Tuesday, 23 December 2014 00:01
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Dirty money or black market cash illegally transferred to tax havens scattered around the world is robbing everyone a chance for a sustainable future. A record $ 991 billion in unrecorded funds left 151 developing and emerging economies in 2012, up nearly 5% from a year earlier, according to US-based watchdog Global Financial Integrity (GFI) that exposes financial corruption.
Asia was the region of the developing world with the greatest flow of dirty money over the decade, accounting for 40.3% of the world total, driven by China. Sri Lanka’s neighbour India and close countries such as Malaysia were also in the fray. But the researchers found growth of illicit flows was faster in other parts of the world, particularly in the Middle East and North Africa and in sub-Saharan Africa, where the growth was seen at 24.2% and 13.2% respectively.
The GFI research found fraudulent mis-invoicing of trade transactions was the most popular method to move money illegally and accounted for nearly 78% of illicit flows in 2012. Money is moved overseas through trade mispricing by fraudulent under-billing or over-invoicing for goods to avoid tax or to hide large transfers.
So stark has the problem become that the organisation has called for the United Nations to next year include a target to halve all trade-related illicit flows by 2030 as it negotiates a new set of global goals, the Sustainable Development Goals, to replace the Millennium Development Goals.
While the exact numbers cannot be proven, it cannot be ignored that this trillion dollars lost from economies in 2012 could have been invested in local businesses, healthcare, education or infrastructure. It could have contributed to inclusive economic growth, legitimate private-sector job creation, and sound public budgets.
Sri Lanka too is facing an epic battle against escalating corruption, which has even become the rallying call for the upcoming presidential election. In the melee of words and accusations, it is easy to forget that Sri Lankan officials too have been embroiled in allegations of holding Swiss bank accounts. Even as early as 2012 Parliament was the scene of a landmark revelation by the Opposition that claimed an alleged 400 officials held or were proxies for Swiss bank accounts.
Nihal Sri Ameresekere, Sri Lanka’s foremost anti-corruption buster whose efforts have been recognised by the United Nations, at the time went on record insisting the amount disclosed (about 85 million US dollars or Swiss Francs in 2011) is just the tip of the iceberg. Ameresekere also noted that Finance Intelligence Units, such as the one under the Central Bank, were set up under the UN Convention and are pro-active in tracking terrorist funding and money laundering.
Despite Sri Lanka being the second country to sign the convention in 2004, it hasn’t impressed on the implementation front. Under the Convention, an International Association of Anti-Corruption Authorities (IAACA) exists and under that law enforcement authorities like the Attorney General, Police or Bribery Commission can seek the assistance of countries to trace any laundered money. Yet, without specific details such as names, these mechanisms are all but pointless. In Sri Lanka’s environment of absolute impunity, even more so.
This is the deep and growing problem of corruption, not just in tiny Sri Lanka, but around the world. Yet even a small country can make a difference – if it wants to.
