Why won’t governments use bank info to go after the corrupt?

May 23rd, 2016

We saw a familiar scene at the end of the Anti-Corruption Summit in London.

Participating countries delivered a strong communique, and committed to increasing international transparency on tax to deter tax crimes and ‘prevent individuals from concealing proceeds of crime, including corruption in other jurisdictions’.

The diagnosis of the problem is spot on, but, unfortunately, the solution falls short of what’s needed.

Countries committed to the implementation of OECD’s Common Reporting Standard (CRS) on automatic exchange of financial information, which will allow governments to exchange information on foreign citizens that hold assets in their banks. For example, France will be able to see which of their citizens have money in bank accounts in Germany, and whether or not they’ve made this known to authorities. This will allow governments to assess whether their citizens are hiding undeclared wealth abroad.

But rather than using this great new abundance of data for all it’s worth, the information exchanged is restricted to use in tax matters. This is despite the clear fact that information on foreign bank account holdings has great value beyond tracking tax evasion, for example, in identifying and prosecuting cases of corruption.

Unfortunately, the simple measure of ensuring that this information is also shared with law enforcement authorities, as well as other agencies related to tackling crime, corruption, and money laundering continues to be ignored.

Proposal to Increase Scope of Information Exchange

Our proposal involves increasing the information available to improve the fight against crime, corruption and money laundering, at no extra costs for countries – it simply requires that bank account information sent to tax authorities may also be shared with law enforcement agencies and other relevant authorities. We call on governments to sign this declaration to authorize that the information to be sent pursuant to the OECD’s Common Reporting Standard (CRS) may be shared by the recipient jurisdictions with other relevant government authorities to tackle crime, corruption and money laundering even if not related to tax purposes, provided the same standards of confidentiality and safeguards for the protection of personal data are respected.

Addressing illicit financial flows is complex and there is no easy fix but for such low-hanging fruits to be ignored is baffling. We urge the OECD and G20 countries to review the Common Reporting Standard (CRS) and incorporate this measure so relevant authorities are empowered with the information necessary to confront these issues.

Gender Implications

Publications such as the Panama Papers and Swiss Leaks have repeatedly demonstrated how opacity and secrecy in the financial system continues to aid crime, corruption and money laundering which has devastating consequences in all countries, particularly developing countries. Tackling these linkages also has important implications for gender justice, as evidence from Panama Papers also showed how an alleged ringleader of a network of businessman involved in sex trafficking of underage girls was also a client of Mossack Fonseca. The same complex web of intermediaries (lawyers, accountants, etc.) and secrecy jurisdictions or tax havens are often exploited by networks of human traffickers, disproportionately affecting women and children.

This isn’t just about tax abuse; there are real victims of a shadow financial system propped up by the powerful. According to the report of the Special UN Rapporteur on Extreme Poverty and Human Rights, States must review tax structures, codes and instruments for explicit and implicit gender bias and ensure they do not reinforce existing gender inequalities. Guaranteeing that all relevant agencies have access to important information to address such complex issues is only a small step towards addressing inequalities fueled by the global financial system.

Written by Pooja Rangaprasad

Pooja is the FTC's Policy Coordinator

Unmodified image used under Creative Commons license / Flickr User OECD

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