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Bravo for Tunisia: Hope Springs Eternal

Raymond Baker

This article was originally published by The Huffington Post.

Amid the ongoing turmoil in Syria and the turbulent transition to democracy in Egypt, the optimism we all felt about the Arab Spring in the early months of 2011 seems rather far away.

That’s why it was so encouraging last week to learn that $28.8 million of the former Tunisian dictator’s stolen assets were returned to the people of Tunisia. Recovered from a Lebanese bank account belonging to Zine al-Abidine Ben Ali’s wife, the repatriated riches are the first stolen assets returned to the North African country since the overthrow of Mr. Ben Ali more than two years ago.

The repatriation is a joyous moment, the funds can be put to good use investing in the nation’s infrastructure and shoring up government finances. Still, the news underlines just how difficult it can be to repatriate ill-gotten-gains once they have left the country.

At Global Financial Integrity, we estimate that at least $311 million–and possibly more than $9 billion–was squirreled out of Tunisia illicitly in the decade preceding the Arab Spring. Some analysts have suggested that Mr. Ben Ali could have hidden up to $17 billion in illicit assets abroad over his more than 23 years in power. Put in context, $28.8 million doesn’t seem like a lot of money.

Globally, developing and emerging market economies hemorrhage nearly $1 trillion every year in illicit financial outflows, of which roughly $30-$50 billion is attributable to government corruption. According to the World Bank, only about one percent of corruptly transferred assets are ever returned to source countries.

Opacity in the international financial system and an extremely bureaucratic system of international legal treaties make it immensely difficult to locate and repatriate corrupt assets once they leave a country.

So what should be done?

While appreciating efforts to claw back assets that already left the country, Tunisia and other governments should adopt measures to slow the ongoing outflow of illicit money. Curtailing the potential for the same thing happening again is the first order of business.

The Tunisian government could require that all banks in the country know the true, human, “beneficial” owner of any account opened in their financial institutions. Often banks do not know who owns or controls accounts–they might have the name of an anonymous shell company, but they don’t know the human being controlling that shell company. As such, financial institutions cannot monitor the accounts for money laundering. That is a simple step that would significantly curtail the problem.

Tunisia could boost its customs enforcement, by training officers in better detection of intentional misinvoicing of trade transactions, and utilizing software to detect invoices that fall outside the normal range of prices for a particular good.

Tunisia could strengthen and enforce its anti-money laundering policies to ensure banks are not facilitating illegal capital flight.

And, Tunisia could engage in the automatic exchange of tax information with other countries to help detect and deter high net worth individuals from stashing their illicit assets in foreign countries.

Broader reform to curtail illicit financial flows needs to come from world leaders at the G8, G20, and United Nations, but these are some simple steps Tunisia can take by itself.

After 28 months, it’s very encouraging to see the partial return of Mr. Ben Ali’s money: it belongs to the people of Tunisia. The focus should now be placed on enacting measures to ensure a future corrupt official, tax evading businessman, or criminal kingpin doesn’t have the money laundering tools available to continue stealing from the Tunisian economy.

Raymond Baker is director of Global Financial Integrity, a Washington-based research and advocacy organization, and author of “Capitalism’s Achilles Heel: Dirty Money and How to Renew the Free-Market System