Voices from Delaware Are Speaking Out Against Anonymous Company Ownership

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August 27, 2014

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Delivering Development After 2015
Center for American Progress, August 25, 2014

By Molly Elgin-Cossart

Improving domestic resource mobilization has several components that could be discussed in Addis, with actions to be taken by both developed and developing countries. Developed countries can help to get their own houses in order, improving transparency, reducing illicit flows and tax evasion, and ensuring that more revenue stays where it is generated. According to Global Financial Integrity, an estimated $946.7 billion left developing countries in illicit financial outflows during 2011, often ending up in banks in developed countries or tax havens. Initiatives such as the Extractive Industries Transparency Initiative, or EITI, and the Dodd-Frank bill are promising attempts to improve transparency and decrease abuse of transfer pricing and other tax-avoidance tactics, but the effectiveness of such initiatives and legislation is still being tested.

Developing countries have work to do, too. Improving the capacity of domestic tax systems can help stem illicit flows and tax avoidance, and development assistance could play a role in shoring up these capacities. Developing countries collect significantly less in taxes as a percentage of gdp than developed countries do and, as a result, tend to be dependent on a narrow tax base, which has economic and political consequences. While high-income countries collect an average of about 35 percent of their gdp in taxes, half of the countries in sub-Saharan Africa collect less than 17 percent. Ensuring that government spending is focused on concrete benefits for citizens is a final challenge, and such a drive for accountability must be domestically driven. A broader tax base and more targeted subsidies can help achieve this objective and should be part of the policy packages discussed for FFD.

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In the Last Ten Years $4.3 Billion Dollars Left Motenegro without a Trace
Independent Balkan News Agency, August 26, 2014

By Adnan Prekic

During the period from 2002 to 2011, Montenegro lost almost 4.3 billion dollars or 3.24 billion euros from its revenues without a trace, which is more than the entire annual gross domestic product of the country. This information was published in the U.S. financial agency “Global Financial Integrity.” Most of the money, in this analysis, nearly two billion euros, left the country in 2004 and 2005, when Montenegro implemented some of its largest privatizations.

According to the analysis of the U.S. agency, there are two main ways in which the money are taken out of the country. Those are gaps in the balance of payments and intentional errors in external trade. On the example of Montenegro, Global Financial Integrity states that most of the money was taken away in 2004, 980 million and the following year 925 million dollars. The amount of money that was taken away in those two years makes up 44 percent of the total amount for the entire ten-year period. In 2006, when Montenegro regained its independence after a referendum, 436 million dollars where illegally taken from the state, while in 2007, which was marked by strong credit growth and a boom in the real estate market and capital, this amount increased to 743 million.

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Do Settlements for Corporate Financial Malfeasance Work?
Transparency International (Blog), August 21, 2014

By Robin Hodess

This week Standard Chartered Bank reached a second settlement with regulators in New York for failing to monitor suspicious financial transactions. It had also promised to tighten up its anti-money laundering processes when it admitted violating US banking rules on transactions with countries under sanction including Sudan and Iran.

Perhaps it didn’t get the message. Total fines will now be US$974 million, but no individuals have been charged. Recently BNP Paribas and Credit Suisse reached multibillion-dollar settlements with the US authorities for financial malfeasance.

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Phantom Firms

Senator Leahy: Stop Corruption, Help the Poor
Bennington Banner, August 26, 2014

By Beatrice Parwatikar

Medicare fraud. Drug running. Human trafficking. Tax avoidance.

The common thread that runs through all of these crimes is the use of anonymous shell companies, phantom entities set up to hide the flow of money. We hear about these companies in the news, often in the context of stories about the ultra-rich and their efforts to avoid taxation. We think of the Cayman Islands and banking transactions made poolside. But anonymous shell companies have far more to do with average Americans than we think.

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Money Laundering

House Republicans Are Trying To Make Money Laundering A Lot Easier
The Huffington Post, August 27, 2014

By Zach Carter

House Republicans are agitating to dramatically curb federal bank regulators’ ability to combat money laundering, calling for changes in decades-old financial fraud standards in an effort to aid payday lenders.

Moving illegal cash through the financial system has long been barred by money laundering laws. But under a bill introduced by Rep. Blaine Luetkemeyer (R-Mo.), federal regulators would be forbidden from doing anything to “restrict or discourage” a bank from doing business with any company that has both a license to do business and a “reasoned legal opinion” from a lawyer claiming that the business doesn’t break the law.

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Israel May Be Admitted to Global Anti-Money Laundering Task Force
Haaretz, August 26, 2014 

Joining the Financial Action Task Force will help improve coordination with many other nations in terms of intelligence and legal assistance, says official.

By Efrat Neuman

Israel is eligible to join the Financial Action Task Force as a full member so long as it passes an inspection by the international organization tasked with preventing money laundering and illicit financing, said the Justice Ministry on Tuesday.

The FATF is an international organization founded by the G7 in 1989. It sets international standards for preventing money laundering and its goals include advancing countries’ legislation in this regard. It currently has 34 members, including the United States, Canada, the United Kingdom, Argentina, Brazil, France, Russia, China, Japan, Holland, Belgium, Switzerland, Norway, Spain, japan and india.

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Mozambique: Government Approves Rules Against Money Laundering
Mozambique News Agency, August 22, 2014

The Mozambican government on Thursday approved a set of regulations, incorporated into the 2013 law against money laundering, intended to combat organised crime, and particularly any financing of terrorist activities.

Briefing reporters after a meeting of the Council of Ministers (Cabinet), the government spokesperson, Deputy Justice Minister Alberto Nkutumula, said that an earlier law on the same subject, dating from 2002, was no longer adequate precisely because it did not contain mechanisms for preventing and combatting the funding of terrorism.

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Tax Evasion and Avoidance

The Biggest Tax Scam Ever
Rolling Stone, August 27, 2014

Some of America’s top corporations are parking profits overseas and ducking hundreds of billions in taxes. And how’s Congress responding? It’s rewarding them for ripping us off

By Tim Dickinson

In July, the American pharmaceutical giant AbbVie, maker of the world’s top-selling drug – the arthritis treatment Humira – reached a blockbuster deal to acquire European rival Shire, best known for the attention-deficit medication Adderall. The merger was cheered by Wall Street, not for what the deal will do to advance pharmaceutical science, but because it will empower the bigger firm, AbbVie, to renounce its U.S. citizenship.

At $55 billion, the AbbVie deal is the largest in a cavalcade of corporate “inversions.” A loophole in American tax law permits companies with just 20 percent foreign ownership to reincorporate abroad, which means that if a big U.S. firm acquires a smaller company located in a tax haven, it can then “invert” – that is, become a subsidiary of its foreign-based affiliate – and kiss a huge share of its IRS obligations goodbye.

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G-20 Plans For World Without Tax Evasion
Forbes, August 22, 2014

By Kenneth Rapoza

Good luck hiding your money in an Isle of Man bank account, people.  The G-20, a group of the world’s largest economies, are going to discuss ways to make hiding your cash off-shore next to impossible during their finance ministers and central bankers summit meet in Australia Sept 21.

“We expect a group of countries to agree to a reasonably rapid timeline for implementing automatic exchange of tax information,” Australia’s G20 Finance Deputy Secretary, Barry Sterland, was quoted saying by the Press Trust of india on Friday. Sterland told reporters that the group’s central bank governors and finance ministers we will be “outlining implementation plans, timelines and approaches to be taken” to greatly inhibit overshore tax havens.

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Burger King and Warren Buffett Under Fire for Tim Hortons Deal
Los Angeles Times, August 27, 2014

By Jim Puzzanghera and Shan Li

Burger King’s $11.4-billion deal for Canadian coffee-and-doughnut chain Tim Hortons Inc. — with a new headquarters in canada — sparked calls for a boycott and criticism of billionaire Warren Buffett, who is helping to finance the merger.

The latest in a series of corporate offshore tax-reducing moves, known as inversions, also puts the Obama administration in a difficult spot as it tries to stem the flow of U.S. companies moving to countries such as canada with lower tax rates.

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Illicit Financial Flows

Black Money Flying Abroad
The Daily Star (Bangladesh), August 26, 2014

Govt’s amnesty draws very little response

By Rejaul Karim Byron and Sajjadur Rahman

When money laundering is as easy as slicing a cake and the money is safe abroad, why anyone would want to legalise his black money is a question that seems to have no answer. And even if one wants to do so, he is discouraged by the complex legal structure and the vengeful political culture in the country.

This is evident in the black money holders’ lukewarm response to the government’s repeated declarations of amnesty to them.

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Stopping Capital Flight
Financial Express (Bangladesh), August 26, 2014

By Md. Abdul Halim

Foreign exchange rate is vital for the country's economy. Bangladesh has been experiencing a floating exchange rate regime since May 2003. Actually it is not floating exchange rate; it is a managed exchange rate system in our economy.

We have now imperfect capital outflows. Legally, no one can take foreign currency out of the country as much as one wants. Such an outflow is strictly regulated by the Bangladesh Bank. Nevertheless, huge amounts of capital fly out of the economy every year through illegal channels.

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Global Financial Integrity (GFI) works to curtail illicit financial flows by producing groundbreaking research, promoting pragmatic policy solutions, and advising governments.

For additional information please visit www.gfintegrity.org.

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