World Bank and International Monetary Fund Host Talk on Illicit Financial Flows

Posted: October 24, 2014 at 3:33 pm, Last Updated: October 24, 2014 at 3:35 pm

By Kasey Kinnard

Presenting to a standing-room only crowd, Integrity Vice President of the World Bank Group (WBG), Leonard Frank McCarthy, set the tone of the discussion on illicit financial flows at the 2014 Annual Meetings of the IMF and WBG, with the analogy that the cost to combat the current Ebola crisis in Guinea, Liberia and Sierra Leone will likely reach $1bn, yet the total illicit financial flows out of the same three countries between 2011 and 2014 is estimated at $1.36bn. He was followed by speakers from WBG, as well as government officials and advocates from Norway, Denmark, Bangladesh, and the U.S. who echoed concerns about the potential of the developing world that is lost as an effect of illicit financial flows (IFF), and how the developed world is part of the international system that makes it possible.

The ability to have such a conversation is a vital first step in addressing the role of each member of the global community in combatting IFF as a means of meeting development goals. Without speakers from the IMF represented, it is impossible to know what is seen as the IMF role in the policy suggestions made. Raymond Baker, President, Global Financial Integrity, pushed for a pivot from noticing the problem to addressing it through policy, and made multiple references to a post 2015 relationship with Africa that is based on partnership, which would be assisted by the publication of the UN Economic Commission for Africa’s High Level Panel Report. Download the current report here. Specifically, Mr. Baker insisted on tackling rampant “misinvoicing” of commercial trade values that allows legally traded goods to facilitate IFF, naming it the most common way to move illicit money. Another stand out on the panel was Dr. Atiur Rahman, Governor, Central Bank of Bangladesh, who put a light on the responsibility of developed countries to examine the practice of allowing immigration of “high value” people to their countries without thoroughly questioning the origins of their wealth, and the need to increase the level of criminalization for IFF in commercial trade from a civil offense to a criminal offense. Morgens Jensen, Minister for Trade and Development Cooperation, Denmark, urged that private enterprise must become a stakeholder in addressing IFF, that IFF must be included in measurements of governance indicators, and that everyone must address the large facilitators of IFF, including big banks. It is impossible to say what real world implications such a conversation led by the WB and IMF could have, or how much opportunity has been lost forever given how embedded IFF is in all manner of financial and commercial activity, especially in the developing world, but it is a necessary conversation nonetheless.

But, for all the ideas, questions regarding the lives of individuals in the developing world, specifically Sub Saharan Africa, received fewer answers. In the end, one significant suggestion, made by Mr. Baker, was that when Sustainable Development Goals (SDGs) replace Millennium Development Goals (MDGs) in 2015, one declared SDG should be to cut IFF by 50% in the next 15 years. The feasibility of such a goal is unknown, but declaring the goal would avail a number of resources, which may not be currently accessible, to those working toward that goal.

IFF Panel

IFF Panel Courtesy of Kasey Kinnard

Write to traccc at traccc@gmu.edu