scholarly journals How Big Are Illicit Financial Flows?

2021 ◽  
pp. 75-88
Author(s):  
Joras Ferwerda ◽  
Brigitte Unger
Keyword(s):  
Money Laundering ◽  
Tax Evasion ◽  
Tax Avoidance ◽  
Financial Flows ◽  
Illicit Financial Flows ◽  
The Cost ◽  
Insight Into ◽  
Tax Regulation

In recent years several leaks have given us insight into how the wealthy and criminals hide their money. The boom of leaks has resulted in a ‘hot phase’ in tax regulation. As a result, the number of studies that want to measure illicit financial flows has also increased. This chapter tries to provide an overview of this booming new field. What do all these studies teach us about the seriousness and size of tax avoidance, tax evasion, and money laundering? What is precisely measured, and how? This chapter concludes that the term ‘Illicit Financial Flows’ has become a bit of a floating identifier, a name that is vague enough to be used for many different concepts but at the cost of losing its meaning. We argue that decomposing the problem of illicit financial flows and what each study aims to measure, might give more useful insights.

Addressing illicit financial flows in Africa

2016 ◽  
Vol 23 (4) ◽  
pp. 1074-1091 ◽  
Author(s):  
Bernd Otto Schlenther
Keyword(s):  
Money Laundering ◽  
Tax Evasion ◽  
Tax Avoidance ◽  
Medium Term ◽  
Profit Shifting ◽  
Financial Flows ◽  
Content Type ◽  
Priority Areas ◽  
Long Run ◽  
Illicit Financial Flows

Purpose This paper aims to identify the underlying key components of illicit financial flows (IFFs) and highlights the priority areas where government resources should be pooled under a whole of government approach to mitigate the risks posed by IFFs. These areas are tax avoidance and tax evasion (specifically intra-company profit shifting, investment and profit shifting within the extractive sector, fraud and beneficial ownership), anti-corruption measures, governance and accountability measures, anti-money laundering effectiveness and effectiveness in the detection of falsified customs declarations. Design/methodology/approach The concept of IFFs is emerging as an umbrella term for bringing together seemingly disconnected issues. The concept is ill-defined, but there are various identifiable components supporting the term IFF such as capital flight, corruption, money laundering, tax avoidance, tax havens and transfer pricing practices. The author identifies the key areas of concern through a literature review and recommends prioritization of short- to medium-term risk areas and long-term policy imperatives. Findings In the short- to medium-term, an effective “whole-of-government” approach should be based on uniform risk identification and prioritization between mandated government agencies and in the long run, it should be focused on building responsive and effective institutions through a process of good governance and effective taxation. Originality/value A large body of literature deals with “IFFs” and the “whole-of-government approach” as separate concepts. This paper draws on the existing literature and identifies priority areas for addressing IFFs, and, for these to be successful, they are entirely dependent on a whole-of-government approach – both in the short and long run.

Curbing Illicit Financial Flows

2018 ◽  
Author(s):  
Xiaodon Liang
Keyword(s):  
Tax Evasion ◽  
Developing Economies ◽  
International System ◽  
Tax Avoidance ◽  
Incentive Structure ◽  
Global Finance ◽  
Tax Havens ◽  
Financial Flows ◽  
Playing Field ◽  
Illicit Financial Flows

Illicit financial flows (IFFs) drain state finances and economic vitality, with disproportionate impact on developing economies. IFFs—including money laundering, tax evasion, and tax avoidance—pose a transnational problem addressed so far through international regimes of coordination and cooperation. But meaningful reductions in IFFs require addressing the root of the problem: information asymmetries. Developed nations and tax havens know where money is hidden and profits are made, while developing nations do not. Since the international system of global finance creates the incentive structure and permissive environment for illicit flows, it is at this level that states must focus their policy-making attention. New information-sharing mechanisms, such as automatic exchange of tax information and public country-by-country tax reporting, can level the playing field and enable lower-income states to effectively address the IFF problem.

Who are our owners? Exploring the ownership links of businesses to identify illicit financial flows

2021 ◽  
pp. 147737082098036
Author(s):  
Alberto Aziani ◽  
Joras Ferwerda ◽  
Michele Riccardi
Keyword(s):  
Money Laundering ◽  
Tax Evasion ◽  
Economic Incentives ◽  
Tax Havens ◽  
Financial Flows ◽  
Holding Companies ◽  
Business Ownership ◽  
Cultural Proximity ◽  
Illicit Financial Flows ◽  
High Level

This article investigates the patterns of business ownership in Europe, using a unique dataset on the nationality of 28.7 million shareholders of companies registered in 41 European countries. By means of an exploratory multivariate analysis, it tests whether ownership links between different countries are driven exclusively by social and macroeconomic variables – such as trade or geographical or cultural proximity – or are also related to measures of financial secrecy, corruption and lack of compliance with anti-money laundering regulations. The results indicate that factors other than licit economic incentives explain the international ownership structure of European companies. European firms have an abnormal number (that is, above the predicted value) of owners from tax havens and countries with poor financial transparency, which may suggest the use of holding companies for money laundering and tax evasion and to conceal illicit financial flows. However, ceteris paribus, the number of owners is abnormal in countries where rule of law and the control of corruption are more effective, suggesting that a high level of corruption may be a cost in money laundering activities. The findings contribute to the current international debate on illicit financial flows – as framed by United Nations Sustainable Development Goal 16.4 – and can be used by public agencies and private actors to detect anomalies in business ownership and prevent potential financial crime schemes at corporate level.

Illicit Financial Flows: Concepts, Measurement, and Evidence

2019 ◽  
Vol 35 (1) ◽  
pp. 44-86
Author(s):  
Matthew Collin
Keyword(s):  
Money Laundering ◽  
Tax Evasion ◽  
Research Agenda ◽  
Empirical Work ◽  
Risk Indicators ◽  
Financial Flows ◽  
Cross Border ◽  
Illicit Flows ◽  
Illicit Financial Flows ◽  
The Subject

Abstract There is a growing consensus that the presence of illegal and harmful cross-border financial flows is one of the factors impeding economic and human development. In recent years, a new conceptual framework for describing these “illicit” financial flows (IFFs) has emerged that combines issues ranging from cross-border money laundering to tax evasion. This article summarizes and clarifies recent empirical work in this area. Three types of studies are considered and critiqued: (i) methods of measuring IFFs, (ii) constructed risk indicators, and (iii) forensic studies that aim to uncover instances where illicit flows have occurred. The article discusses the limitations of all three approaches and proposes ways in which the research agenda on IFFs could be reasonably advanced, given the hidden nature of the subject.

Terrorism financing and money laundering: two sides of the same coin?

2018 ◽  
Vol 25 (4) ◽  
pp. 962-968 ◽  
Author(s):  
Frederic Compin
Keyword(s):  
Money Laundering ◽  
Tax Evasion ◽  
White Collar Crime ◽  
Islamic State ◽  
Content Type ◽  
Fully Integrated ◽  
Financial Crimes ◽  
Terrorism Financing ◽  
Utilitarian Approach ◽  
The Cost

Purpose The purpose of this paper is to analyse how terrorism financing can be assimilated with money launderning when the amounts ofmoney involved differ so markedly. Not only is the cost of financing terrorist attacks minimal compared to the huge sums often at stake in financial crimes, but also the psychological profile of terrorists, who are reclusive by nature, contrasts starkly with that of financial criminals, who are usually fully integrated members of society. When terrorism financing is equated with money laundering this represents a utilitarian approach in that it facilitates the creation of a security strategy and stifles criticism of criminogenic capitalismthat turns a blind eye to tax evasion. Design/methodology/approach The analysis is conceptual, focussing on the assimilation of terrorism financing with money laundering. There is an interview with a French magistrate, specialized in the fight against corruption and white-collar crime, and data have been collected from international organizations and scholarly articles. Findings The fight against money laundering and money dirtying has clearly sparked numerous controversies around evaluation, scope, criminal perpetrators and a lack of vital cooperation between administrative and judicial services. Social implications This paper raises questions about the reasons behind the linking of money laundering and money dirtying by states and players in public international law and why the fight against money laundering is very much overshadowed by their focus on terrorist financing in dealing with the growing threat of Islamic State, otherwise known as ISIS or ISIL, in the Middle East and West Africa. Originality/value The paper enables the reader to raise the question of similarities between the fight against money laundering and the fight against terrorism financing.

scholarly journals A Study on Anti-Money Laundering: Principles And Perceptions in Context to India

2021 ◽  
pp. 127-137
Author(s):  
R. Harika ◽  
V. N. V. Sai Ramresh
Keyword(s):  
Money Laundering ◽  
Tax Evasion ◽  
Tax Avoidance ◽  
Combat Money Laundering

Tax evasion is the focal turn of numerous genuine offenses. Hacking frameworks or laundering cash has become an extraordinary calling of individuals where they exploit distinctive monetary and general sets of laws of various nations. AML is needed to make the country less appealing for the launderers, in this manner shielding the monetary area from functional and reputational hazards. To have a thorough paper, the paper is partitioned into four sections. Part I opens up with clarifying the ideas and cycles of tax evasion calling attention to the causes and methods of illegal tax avoidance. Part II moves with rules and guidelines/control instruments to manage the issue of illegal tax avoidance. Considering the previously mentioned conversation Part III continues in expounding the ideas to have a decent enemy of tax evasion system. The paper is the principal endeavor to move toward AML Bill 2008 to combat money laundering.

scholarly journals Illicit financial flows and foreign direct investment in developing countries

2016 ◽  
Vol 6 (4) ◽  
pp. 442-447
Author(s):  
Emmanuel Innocents Edoun ◽  
Alexandre Essome Dipita ◽  
Dikgang Motsepe
Keyword(s):  
Foreign Direct Investment ◽  
Interest Rates ◽  
Tax Evasion ◽  
Local Governments ◽  
Direct Investment ◽  
Good Governance ◽  
Transfer Pricing ◽  
Developed Countries ◽  
Financial Flows ◽  
Illicit Financial Flows

Africa is facing a number of challenges that are negatively affecting socio-economic development at all levels of governments and local governments are expected to play a leading role for Africa’s development. One of these challenges are illicit financial flows that are perceived by many as a crime against Africa’s transformation. The continent is losing billions of dollars every year because of tax evasion, corruption and inappropriate transfer pricing and maladministration. With tax being one of Africa’s main sources of revenue, current and past researches revealed that, illicit financial flows (IFFs) cripple African Governments tax base as a results of capital outflows and lack of good governance. This situation obviously is a challenge for Africa’s development as governments struggle to finance structuring projects and this in turn compels these governments to seek funds from international organisations at very high interest rates. It is also important to reveal that Foreign Direct Investment (FDI) rapidly grew after the Second World War with the intention to maximize profit on investment in less developed countries and specifically in the African continent. In competing in Africa, most multinationals main objective is to pay less tax, make extensive profits and transfer the proceeds to their country of origin. This subsequently gave rise to illicit financial flows in Africa where the continent is losing billions of dollars. Past studies equally revealed that, Africa’s revenue could increase between 55 and 65%, if appropriate mechanisms of monitoring the flows were in place. This study therefore is based on the premise that, tax evasion, illicit financial flows, corruption and abusive transfers pricing are all factors that affect Africa’s development. Using appropriate method of inquiry, this study wants to demonstrate the presence of FDI’s in Africa as a modus operandi behind tax evasion. It also using the “Appropriability Theory” to explain the rationale for FDI in Africa.

How Countries Should Share Tax Information

2019 ◽  
pp. 303-322
Author(s):  
Arthur J. Cockfield
Keyword(s):  
Human Rights ◽  
Transaction Costs ◽  
Tax Evasion ◽  
Academic Support ◽  
Tax Planning ◽  
High Quality ◽  
Financial Flows ◽  
Optimal Outcomes ◽  
Illicit Financial Flows ◽  
International Tax

This chapter looks at exchange of information (EOI) policies, proposing several ways to make EOI policies fairer and more efficient, so as to maximize their potential to reduce illicit financial flows and curb abusive tax practices that undermine human rights. While there appears increasing policy and academic support for EOI initiatives that promote global financial transparency, the current international tax regime, with its high transaction costs for taxpayers and tax authorities, does not seem particularly amenable to producing optimal outcomes. The chapter then emphasizes how, to promote enforceability, the ideal EOI system delivers high-quality tax information while providing needed legal protections for taxpayer privacy. The exchange and usage of high-quality tax information would reduce transaction costs for tax authorities as they could more readily identify taxpayers engaged in offshore tax evasion and aggressive international tax planning.

scholarly journals The Tax Regulation System in Transformational Economy

2021 ◽  
Vol 5 (520) ◽  
pp. 359-364
Author(s):  
V. V. Koroviy ◽  
Keyword(s):  
Tax Avoidance ◽  
Regulation System ◽  
Tax Burden ◽  
Eastern European ◽  
Research And Innovation ◽  
Innovation Activities ◽  
Eastern European Countries ◽  
The Cost ◽  
Sustainable Economic Growth ◽  
Tax Regulation

The article is aimed at substantiating the directions of development of the tax regulation system for the medium term, taking into account the peculiarities of the transformational economy. The article analyzes the tax burden in the countries of the sample of Central and Eastern Europe for the period 2006-2019. A higher level of tax burden than in Ukraine is recorded for Slovenia and Hungary. The rating and indicators of Central and Eastern European countries in the Paying Taxes 2020 rating are studied. The expediency and measures to improve Ukraine’s position in the above mentioned rating are substantiated, in particular in terms of reducing the time costs of paying taxes and filling in tax reports. The possibilities of increasing the effectiveness of the tax regulation system in terms of optimizing tax expenditures are estimated. For countries with a transformational economy, it is advisable to use a proportional scale of taxation, because its differentiation increases the cost of administration and creates additional opportunities for manipulation and tax avoidance by certain payers. The need for tax incentives for research and innovation activities in the context of transformational economy is substantiated. In order to ensure sustainable economic growth, directions for increasing the level of socio-economic development of territories and increasing the fiscal capacity of local budgets are proposed.

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