Global Financial Integrity



Nipping It in the Black

Dev Kar

It’s Better to Adopt Measures to Tighten the Creation of Black Money than to Be Quixotic about its Return

Despite India’s support for it at the G-20, the OECD’s automatic exchange of financial information (AEFI) regime is riddled with loopholes that make its usefulness questionable.

Successive governments have attempted to curtail the black money menace through policy action and moral suasion. But the recent slew of measures, including bilateral and multilateral initiatives — most recently, India and the United States signed an agreement under the American Foreign Account Tax Compliance Act — is perhaps the most far-reaching in memory. Black money or illicit financial flows violate laws in their creation, utilisation or transference. They have had a pernicious influence in India since Independence — from the financing of elections to that of terrorism against the state.

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From Foreign Aid to Legitimate Trade: How to Finance Development

Raymond Baker

The Most Important Step that Can Be Taken Toward Equitable, Sustainable Development in the Years Ahead Is Legitimate Trade

Plastic buckets from the Czech Republic at $970 each? Brown sugar from Turkey going for $240 per pound? Or weed whackers shipped to Venezuela at $12,300 apiece?

These are all examples of the troubling and growing phenomenon known as trade misinvoicing — the fraudulent over- and under-invoicing of international trade transactions to secretly move money, covering the proceeds of crime, corruption, and tax evasion.

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Offshore Interests Not Aligned with Africa’s Development Agenda

Tom Cardamone

Offshore Financial Centres Can Help Curb Illicit Flows by Exchanging Tax Information and Providing Transparent Beneficial Ownership Information

In its recent op-ed, Jersey Finance provides a defence of the offshore financial centre’s legal code and regulatory framework against charges by “pressure groups” of alleged financial improprieties. The author also promotes Jersey’s financial services to current and potential clients that intend to invest in Africa.

However the article’s logic is flawed. It suggests that since Jersey is an international finance centre with allegedly tough anti-money laundering laws to help prevent wrongdoing, other IFCs are also proper places to facilitate investments in the developing world. One need only search “Swiss leaks” or “Lux leaks” to understand more clearly how taxes are dodged, money laundered, and financial secrets kept around the globe. Secret bank accounts, anonymous corporations, fraudulent foundations, nominee trust accounts and other opaque structures are the calling cards of many IFCs and are utilised by any firm or person who wants to move, hide or launder money.

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G7 Whiffs on Illicit Financial Flows as FfD Conference Approaches

Clark Gascoigne
Sophie Haggerty

World Leaders Urged to Target Illicit Flows, Trade Misinvoicing at Addis Summit

The outlook was promising. In the outrage over the unfolding FIFA corruption scandal, UK Prime Minister David Cameron vowed Saturday to put corruption on the agenda of this week’s G7 Summit in Germany.

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The Hunt for Black Money

Raymond Baker
Tom Cardamone

Modi Can Lead an International Consensus on Curbing the Flow of Illicit Funds

India has a tremendous opportunity to increase its influence on the world stage. With the second largest population, 10th largest economy, and strategic position among G-20 countries, Prime Minister Narendra Modi can, if he chooses, speak articulately for billions of people struggling for a fair share of the world’s riches. At home, his nation continues to face significant challenges in the areas of education, health, sanitation, and inequality. This dichotomy of having a foot in two camps simultaneously — among the richest and poorest nations — provides the platform on which India can seek a much-improved global economic consensus.

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Investors Should Hold BNP Paribas Accountable—Someone Has To

Joshua Simmons

Late last month, the U.S. government proudly announced a deal to resolve charges against BNP Paribas, France’s largest bank, for its prodigious violations of U.S. financial sanctions against Sudan, Iran, Cuba, and Burma. The bank agreed to pay a massive $8.9 billion fine and temporarily give up its ability to handle certain transactions in U.S. dollars. Although the case is yet another wholly lacking in individual prosecutions, many hailed (and some bemoaned) the punishment as unprecedentedly heavy—a strong statement of American intent to hold banks accountable for wrongdoing and a fair price to pay for a bank that would surely suffer grave damage to its reputation as well. But mere weeks later, it seems that the severity and persistence of BNP’s misconduct is all but forgotten, while the bank’s customers and investors have already returned to business as usual.

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Want Sustainable Development? Mobilize Domestic Resources, Curtail Illicit Capital Flows

Raymond Baker

While the precise magnitude and consequences of illicit financial flows in African countries — and throughout the developing world — deserve further analysis, it is clear that such flows are wreaking havoc on the continent. Any sustainable approach to global development has to curtail illicit flows and the mechanisms facilitating them. Only then will we be able to mobilize domestic resources for long-term development.

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Trade Misinvoicing, or How to Steal from Africa

Brian LeBlanc

The Little-Understood Practice of Misinvoicing or Re-Invoicing Relies on Legal Grey Areas and Financial Secrecy and Costs the Continent Dearly

Lately, the media has been replete with stories about how Africa is losing billions of dollars a year through a process called “trade misinvoicing.” The concept of trade misinvoicing is simple: companies and their agents deliberately alter the prices of their exports and imports in order to justify moving money out of, or into, a country illicitly.

The practice is very common in Africa. To name just a couple instances, it has allegedly been used to avoid paying import duties on sugar in Kenya and to shift taxable income out of Zambia and into tax havens abroad.

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