Today’s Top Stories from GFI – Investors Should Hold BNP Paribas Accountable-Someone Has To

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Investors Should Hold BNP Paribas Accountable—Someone Has To
Reuters, July 25, 2014

By Joshua Simmons

Late last month, the U.S. government proudly announced a deal to resolve charges against BNP Paribas, France’s largest bank, for its prodigious violations of U.S. financial sanctions against Sudan, Iran, Cuba, and Burma. The bank agreed to pay a massive $8.9 billion fine and temporarily give up its ability to handle certain transactions in U.S. dollars. Although the case is yet another wholly lacking in individual prosecutions, many hailed (and some bemoaned) the punishment as unprecedentedly heavy—a strong statement of American intent to hold banks accountable for wrongdoing and a fair price to pay for a bank that would surely suffer grave damage to its reputation as well. But mere weeks later, it seems that the severity and persistence of BNP’s misconduct is all but forgotten, while the bank’s customers and investors have already returned to business as usual.

The court documents from the case include some stark revelations. Between 2002 and 2012, BNP settled over $190 billion worth of transactions through its New York office for clients in Sudan, Iran, and Cuba, at one point providing over half of the banking services in use by the Sudanese government. Along with blanket sanctions on these countries, many of BNP’s clients were subject to further targeted sanctions putatively denying them access to the American financial system. BNP’s methods for concealing the transactions are alarmingly quotidian—the bank simply routed money first through its European offices, which removed identifying information from the transactions that could link the money back to the sanctioned countries, before passing it on to the U.S. 

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The Case for Merging Mexico’s Peso With Block Chain Technology
CoinDesk (UK), July 26, 2014

By Tanaya Macheel

A developing plan in Mexico to create a digital peso could demonstrate the potential of bitcoin technology to the rest of the world, if it’s successful.

After all, digitizing the currency would be just one part of a greater endeavor to adopt block chain technology into what the project’s leader hopes might become a more transparent and trustful bureaucracy and democracy.

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Tax Evasion and Avoidance

Close the tax loophole on inversions
Washington Post, July 27, 2014

By Jacob Lew

Since we last overhauled our federal tax code, in 1986, countries around the world have lowered their tax rates, leaving the United States with the highest corporate tax rate in the developed world. At the same time, the system has become full of inefficiencies and special-interest loopholes. That is why it is so important that we reform our business tax code to make the U.S. economy more competitive and to accelerate economic growth and job creation. Taking this step will make the United States an even more attractive place to do business and ensure that capital and talent are allocated more efficiently in pursuit of high economic returns, rather than low tax bills.

The president put forward a framework for business tax reform more than two years ago and has been pushing Congress to move forward on it. The president’s proposal would lay the foundation for broadly shared long-term growth by lowering corporate tax rates, broadening the tax base, simplifying the system and eliminating wasteful carve-outs and tax expenditures. These reforms would result in savings that could be reinvested in our nation’s aging infrastructure.

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Nigeria: Illicit flows and corporate tax dodgers compound poverty
Business Day (Nigeria), July 27, 2014

By Edozie Ifebi and Yinka Abraham

In a recent speech, President Obama criticized corporate entities avoiding tax remittances through the exploitation of legal tax loopholes in a practice known as tax inversion. Recently, there have been a rising number of U.S. companies using international mergers to relocate their headquarters overseas in an effort to avoid paying U.S. corporate taxes.

Tax inversion is a process where companies in a particular country merge with foreign entities and use their foreign counterpart for their home addresses or tax base, thereby avoiding corporate taxes in their home country.

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Greek-American Cooperation to Tackle Tax Evasion
Greek Reporter USA, July 28, 2014

By Nikoleta Kalmouki

Greece is determined to cooperate with the US government and US authorities in order to fully enforce the US’s Foreign Account Tax Compliance Act (FACTA), which has ordered that all credit institutions operating outside the US will have to inform American authorities of their transactions with US citizens concerning their accounts and investment products. This obligation applies as of July 1.

Greek Finance Minister Gikas Hardouvelis has informed Washington that he intends to personally undertake the completion of a bilateral state agreement, expected to be completed by the end of the year. Hardouvelis has already contacted his American counterpart, Jack Lew, in order to get the process started.

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Obama criticises Google for exploiting European tax loopholes
Wired UK, July 28, 2014

By Cyrus Farivar

Google continues to expand its use of legal-but-questionable tax shenanigans as a way to minimise its overseas tax burden.

According to Irish media reports Friday, in 2013 Google Ireland Limited paid an effective tax rate of just 0.16 percent on €17 billion (£13.5 billion) revenue, which came to a mere €27.7 million (£22 million). Google paid €11.7 billion (£9 billion) in “administrative expenses,” which The Irish Times reports “largely refers to royalties paid to other Google entities, some of which are ultimately controlled from tax havens such as Bermuda.”

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French economist hails progress against tax evasion; Swiss banks will continue to cheat
FinFacts (Ireland), July 28, 2014

By Michael Hennigan

Switzerland has faced turbulence in recent times over tax evasion and banking secrecy, and the Swiss have this year agreed under duress to sign up to a multilateral agreement sponsored by the Organisation for Economic Co-operation and Development (OECD), which provides for automatic sharing of banking information from 2017. However, a French economist claims that Swiss banks will continue to have tempting incentives to cheat.

The clash between the influence of Jean Calvin (1509-1564), whose austere religious doctrine forced the Frenchman to take refuge in Geneva, that would become part of the Alpine country in 1815, and the more recent role of the Swiss in hosting the plunder of foreign dictators or confiscating the wealth of Holocaust victims, was a far cry from the gripes of the main character Michel, in the 1902 novel ‘L’Immoraliste,’ by André Gide (1869-1951) the French writer who won the Nobel Prize in Literature in 1947: “I detest these honest folk. I may have nothing to fear from them, but I have nothing to learn from them either. And they have nothing to say…Oh, these honest Swiss. Where do their good manners get them?…They have no crime, no history, no literature, no art…They are like a sturdy rosebush without thorns or flowers.”

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Money Laundering

Why $10B of China’s money is laundered every month
New York Post, July 26, 2014

By Diane Francis

China has built the world’s second-biggest economy and created a middle class bigger than America’s entire population, but it faces a major problem: The people who get rich there want to put their money somewhere else.

To avoid taxes or even seizure by the government, rich Chinese have exported a stunning $1.4 trillion between 2002 and today.

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Tanzania: BoT Clears Habib African Bank of Money Laundering
Tanzania Daily News, July 28, 2014

By Finnigan Wa Simbeye

Locally registered Habib African Bank (HAB) Limited has no direct links with Habib Bank AG Zurich of Switzerland, which was fined 525,000 pounds sterling by Financial Service Authority of UK for engaging in money laundering.

Bank of Tanzania (BoT) spokesperson Zalia Mbeo told the ‘Daily News’ over the weekend that HAB is Tanzanian and has local registration with full compliance to the law.

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Corruption

EACC Probes MPs over Corruption Allegations
The Star (Kenya), July 28, 2014

By David Mwere

THE activities of the National Assembly Committee on Administration and National Security are under scrutiny by the Ethics and Anti-Corruption Commission.

This follows claims that the Committee bungled its probe into the multi-billion-shilling Safaricom tender, for individual financial gain.

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Global Financial Integrity (GFI) promotes national and multilateral policies, safeguards, and agreements aimed at curtailing the cross-border flow of illegal money. In putting forward solutions, facilitating strategic partnerships, and conducting groundbreaking research, GFI is leading the way in efforts to curtail illicit financial flows and enhance global development and security.

For additional information please visit http://www.gfintegrity.org.


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