CORRUPTION

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Interview with Raymond Baker International Affairs Forum dividends, or sending dividend payments abroad. What it can do in its trade relationships with its parent is to misprice trade, either overpricing an import, so that it pays an extra amount to the parent company, or underpricing something it is exporting to the parent, in order to shift value to the parent. It is the over-invoicing and under-invoicing of imports and exports that gives traders the ability to move money at will. This enables the muddying of capital and trade transactions, in order to facilitate the flow of resources out of emerging markets in developing countries. What are the impacts to developing countries as a result of illicit financial flows? In my opinion, there is nothing more damaging to developing countries than the loss of massive amounts of revenue that are bleeding abroad. It directly impacts poverty and it is inadequately addressed. It means that the economy does not have as much money in it as it would otherwise have and that governments do not have as much tax revenue as they would otherwise have. Illicit financial flows also contribute to inequality of income and the growth of that inequality. It has all the negative effects that you can imagine from massive amounts of monies draining. And, in most cases, they are drained permanently out of emerging markets and developing countries. Much of your work centers on data collection, research, and analysis of illicit financial flows. What issues have you experienced trying to obtain good, reliable data for your research? We take a couple of approaches to this. First, we base our analysis entirely on data filed by governments with the IMF. We also use UN Comtrade data, broken down by countries and commodity groups. However, there can be errors in this data, such as statistical errors. There can be intentional holes left in the data, and so forth. Imperfections in the data can reduce the level of illicit flows that we measure, or increase the level of illicit flows that we measure. As previously mentioned, we think that if we had perfect data, the data would show more than a trillion dollars are flowing out of emerging market in developing countries. The reason for this is that there are a lot of things not included in the data that is provided by governments to the IMF. For example, cash transactions and across border cash transactions that are used by drug dealers, human traffickers, and counterfeiters, do not show up in official statistics. Secondly, none of the misinvoicing of services and intangibles shows up in the data because the IMF does not compile data on the trade of services and intangibles. That is estimated to be about twenty-five to twenty-eight percent of global trade. Furthermore, in the business of misinvoicing, if the misinvoicing is agreed to by the buyer and the seller in a transaction, and that misinvoicing is included in the invoice that is exchanged between the buyer and the seller, it does not show up in our data. The only misinvoicing that shows up in our data, is where it has been reinvoiced. In other words, the seller sends the invoice to, for example, a tax haven entity, which re-invoices at a higher or lower amount and sends the invoice onto the buyer. But where the misinvoicing is agreed to, between the buyer and the seller, and it’s simply the original invoice is manipulated, this also does not show up in our data. So there are a lot of elements of both the corrupt departmental and the commercial components that don’t show up in our data. We believe that if we had better data on those, the numbers would be considerably higher. 18
International Affairs Forum Fall 2016 Since Global Financial Integrity was founded, what traction have you seen in international recognition of the issues and also steps to combat them? When my colleague Tom Cardamone joined me in this endeavor in 2006, we went through a lengthy conversation as to what we would call this phenomenon that we’re dealing with. In a book that I had written (Capitalism’s Achilles Heel: Dirty Money and How to Renew the Free- Market System), I called it “dirty money.” We agreed not to call it “dirty money”, however. So we went through a lot of combinations and permutations and finally decided to call this phenomenon, illicit financial flows. It took us about five years to get that terminology into the media and to get it to be used. outcome document, there appears to be some uncertainty as to what comes next. There needs to be concrete steps that governments take to curtail these flows. There are some steps being taken now, but there needs to be a great deal more focus on this in the immediate months and years ahead. Over the last five years, it has exploded to the extent that now the entire global community has signed on to addressing the issue of illicit financial flows. So we’ve gotten the issue on the table. One hundred ninety-three nations signed onto addressing this issue in the Sustainable Development Goals (SDGs) and there was the adoption of the Financing for Development outcome document. We have gotten the issues into the thinking of a lot of organizations, such as the United Nations, the OECD, and the World Bank. Each of those institutions is at various levels in progressing with these issues, as well as the entire world recognizing that this phenomenon is a reality and has to be dealt with. What do you view as the major challenge moving forward? The challenge now is to take the steps necessary to curtail these flows by putting teeth into the business of curtailing illicit financial flows. Since the adoption of the sustainable development goals and the Financing for Development Fall 2016 19
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Page 4 and 5: HUMAN TRAFFICKING 73 Interview with
Page 6 and 7: Special Themed Issue: Editors’ In
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Page 14 and 15: Corruption-Security: Forging US Str
Page 16 and 17: Political Will - or Political Won
Page 18 and 19: Political Will - or Political Won
Page 22 and 23: Interview with Raymond Baker Raymon
Page 24 and 25: Interview with Jessica Tillipman In
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Page 30 and 31: Interview with Jessica Tillipman Je
Page 32 and 33: Interview with Dr. Julio Bacio Terr
Page 34 and 35: Interview with Professor Louise She
Page 40 and 41: Corruption: Is the Right Message Ge
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Page 44 and 45: Interview with Professor Suelette D
Page 50 and 51: New Methods to Engage Civil Society
Page 52 and 53: New Methods to Engage Civil Society
Page 54 and 55: Transparency and Open Contracting T
Page 60 and 61: Treating Health and Pharmaceutical
Page 62 and 63: Treating Health and Pharmaceutical
Page 64 and 65: Interview with Professor Emerita He
Page 66 and 67: Interview with Professor Emerita He
Page 68 and 69: Global Anti-Corruption Conditionali
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Global Anti-Corruption Conditionali
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Global Anti-Corruption Conditionali
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73 Interview with Dr. Myria Vassili
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Interview with Dr. Myria Vassiliado
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Interview with Dr. Myria Vassiliado
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Interview with Matthew Friedman Int
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Interview with Matthew Friedman We
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Interview with Matthew Friedman Int
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Interview with Matthew Friedman Dur
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The Potential Correleation Between
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Between Criminal Justice and Human
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Human Trafficking Around the World:
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Interview with Dr. Osei Bonsu Dicks
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Interview with Dr. Osei Bonsu Dicks
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State-Sponsored Slavery: Migrant La
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State-Sponsored Slavery: Migrant La
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Child Trafficking in China: Who Are
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Interview with Dr. Robert Lawson In
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Interview with Dr. Robert Lawson Dr
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Interview with Professor Susanne Lu
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Organ Trafficking During Times of W
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Interview with Ms. Taina Bien-Aimé
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Lessons Learned by NGOs in the Figh
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REFERENCES AND FOOTNOTES Corruption
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%e2%80%9chow-to%e2%80%9d/, 25 Novem
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1 By Law No. 228/2003. 2 In particu
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Shen, Anqi (2015). Offending Women
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direct experience of some of the is
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