CAPITALISM'S ACHILLES HEEL Dirty Money and How to

Corruption is by far the smallest of the three components of crossborder
dirty money. However, it has an influence on a society well beyond
its size. A country that is corrupt at the top also will have large criminal
and commercial components of dirty money. There is no such thing as a
nation with corrupt leaders and officials on the one hand and low levels of
crime and tax evasion on the other hand. Government corruption creates a
permissive environment, and this magnifies criminal activities and financial
shenanigans in the rest of the economy.
Third is the commercially tax-evading money arising through (1) mispricing,
(2) abusive transfer pricing, and (3) a broad range of generalized
fakery, the catalogue of methods covered in Chapters 2 and 3. Getting a
handle on this requires asking people—carefully—what they are doing.
Mispricing
Magnitudes and Misunderstandings 169
In the early 1990s, I undertook a project to examine the amount of mispricing
in international trade between unrelated parties, which I first observed
in Africa in the 1960s and have seen all over the world ever since. My company
conducted 550 interviews with presidents, managing directors, or
deputy heads of trading companies in 11 countries: the United States, the
United Kingdom, France, Netherlands, Germany, Italy, Brazil, India, South
Korea, Taiwan, and Hong Kong.
We used local languages in all interviews, which usually lasted an hour
or longer. We gave respondents a written assurance of anonymity, and no
record was maintained of individuals’ names or their companies. We used
survey forms with 85 specific questions, and answers were recorded in both
tabular and verbatim form. We asked respondents about trading relations
with any two countries, both of which they were permitted to select from
two different continents, so it was apparent that our queries were not focused
on any particular country. Questions covered the entire range of what
is encompassed in international trade transactions: negotiating, ordering,
purchasing, shipping, paying and handling claims. Within these questions,
mispricing in order to generate kickbacks into foreign bank accounts was
treated as a well-understood and normal part of transactions. Because kickbacks
were accepted as routine and discussed openly, because respondents
could select the trading-partner countries they wanted to talk about, and because
their anonymity was guaranteed, we recorded good data on a sensitive