Global Financial Integrity

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US$68.9 Billion Flowed Illegally into or out of Emerging EU Economies in 2011

E.J. Fagan, +1 202 293 0740 ext. 227
Clark Gascoigne, +1 202 293 0740 ext. 222

GFI Urges EU Parliament Legislators to Follow UK’s Lead, Ban Anonymous Shell Companies

Anonymous Shell Companies are a Major Conduit of Illegal Funds; Public Registries of Beneficial Ownership are the “Gold Standard” in Curbing Phantom Firm Abuse

WASHINGTON, DC – Global Financial Integrity (GFI) today urged members of the European Parliament to support the creation of public registries of corporate ownership information in the upcoming vote on key revisions to the European Union (EU) Anti-Money Laundering Directive (AMLD).  The pressure comes as GFI revealed that nearly US$70 billion in illicit financial flows—the proceeds of crime, corruption, and tax evasion—flowed into or out of developing and emerging EU member-states in 2011.

GFI—a Washington, DC-based research and advocacy organization that studies and promotes policies to curtail illicit financial flows—noted that the February 13th vote would be a key moment for the future of financial transparency.

“There is a tremendous amount of illicit capitol flowing into and out of Eastern Europe, and anonymous shell companies are one of the main reasons why,” said GFI President Raymond Baker, a respected authority on financial crime.  “British Prime Minister David Cameron set a new global standard last fall when he committed the United Kingdom to creating a public registry of the true, ultimate owners of all companies in the UK.  It is now time for the full European Union to decide if it will rise to that standard.”

Developing EU Countries Hit By ‘Devastating’ Illicit Financial Flows

Research published today by GFI finds that US$68.9 billion flowed illegally into and out of developing and emerging EU member-states in 2011.  The analysis, compiled by GFI Junior Economist Brian LeBlanc, reveals that Bulgaria, Croatia, Latvia, Lithuania, Poland, and Romania hemorrhaged US$20.8 billion in illicit financial outflows in 2011.  GFI further found that a massive US$48.1 billion of capital and merchandise was illegally smuggled into these five countries in 2011, fueling crime and driving the underground economy.

“The scale of illicit capital and merchandise moving into and out of developing EU member states is devastating,” said Brian LeBlanc, an economist at GFI. “We’re seeing an incredibly worrying acceleration in both illicit inflows and outflows. There is an urgent need to eliminate anonymous shell companies by establishing public registries of corporate ownership information.”

“Illicit financial flows increase the size of the underground economy, decrease tax revenues, facilitate corruption, and allow organized crime to flourish,” continued Mr. LeBlanc, “They are an important factor holding back economic growth in developing EU member states.”

Global Financial Integrity produces estimates of illicit financial flows for countries classified by the IMF as developing and emerging economies. They have not produced estimates of other EU member states.

The country breakdowns of illicit flows for each of the six economies are as follows:

Illicit Financial Inflows, 2011:

  1. Poland……………………US$38.03 billion***
  2. Romania.………………..US$3.15 billion
  3. Lithuania………………..US$2.56 billion
  4. Bulgaria………………….US$2.08 billion
  5. Latvia……………..………US$1.82 billion
  6. Croatia……………………US$441 million

*** Poland ranked 3rd among all developing and emerging countries in illicit inflows through import under-invoicing in 2011.

Total Illicit Financial Inflows, 2011: US$48.08 billion

Illicit Financial Outflows, 2011:

  1. Poland……………………US$9.14 billion
  2. Lithuania………………..US$4.27 billion
  3. Latvia……………………..US$4.06 billion
  4. Bulgaria………………….US$2.56 billion
  5. Croatia……………………US$1.57 billion
  6. Romania…………………US$1.12 billion

Total Illicit Financial Outflows, 2011: US$20.80 billion

Download the full developing EU member state data for 2002-2011 here. (.xls)

Phantom Firms Favorite Vehicle for Hiding Dirty Money

Throughout the European Union and around the world, corporations can be formed without disclosing who actually owns or controls them. Criminals often exploit this ability to create anonymous shell companies—legal entities that are set up for the sole purpose of hiding the owner’s identity that do little or no legitimate business.  The U.S. Department of Justice notes that such “phantom firms” are the most widely used method for laundering the proceeds of crime, corruption, and tax evasion.

“Anonymous shell companies make it easier for criminals to move money across borders without a trace,” said Joshua Simmons, Policy Counsel at Global Financial Integrity, “They play an essential role in the money laundering process.”

Solving the phantom-firm problem requires identifying the “beneficial owner” of a company when it is formed. By also making this information available to the public, the EU would achieve the “gold standard” of transparency, enabling its citizens and other companies to always know with whom they are doing business and empowering civil society organizations, journalists, and investors to hold individuals accountable for their companies’ actions.

“We strongly encourage every MEP to take a strong step toward curbing money laundering and hampering crime by voting to require the creation of public registries of corporate ownership information when the European Parliament considers revisions to the AML Directive later this month,” added Mr. Simmons.

To schedule an interview with Mr. Baker, Mr. LeBlanc, Mr. Simmons, or other GFI spokespersons, contact EJ Fagan at +1 202 293 0740 x227 / On-camera spokespersons are available in Washington, DC.


Notes to Editors:

  1. Click here (.xls) to download the full data from GFI on illicit financial flows of money into and out of Bulgaria, Croatia, Latvia, Lithuania, Poland, and Romania over the time span 2002-2011.
  2. Click here (.pdf) to read a briefing from the Financial Transparency Coalition on the EU AML Directive vote and the importance of public registries. Global Financial Integrity is a member of the Financial Transparency Coalition.
  3. Click here to read the October 2013 statement from the UK government announcing the move to establish public registries of all British companies.
  4. Global Financial Integrity produces estimates for illicit financial flows from countries classified by the International Monetary Fund as developing.

Journalist Contacts:

E.J. Fagan
+1 202 293 0740, ext 227

Clark Gascoigne
+1 202 293 0740, ext. 222 (Office)
+1 202 815 4029 (Mobile)


Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system.

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