ONE to highlight Trillion Dollar Scandal at crunch Anti-Corruption Summits
- More than one trillion dollars siphoned from developing countries annually
- Failure to plug leaks in global financial system is not an option
- The ONE Campaign calls for standards of “fair play” to be raised to help end corruption.
LONDON, Monday 9th May | As world governments gather for a major Anti-Corruption Summit on 12 May, anti-poverty group ONE urges them to take meaningful action to stop the siphoning of more than $1 trillion dollars from developing countries each year.
As the recent Panama Papers showed, flaws in the global financial system enable corrupt individuals to hide details of their financial affairs under the noses of governments and law enforcement agencies. If just a portion of the stolen and hidden funds was properly taxed and the revenues invested in public services and systems, this could help developing countries finance their fight against extreme poverty.
Adrian Lovett, Deputy Chief Executive (Interim) of ONE said: “ONE and our seven million members around the world want leaders gathering in London to call time on this Trillion Dollar Scandal. The secrecy surrounding the ownership of companies and trusts provides a convenient cloak for the corrupt, and people in developing countries pay the price as vital revenues that could help fight poverty are lost. Leaders at this important summit need to adopt new standards of financial openness and drag this illicit activity out into the open.”
For the last two years, ONE has been campaigning for greater openness following its ground-breaking Trillion Dollar Scandal report which revealed the scale of money disappearing each year from poorer nations because of weak global financial governance. *
Corrupt individuals know they can conceal their identities through anonymous shell companies which then funnel the cash into other companies, property and assets.
ONE is calling on delegates to seize this week’s opportunity to help end the Trillion Dollar Scandal.
ONE has laid out key areas for the Anti-Corruption Summit to take action and set a global standard of “Fair Play”:
- Public register of beneficial ownership, so we know who owns trusts and companies.
- Tighter rules to make it harder to hide corrupt assets.
- More Due diligence in business transactions so ignorance is no excuse if people you do business with turn out to be corrupt.
- Transparency for companies buying oil, minerals or gas.
- Public disclosure of companies’ tax payments.
- Greater transparency in government procurement.
- Government budgets should be available for anyone to view.
The Anti-Corruption Summit is taking place in London, a leading financial centre that plays a central role in the global system that allows funds to flow out of developing countries. Many other developed countries – including France and the US – and are also implicated in this web of shady deals. **
ONE believes the Anti-Corruption Summit could be the moment world leaders turn the tide in the fight against corruption and raise the global standard of transparency and openness.
Ahead of the Summit, Adrian Lovett will speak at the event ‘Tackling Corruption Together’, taking place at Marlborough House, on Wednesday 11th May. This will see civil society and representatives from governments attending the Anti-Corruption Summit on the 12th exchange ideas on how to deal with global corruption.
*ONE launched the first Trillion Dollar Scandal report in September 2014. The figures presented here are updated using latest information from 2015.
**Data from the Panama Papers has helped reveal the extent of money held in cities such as London and Paris that is associated with corrupt officials:
- James Ibori, the former Governor of Nigeria’s oil-rich Delta State, is currently serving a 13-year conviction in the UK for ten counts of money laundering and conspiracy to defraud. He owned six properties in London with the help of secret shell companies. His properties included a flat opposite Abbey Road recording studios and a six-bedroom house with indoor pool in Hampstead worth £2.2m in 2001.[i] In today’s prices, this luxury house could vaccinate 230,000 children in Nigeria against seven killer diseases.[ii]
- Dan Etete, the former Nigerian Minister of Petroleum, has been implicated in facilitating the transfer of payment of $1.1b to a shell company he anonymously owned in the tainted Oil Prospecting Licence (OPL) 245 deal, with the funds ending up in a Natwest bank account in London.[iii] He was convicted of using €15m believed to have been fraudulently obtained to buy properties in 1999 and 2000 in France, including a chateau in northwestern France for ₣7.5m (€1.1m), a Paris apartment for ₣12 million (€1.8m) and a luxury villa in the chic Paris suburb of Neuilly for ₣28m (€4.3m). The value of these French properties is equivalent to antiretrovirals to treat HIV/AIDS for over 370,000 people in Nigeria.[iv]
Background to summit:
- In 2013, Prime Minister David Cameron led the world on a number of tax, trade and transparency initiatives with the aim of the G8 getting its own house in order and addressing the corruption that undermines growth and prosperity in developing countries. Ahead of the 2015 G7 summit in Germany and following the FIFA corruption scandal, the Prime Minister announced a major anti-corruption summit to take place in London in 2016
Methodology of the $1 trillion figure:
- Given the challenges involved in estimating the costs of corruption, ONE has investigated its impacts through three approaches, all of which overlap but which we believe corroborate our findings.
- The first draws on estimates of ‘Illicit financial flows’ from developing and emerging countries by the US-based organisation Global Financial Integrity, which estimates the scale of illicit financial flows to be $1.09 trillion in 2013. These figures do not represent the government revenues lost to developing and emerging countries, but rather to the amount of capital that escapes their economies illicitly.
- The second approach involves updating estimates from the United Nations Office on Drugs and Crime (UNODC), which put the scale of global money laundering at between 2.1% and 4% of global GDP. This estimate sits within the often cited International Monetary Fund ’consensus range’ on the scale of money laundering of 2–5% of global GDP. Thus, in 2015 money laundering globally was estimated to involve between $2.38 trillion and $4.53 trillion. UNODC suggests that “all crime proceeds appear to be generally higher in developing countries and tend to be laundered abroad more frequently”. ONE estimated the proportion of this estimate likely to relate to developing countries, using IMF statistics on the proportion of global GDP (purchasing power parity) originating in developing and emerging economies (57.6%), and used this ratio to calculate the likely scale of money laundering as estimated by UNODC originating in developing and emerging economies. We concluded that in 2015 the amount involved was likely to be between $1.37 trillion and $2.61 trillion.
- The final approach involves an aggregation of a range of methodologies. Developing countries lose an estimated $100–$160 billion in tax revenues as a result of trade mispricing and an estimated $250 billion from illegal tax evasion each year. The global cost of money laundering in 2015 is estimated at between $2.38 trillion and $4.53 trillion. The global cost of bribery is estimated at between $600 billion and $1.7 trillion. ONE has taken a highly conservative estimate of the low-range costs of money laundering and bribery incurred by developing countries, at one-third of the global total. In this scenario, the cost of money laundering for developing countries is between $792 billion and $1.51 trillion, and the cost of bribery is between $200 billion and $560 billion. While there may be some overlap between these estimates, the use of highly conservative assumptions means the cost of corruption is likely to be underestimated rather than overestimated. If we aggregate the low range, the total comes to $1.34 trillion. Using less conservative assumptions of the proportion of bribery and money laundering relating to developing countries – two thirds – but still using low-range global estimates, the total could be as much as $2.33 trillion.
- It is important to note that the $1 trillion estimate is money siphoned out of all developing countries – not only low income countries. It is also critical to note that the estimate is not all public money that would otherwise be in government coffers, but even if a proportion of this money was available and could be taxed it could generate significant revenues for development.
[ii] ONE internal calculation using the unit vaccine rate of €19.74 per child for vaccinations to protect against: tetanus, diptheria, whooping cough, Hepatitis B and meningitis (pentavalent); pneumonia (pneomococcal); and diarrhoeal disease (rotavirus). Gavi, The Vaccine Alliance (2014) CEO Board Report, http://www.gavi.org/About/Governance/GAVI-Board/Minutes/2014/10-Dec/Presentations/03—CEO-presentation/
[iv] ONE internal calculation using the unit vaccine rate of antiretrovirals to treat HIV/AIDS of $92 per annual course. PEPFAR (2014) Report on Costs of Treatment in the President’s Emergency Plan for AIDS Relief.