew to $1.5 billion in 2010, but annual government revenue from its sale was only about $100 million, or about 7%.
By Michele Fletcher, June 26, 2014
Last week, Namibian activists raised concerns about transfer pricing in Africa’s extractive sector in an open letter to De Beers. Their letter comes at a critical time in which transfer pricing and tax havens have contributed to an exorbitant amount of capital flight from developing countries. Namibia’s economy is hugely dependent on the extractive sector, particularly in diamond exports, which alone account for 10% of GDP. With increased scrutiny into transfer pricing just across the border in South Africa’s platinum mines, these Namibian activists have delivered a timely, earnest demand to investigate transfer pricing in their own country.
Multinational corporations (MNCs), especially those which operate in Africa, are coming under increased scrutiny by governments, media, and the public over their bookkeeping and payments to governments. The extractive sector in particular has been the focus of new regulations on financial transparency: an extremely positive development, but one which has so far missed an opportunity address larger issues concerning abusive transfer pricing and how MNCs of all sorts conduct their fiscal operations.
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: