Tax Evasion: Rich countries failing to address money laundering and tax evasion, says OECD

The world's richest countries are failing to deliver on their pledges to crack down on money laundering and tax evasion, which drains billions of dollars from poor countries, a report said on Wednesday.

The damning assessment from the Organisation for Economic Co-operation and Development (OECD), a group of 34 countries, comes despite tough rhetoric on illicit financial flows from leaders of the G8 group of industrialised countries, particularly the British prime minister David Cameron.

According to Global Financial Integrity, a US NGO, illicit financial flows from developing countries between 2001 and 2010 reached $5.8tn, with China responsible for almost half of the total – five times as much as the next highest source country, Mexico.

At a time of declining official development assistance, donors and aid recipients see the loss of revenues to poor countries through illicit flows as an increasingly urgent problem. The OECD report measures for the first time its members' responses to the flows – money laundering, bribery by international companies, recovery of stolen assets and tax evasion, including abusive transfer pricing (pricing goods to minimise tax payments). In all areas, OECD countries are found wanting.

Anti-money laundering and counter-terrorist financing are governed by 40 recommendations drawn up by the Financial Action Task Force (FATF), an inter-governmental body established in 1989. The recommendations cover areas such as beneficial – or true – ownership of companies, and customer due diligence and record-keeping (knowing customers and understanding their risk profiles).

On average, OECD countries' compliance with key recommendations on money laundering is low, said the report. The lowest areas of compliance includebeneficial ownership and politically exposed people (prominent individuals who can abuse their position).

Read more: Rich countries failing to address money laundering and tax evasion, says OECD | Global development | theguardian.com

Fatca, despite worldwide protests as a major infringement on personal privacy laws could still be forced into law by financial sector and some Governments

The European Nordic banking associations have recently opened FATCA reciprocity talks. This regardless of Fatca being widely criticized by privacy advocates around the World including the European parliament, as an infringement on privacy laws,

FATCA , supported by the financial, banking, insurance industries, and  most conservative national governments, is not only considered to be a very controversial proposal but also a major infringement on Privacy laws, which has resulted in massive criticism of Fatca worldwide

The push for reciprocity under the US Foreign Account Tax Compliance Act (Fatca)

is gaining pace say the supporters of Fatca, with banks in four Nordic countries now  urging their national governments to facilitate this bilateral agreements with the US.

The reciprocity agreements will allow foreign financial institutions to report European and US customer data to their national governments.. 

 

When the draft Fatca regulations were released in February this year, the UK, Spain, Italy, France and Germany issued a statement of intent alongside the US detailing their intention to seek reciprocal agreements.

One can only hope that advocate groups, politicians and others will remain vigilant that Fatca is not sneaked through one way or the other and becomes a law, just like the recent controversial bill that will give the U.S. Department of Home Security access to EU airline passengers' personal information including credit card data..

EU-Digest