US-Africa Summit: One Day Left, Where Does Financial Transparency Fit In?
August 6th, 2014
August 6th, 2014
This week, almost 50 Africa heads of state are in Washington to meet with President Obama for the largest summit ever between the US and Africa governments. But civil society leaders often are the ones holding their governments accountable, so it’s imperative that they be involved in the process, too. On Monday, the State Department hosted a forum for civil society organizations that featured Secretary of State John Kerry and Vice President Joe Biden. In his remarks, Vice President Biden highlighted the importance of targeting government corruption through the creation of robust and independent oversight institutions:
Every country that has a vibrant democracy and has a minimum amount of corruption has a system like that. That’s how you stop illicit finance, that’s how you build transparent institutions.
Full video of Biden’s remarks (discussion of corruption starts around 11:44):
However, Vice President Biden focused primarily on rooting out illicit financial flows through the lens of ending corruption within one’s own borders and within one’s own institutions, like the courts, police, and military. While this is undoubtedly an important goal, the financial systems that proliferate illicit flows are global and don’t respect national boundaries.
On top of that, government corruption represents just three percent of the hundreds of billions of dollars in illicit financial flows that leave the developing world every year, while 65% of illicit flows come from trade manipulations and corporate tax evasion. (We discussed this very point in an opinion article written for The Africa Report ahead of this week’s summit). Some of the worst accomplices of illicit financial flows are corporations, bankers, and lawyers residing in the U.S., Europe, and other tax havens.
At a civil society event held Monday, that point was echoed by billionaire philanthropist Mo Ibrahim and Mojanku Gumbi, a trustee of the Thabo Mbeki Foundation and member of the UNECA High Level Panel on Illicit Financial Flows. During the event, Gumbi called for an honest conversation with business, asking “why are they stealing money from African economies?” Ibrahim reiterated the need for financial transparency, stating that “there’s no good reason for someone to have an anonymous shell company.”
Vice President Biden should understand the overarching correlation between addressing financial transparency and halting illicit flows. After all, he’s a native of Delaware. His home state is one of the easiest places to form anonymous companies, a primary vehicle for moving illicit money. Delaware is only rivaled by Kenya as the easiest place in the world to form a company without providing ownership information.
It’s indisputable that addressing corruption within African governments must be central to reforms, but if we’re really going to take care of the bulk of illicit financial flows, we have to look at the institutions in the U.S. and Europe that proliferate financial secrecy.