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I chaired a session at @ChathamHouse on #IFFs illicit financial flows yesterday #CHIllicitFinance - event was deep discussion of how organised crime, kleptocrats ( & terrorists) move & transform money into 'clean' assets & how regulators, law enforcement, banks etc try to stop itpic.twitter.com/e5dg5WcmOj
Participants were people at the sharp end of seeking to understand & uncover IFFs in order to prevent crime & bring perpetrators to justice: anti money laundering experts, cops, gov, banks, service providers, NGOs, academics, FATF, Europol etc...
Discussion was wide ranging: effectiveness of AML, threat of virtual currencies, use of shell corporations, public private pships to share info & intel, beneficial ownership registration, technology & AI, reconciling transparency & privacy, derisking & financial inclusion
I was struck by the things I did not hear. No one said "trade misinvoicing is the largest component of IFFs" https://www.dailymaverick.co.za/article/2018-11-19-trade-misinvoicing-costs-south-africa-7-4bn-in-tax-a-year/ … ( they did talk about smuggling)
No one said this is mainly about MNCs tax planning https://www.un.org/africarenewal/magazine/april-2016/mbeki-panel-ramps-war-against-illicit-financial-flows … https://www.un.org/africarenewal/magazine/december-2013/illicit-financial-flows-africa-track-it-stop-it-get-it … https://www.iol.co.za/sundayindependent/dispatch/africa-still-leaking-billions-through-tax-evasion-15069221https://www.theguardian.com/global-development/2017/may/24/world-is-plundering-africa-wealth-billions-of-dollars-a-year … (but they did say its about tax fraud, and MNCs engaging in bribery & collusion w kleptocrats. They did talk about Danske Bank)
No one said that the aim of tracking, preventing, stopping and returning illicit financial flows is to raise finance for development. But they did talk about the development harms caused by state capture.
No one said this: "corrupt activities such as bribery & embezzlement constitute only about 3% of illicit outflows criminal activities such as drug trafficking and smuggling make up 30% to 35% and commercial transactions by multinational companies make up a whopping 60% to 65%"
No one said that calculations based on gaps & mismatches in trade data or macroeconomic data was useful to their work, or referenced this in helping to understand the nature of the threats.
Barely anyone talked about tax avoidance (apart from Sol who raised this argument that it should be included in #IFFs from the floor http://www.ictd.ac/blog/why-tax-avoidance-is-illicit/ …).
It was clear that the proposed indicator to measure progress on illicit financial flows based on location of MNCs profits bore no relation to the effectiveness of these people's work to tackle illicit financehttps://www.cgdev.org/blog/proposed-sdg-indicator-illicit-financial-flows-risks-conflating-ordinary-business-dirty-money …
Yet these are common themes and foundational beliefs which often underpin discussion on #IFFs in relation to development (particularly in Africa) and especially with NGOs, foundation funders, the transparency and accountability world.
I've written lots of words on the definition and measurement of IFFs https://cfrd8-files.cfr.org/sites/default/files/pdf/Discussion_Paper_Collection_Kahler_et_al_IFFs_OR_Forstater_0.pdf …. But the basic point is: in practice people working on international tax/BEPs don't show up to IFFs conferences, and vice versa.
Here is a super short primer on IFFs for my development colleagues http://devinit.org/wp-content/uploads/2018/10/Understanding-illicit-financial-flows-in-a-development-financing-context.pdf …
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