Thursday, March 30, 2006

The 'supply side' of African corruption

Understanding the contribution of tax havens and offshore finance centres to impoverishment requires a sea-change in attitudes to the traditional whipping-boy of the global South - corruption. The Other Side of the Coin: the UK and Corruption in Africa, released yesterday in London by the Africa All Party Parliamentary Group, suggests that attitudes are starting to change. Rather than complaining yet again about corrupt African governments, the report argues that the UK and other wealthy countries are responsible for providing the 'supply side' of African corruption: the tax havens, banking secrecy and financial experts that make corruption on such a massive scale possible.

Several of the Tax Justice Network's researchers and advisers contributed to the report. Details below.

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News Release FAO Business / Foreign Desks
29 March 2006 - For Immediate Release
Tax Justice Network

UK parliamentarians call for action against Britain's financial infrastructure for African money laundering

Researchers and campaigners welcomed a new report issued today [29 March] by UK parliamentarians which argues that the British government is failing to fulfil its international obligations against bribery, corruption and money laundering; and highlights the role of UK-linked tax havens in laundering the proceeds of African corruption.

The report, launched in London by the All Party Parliamentary Group on Africa, argues that the UK is not doing enough to tackle the 'supply side' of corruption: a lack of transparency and weak financial regulations which allows UK multinational companies to become involved in corruption, and for dirty money flows to be channeled through British banks, shell companies, trusts and financial professionals.

Despite the UK committing to taking a lead on African corruption issues in 2005, and ratifying a number of anti-corruption instruments including the 1997 OECD Convention on Combatting Bribery and the 2003 UN Convention Against Corruption, the report finds that there have been “delays in domestic legislation, in enforcement of existing legislation, and in ratification of the UN Convention, and there has been a dilution of ECGD [Export Credit Guarantee Department] guidelines.” In particular, it finds that UK treaty obligations have not yet been “comprehensively adopted and implemented in all of the UK’s Crown Dependencies and Overseas Territories”, which are amongst the world's leading tax havens and offshore finance centres.

The report calls on the UK government:

  • To take action against the use of shell companies to launder money and evade tax by including within the forthcoming UK Company Law Reform Bill a requirement for UK-registered companies to declare beneficial ownership.

  • To properly implement EU rules on Money Laundering (the Third EU Money Laundering Directive), highlighting offshore transactions as a sign of possible corrupt activity

  • To put pressure on the UK’s Crown Dependencies and Overseas Territories to introduce similar Company Law and Money Laundering regulations

Richard Murphy, a tax expert and chartered accountant who gave evidence to the All Party Parliamentary Group, said:

The UK and other wealthy OECD countries have long chastised corrupt businesses and governments in Africa as an obstacle to economic progress. This report turns that view on its head: the UK and other wealthy countries have been complicit in providing the financial incentives and the pinstripe infrastructure that makes corruption on such a massive scale possible.

John Christensen, director of the Tax Justice Network, an international coalition of researchers and campaigners on tax havens and tax competition, said:

On Tuesday [UK Foreign Minister] Jack Straw announced his intention to improve the governance of Britain's overseas territories and crown dependencies, recognising the UK's duty and right to reform these unaccountable islands in the sun. Today's report shows the urgency of that task. He needs to start by bringing Britain's tax havens into line with their international obligations against corruption and tax evasion.


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