GFI Calls on G20 to Tackle Illict Financial Flows & Banking Secrecy

September 24th, 2009

Global Financial Integrity just released a statement urging G20 leaders, who are meeting in Pittsburgh today and tomorrow, to address the devastating impact that illicit financial flows and banking secrecy have on the developing world.  From GFI:

As the Group of Twenty meets today in Pittsburgh, Global Financial Integrity (GFI) urges leaders to pursue measures to increase transparency in global finance and curtail illicit financial flows.

“Despite the fact that wealthy nations are experiencing a recovery from the global financial crisis experts are warning that the worst may still be ahead for developing nations,” said GFI director Raymond Baker. “The World Bank is predicting that 89 million additional people may be pushed into extreme poverty by the end of 2010 while the combined GDP of developed economies is projected by the United Nations to shrink by 4.1 percent. In the face of these dire forecasts having an effective plan for bolstering economic development in emerging economies is crucial.”

GFI recommends that discussions on development aid include examination of the link between the hundreds of billions in illicit financial flows coming out of developing countries each year, lack of progress achieving poverty alleviation and development goals, and the role played by facilitating secrecy jurisdictions.

“Every year the developing world loses as much as $1 trillion to government corruption, criminal activity, and tax evasion,” said Mr. Baker. “Each country is different; depending upon the geopolitical landscape, but the result is the same, money flows abroad and disappears into secrecy jurisdictions and other points of absorption in Western economies.”

The U.S. has indicated it considers tackling these outflows a part of “strengthening recovery in the world’s poorest countries.” In a letter to colleagues by the U.S. “Sherpa” to the G-20 Michael Froman writes “as we take steps to increase the flow of capital to developing countries, we also need to prevent its illicit outflow. “

“The loss of these funds undermines economic development efforts and forestalls good governance,” said Mr. Baker. “Staunching the outflow of hundreds of billions of dollars is necessary and long overdue.”

The Task Force for Financial Integrity and Economic Development—of which GFI is lead organizer—recently held a two-day conference on “Increasing Transparency in Global Finance: A Development Imperative,” in which policymakers, economists, journalists, and civil society convened to examine in detail the link between poverty, corruption, lack of development and illicit financial outflows.

Task Force members Christian Aid, Global Witness, Tax Justice Network and GFI prepared a brief with recommendations for the G-20 available at the Task Force Web site.

Written by Clark Gascoigne

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