Last week the UK’s Financial Conduct Authority decided to fine the British branch of the Bank of Beirut over £2m for failing to establish sufficient controls to guard against the possibility of money laundering or other financial crimes.
Rules to name, shame, and punish banks, whose clients may funnel money to terror groups, are denying much-needed funds to developing countries. It’s a clash of two sets of sound policies, says Clay Lowery, former assistant secretary for international affairs at the US Treasury and the chair of a CGD working group on this problem of “de-banking.”
It’s a worry for manypeople that legitimate cross-border transactions - including vital remittances sent home by migrant workers - are becoming prohibitively expensive and burdensome because of over-zealous enforcement of anti-money laundering rules. Would cryptocurrencies such as bitcoin be able to help with this problem?
In a few weeks’ time Australia’s Westpac bank will start closing down the accounts of money transfer organizations used by immigrants to send money home. Westpac is the last major Australian bank still offering services to organizations in the country’s US$25bn remittance sector.
De-banking is an ugly word, but it’s the focus of a new working group launched by CGD in Europe. Banks in rich countries, under pressure from anti–money laundering and counterterrorism enforcement efforts, are increasingly “de-banking” money transfer organizations that operate in poor countries. In other words, to prevent criminals transferring their ill-gotten gains around the world electronically, they are denying banking services to legitimate companies that are a vital route for millions of people and businesses. And we are talking huge sums of money.
Aside from lurid revelations about individual companies and the big four accounting firms, the leaks of multinationals’ tax deals with Luxembourg confirm—and expose to a wider audience—the true nature of the tax ‘competition’ that prevents the emergence of effective international rules.
A new paper from Gabriel Zucman (of London School of Economics, and erstwhile co-author of Thomas Piketty) in the (free-to-view) Journal of Economic Perspectives represents a milestone in the academic economics literature.
Illicit financial flows (IFF) is a broad term which conflates a lot of different things, including cross-border laundering of the proceeds of crime, the financing of terrorism, the theft of state assets, private-sector bribery and—of course—abuses of taxation, both personal and corporate.
In 2010 I calculated (for a Christian Aid report) that if Zambia had received in 2008 the same export prices in each copper category as had been declared on Swiss exports, then Zambia’s recorded GDP would have been 80 percent bigger.