4 ways to end the 'trillion-dollar scandal'

Today, ONE launches the “Trillion-Dollar Scandal” — a campaign that seeks to expose the true scale of the impact of corruption and illicit financial flows to the developing world. At least $1 trillion a year leaves developing countries through money laundering, bribery, tax evasion and other forms of corruption. Some 3.6 million deaths could be prevented each year in the world’s poorest countries if action is taken to end the secrecy that allows corruption and criminality to thrive and if the recovered revenues were invested in health systems. Of course, the central problem with corruption is corrupt people, living in both developed and developing countries. But bad policy can facilitate corruption, and making policy changes can dramatically reduce that enabling role. The uncomfortable truth is that much of the money involved is syphoned out of developing countries through companies and financial instruments in G-20 countries. World Bank analysis of the world’s biggest corruption scandals over the past two decades revealed that 70 percent of these scandals involved anonymous shell companies. This secrecy allowed Teodorin Obiang, the son and heir-apparent of Equatorial Guinea’s President Obiang, to buy a mansion in Malibu, a private jet, several Ferraris and Lamborghinis, and a jewel-encrusted glove belonging to the late Michael Jackson. He even commissioned plans to build the world’s second-biggest yacht worth $380 million — almost three times more than his country spends annually on health and education programs combined, and all this in a country where almost 80 percent of the population falls below the poverty line and a third die before the age of 40. These abuses were facilitated by secretive financial structures in G-20 countries. So to prevent further similar scandals, ONE has put together a four-point action plan that it today presents to the G-20 chair, Australia: 1. Shine a light on phantom firms Anonymous shell companies and trusts allow criminals to hide money, rip off governments and taxpayers, and siphon off cash that could be used to pay for health care, education or vital infrastructure investment. Governments, law enforcement agencies and citizens face an impossible task in trying to reclaim billions of dollars’ worth of stolen assets — thwarted by an impenetrable web of secrecy. To end the secrecy that facilitates corrupt deals, each G-20 country should commit to making beneficial ownership information of companies and trusts publicly available. 2. Publish what you pay One-third of the world’s poorest one billion people live in resource-rich countries; resources that have the potential to transform lives. However, without public information on payments made to governments for natural resources, it is impossible for citizens to hold leaders accountable for the use of those revenues. With information, citizens can push for those funds to be invested in infrastructure, social services and human capital — the cornerstones of sustainable economic growth and development. 3. Crack down on tax evaders Tax is how all countries — rich or poor — pay for schools, hospitals and essential infrastructure. However, collecting revenues is a difficult and costly task, especially when governments do not have the information they need to pursue evasion cases. The losses deny developing countries the funds they need to pay for basic medical and infrastructure needs. ONE’s analysis reveals the scale of the problem: ● In 2013, $20 trillion of undeclared assets was held in offshore tax havens. ● $3.2 trillion of that total originated from developing countries. ● If the income on this money were taxed at the current top marginal rate for each country, it could yield revenues of $19.5 billion per year that countries could spend on their own development. All G-20 countries should build a truly multilateral system, accelerate the timeline for complying to no later than 2017 and ensure that developing countries can benefit — even if they are not ready to exchange information themselves. 4. Open up and publish government data Data is a precious commodity that helps us understand the world in which we live. Financial data that tracks the money flowing in and out of government accounts, linked with data on service delivery — such as the number of hospitals and teachers — and results — like primary school completion rates — is crucial for informing smart decision making and public policy. While the collection and use of private data by companies and governments is controversial, opening up data on what governments are doing is truly empowering. Open data is not just about accountability. It is a multipurpose tool for modern government, which can also be used to improve public services, enhance efficiency, stimulate economic growth and create jobs. All G-20 countries should commit to making data open as a norm. These four actions add up to a powerful story of economic growth, strengthening commerce, building accountability and functioning governments, and ensuring more prosperity for all. Indeed, where citizens are empowered to make their own decisions and hold governments to account — and where criminals have nowhere to hide — the world will be a safer and more prosperous place. Join the Devex community and access more in-depth analysis, breaking news and business advice — and a host of other services — on international development, humanitarian aid and global health.