Illicit Financial Flows

By ECONWARFARE | by K.D.M. Jensen
Saturday, November 5th, 2011 @ 10:07PM

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Before I get into anything else, I want to do a brief follow-up on the Charlie Hebdo story of the other day.  You may already have read what happened after the French satirical magazine got the Prophet Mohammed to be editor-in-chief for its next (“Sharia Hebdo”) issue “celebrating” the Islamist political victory in Tunisia.  That’s right: a firebombing of the magazine’s offices and probable hacking and shutdown of its website.

While we wait to see what kind of grade the G20 give themselves at Cannes on the past year’s tightening up on illicit financial flows (money laundering, tax evasion, lack of transparency, bribery, corruption, etc.), we can ponder, as the Christian Science Monitor does, whether the anticorruption effort is for real.  There is a clear lack of analysis out there that is critical of the effort.  Perhaps that’s because of the widespread notion that the debt crises have made the widespread crackdown on tax evasion both logical and emblematic of the new sincerity in general.

The largest problem, the unwillingness of banks (on- and off-shore) to reveal lists of their clients, will not be resolved soon, if ever.  Lynnley Browning has a very good piece on Huffington Post on the current negotiations between the United States and Switzerland that illustrates the degree of difficulty involved.  The Swiss, who have made similar deals with the Germans and the French, are proposing a financial settlement to the IRS to the tune of $10 billion or more, in lieu of client transparency on the part of their banks.  Furthermore, the Swiss want the deal to apply to all 355 of their banks, including the 11 that the IRS has under investigation for sheltering American taxable money.  Ten billion may be ten billion, but is that enough to make the IRS stick to its guns?  I wonder.  But, then, something was achieved in 2010 when the IRS settled for a $780 million deferred prosecution agreement with UBS AG and got a list of 4,450 client names.

Estimates suggest that Switzerland holds $2 trillion in offshore wealth (i.e., more than a quarter of the international total of the same) and that $500 billion of it is American.

Further: Tax havens hither and yon have been busy signing bilateral agreements on “information and cooperation” with tax-needy countries (e.g., the Cayman Islands and Japan). One wonders whether real transparency isn’t being compromised in these agreements.

In the eleven articles that follow there’s a good sampling of current news on illicit financial flows.  They include a piece by a Dr. Tom O’Connor, who seems to be just now getting his head around money laundering and seems to have gotten somewhere (if you are a naif, it’s a good read); a piece in which we see the World Bank reminding us that EU members the UK and Cyprus are major dirty money destinations; an RFE/RL article reminding us that Russia and China still lead the world in soliciting bribes; and a charming piece about corruption in The Gambia.

Finally, I’d like to recommend a book. It’s Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens by Nicholas Shaxson (released April 12, 2011).  It should be required reading for anyone interested in illicit financial flows. Exceptionally discouraging.

Categories: ACD/EWI Blog, Articles and Presentations on Economic Warfare

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