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Light-Bulb Moment: G20 Coming to Terms with Illicit Flows, Commits to Automatic Information Exchange

 GFI Praises G20 Renewal of Anti-Corruption Working Group, Disappointed in Failure to Tackle Anonymous Shell Companies

 

June 20, 2012
Clark Gascoigne, +1 202 293 0740 x222

 

WASHINGTON, DC – Global Financial Integrity (GFI) praised G20 leaders today for prominently focusing on the issue of illicit financial flows, committing to move toward the automatic exchange of tax information, and renewing the mandate of the Anti-Corruption Working Group for another two years, but expressed disappointment in the leaders’ failure to address the issue of anonymous shell companies.

 

Corruption, crime, and tax evasion in the form of illicit financial outflows cost the developing world US$1 trillion per year according to GFI research, with Mexico—the current chair of the G20—suffering more than half a trillion dollars in outflows over the past decade.  Illicit outflows pose serious problems for developed Western economies as well, with Greece—the epicenter of the European debt crisis—hemorrhaging US$160 billion in illicit outflows from 2000 through 2009.

 

Tax Evasion and Avoidance

 

G20 leaders meeting in Los Cabos this week committed “to lead by example in implementing” the practice of automatic tax information exchange, and called upon other “countries to join this growing practice as appropriate,” a move lauded by GFI as a major step in the right direction.

 

“We are thrilled to see the G20 commit to adopting a standardized system of automatic tax information exchange,” said GFI Director Raymond Baker. “Automatic information exchange will go a long way towards curtailing tax evasion, and we’re heartened that the G20 has called upon all nations to adopt this important practice.”

 

GFI noted the significant advancement of this issue since the Cannes Summit in November, where world leaders stated they would merely “consider” automatic tax information exchange “on a voluntary basis as appropriate.”

 

GFI also welcomed the Los Cabos focus on profit shifting and abusive transfer pricing in both the communiqué and the Development Working Group’s (DWG) progress report, as well as the leaders’ support for the work of the OECD’s Oslo Dialogue on Tax and Crime, in which GFI has been an active participant.  GFI noted that a new global accounting standard, requiring the country-by-country reporting of profits made and taxes paid by multinational corporations, would go a long way to identifying where abusive transfer pricing is taking place, and the organization called upon G20 leaders to adopt such a standard moving forward.

 

Anti-Corruption

 

GFI also praised the renewal of the mandate of the G20’s Anti-Corruption Working Group for another two years.  Commissioned at the Seoul Summit in 2010, the Working Group’s mandate was set to expire at the end of this year.

 

“We are extremely happy to see the mandate of the Anti-Corruption Working Group extended,” said Mr. Baker.  “The Working Group has been crucial to progressing anti-corruption initiatives within the G20, and we’re looking forward to continuing to work with it over the coming years.”

 

In this week’s final communiqué, G20 officials agreed to adopt the recommendations of the Anti-Corruption Working Group to deny visas to “corrupt officials, and those who corrupt them,” a move lauded by GFI.

 

“No nation, particularly no G20 nation, should be offering refuge to corrupt foreign politicians,” stated Mr. Baker.   “We’re very pleased that the leaders agreed to deny entry to both kleptocrats and the individuals who corrupt them.”

 

World leaders also committed “to deny safe haven to the proceeds of corruption” and committed themselves “to the recovery and restitution of stolen assets,” language welcomed but met with skepticism by GFI.

 

“As long as G20 nations like the United States and others allow for the incorporation of anonymous shell companies, trusts and foundations, G20 nations will be safe havens for the corrupt proceeds of foreign leaders as well as terrorists, criminals, and tax evaders,” added Baker.  “The G8, at its Camp David Summit in May, laid out a comprehensive asset recovery guide for our partners in the Middle East and North Africa.  However, even the best asset recovery program is futile if we don’t first address the mechanisms, like anonymous shell companies, facilitating the flow of corrupt money into G20 countries.”

 

For more information and to schedule interviews with GFI spokespeople, contact Clark Gascoigne at cgascoigne@gfintegrity.org or +1 202 293 0740 ext 222.

 

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Journalist Contact:

 

Clark Gascoigne
cgascoigne@gfintegrity.org
+1 202 293 0740 ext. 222

 

Notes:

 

  1. Download the 2012 Los Cabos Summit G20 Communiqué.
  2. Download the 2012 Development Working Group’s (DWG) Progress Report.
  3. Despite Global Financial Crisis, Illicit Financial Outflows from Developing World Remain High,” Global Financial Integrity, December 15, 2011.
  4.  “Behind the Greek Financial Crisis: $160 billion lost to illegal capital flight in the last decade, according to analysis from Global Financial Integrity,” Global Financial Integrity, May 11, 2010.
  5. Mexico Hemorrhages US$872 Billion to Crime, Corruption, Tax Evasion from 1970-2010,” Global Financial Integrity, January 29, 2012.
  6. Kar, Dev, “Mexico: Illicit Financial Flows, Macroeconomic Imbalances, and the Underground Economy,” Global Financial Integrity, January, 2012.
  7. Lowe, Heather, “Illicit funds from Mexico find safe haven in U.S.,” CNN, June 12, 2012.
  8. Letter to Mexican President Felipe Calderόn from 66 Civil Society Organizations.
  9. The Task Force on Financial Integrity & Economic Development’s position brief for the Mexican presidency of the G20.

 

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

 

For additional information please visit www.gfintegrity.org.

 

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