Shruti Shah: A case for more integrity in the financial sector
January 22nd, 2013
January 22nd, 2013
Shruti Shah of Transparency International-USA wrote a great op-ed on Devex last week. Ms. Shah connects the dots between the crimes committed at HSBC, the influx of money to the United States from kleptocrats like Teodorin Obiang, and the hundreds of thousands of anonymous shell corporations created every year in the United States. The result? Individuals are able to use the United States and its institutions to, “export, launder and conceal ill-gotten gains” derived from corruption.
Her point is important: there is a causal connection between the facilitation of corruption and corruption itself, in the sense that facilitation is necessary for much of the grand corruption that occurs to exist. Without the ability to easily move money out of the home country, it becomes a lot more difficult to perpetually conceal what you are doing. When you decrease incentives – the potential for dynastic wealth that can be spent with impunity – you decrease the activity.
A 2011 BBC poll surveying more than 11,000 people across 23 countries showed that corruption was the most talked about global issue. In the same survey, 69 percent of respondents rated corruption as a “very serious” global issue.
This is not surprising, as corruption underpins many of the main global challenges. Corruption undermines economic growth, erodes trust in institutions, diverts scare resources that could be used for development, subverts open markets and is perceived to have played a significant role in the recent financial crisis. The continuing discontent of ordinary people – whether in the Middle East, India or even the United States – shows that tackling corruption will continue to be front and center in 2013.
An important issue often missing from discussions on corruption is that preventing the ability of individuals to export, launder and conceal ill-gotten gains can significantly reduce corruption.
It is difficult to reliably estimate how much money is laundered globally. The managing director of the International Monetary Fund in 1998 estimated that the aggregate size of money laundering in the world could be somewhere between 2 percent and 5 percent of the world’s gross domestic product. Even the lower end of the scale of this rather old estimate is staggering. It would be equally if not more difficult to understand the true effect of this leakage on developing countries. The true cost exceeds the value of the stolen assets – siphoning funds away from important development goals, undermining the rule of law.
You can read the entire op-ed on Devex here.