The G20 leaders recognize the work of the World Customs Organization (WCO) in combatting Illicit Financial Flows (IFFs) in documents agreed following the 2017 G20 Hamburg Summit. The Secretary General of the WCO, Dr. Kunio Mikuriya, welcomes this recognition and invites WCO Members to pursue efforts to tackle this issue and to actively participate in the activities undertaken by the WCO on this topic.

The 2016 G20 Hangzhou Meeting had welcomed the “communication and coordination with the World Customs Organization for a study report” to address “cross-border financial flows derived from illicit activities, including deliberate mis-invoicing, which hampers the mobilization of domestic resources for development.” Following this mandate, and after Member’s deliberation, the WCO produced an Action Plan to capture the strategy to counter IFFs and same has been communicated to the German G20 Presidency and the G20 Heads of Customs.

The Action Plan will bring special attention to the question of trade mis-invoicing and also touch on other methods such as transfer mispricing, tax evasion and avoidance, cash smuggling, and informal funds transfer systems. WCO Secretary General Kunio Mikuriya stated that “WCO will continue its action plan to combat IFFs and further enhance its coordination with the G20”, adding that “the WCO Council has, during its 129th/130th Sessions, identified IFFs as one of the six main priorities for Customs Community, along with Trade Facilitation, Security, E-commerce, Customs-Tax Cooperation and Performance Measurement.”

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Customs and the Fight Against Illicit Financial Flows World Customs Organization Action Plan

It has been well-recognized that Illicit Financial Flows (IFFs) hamper sustainable development and present a direct threat to global political and economic security. The loss of capital from corruption, organized crime, illegal exploitation of natural resources, fraud in international trade and tax evasion, deprives countries of vital revenue that could be used to develop infrastructure, provide basic social services and invest in projects to create jobs.

By undermining development efforts, IFFs contribute to persistent poverty and to the perception of corruption and poor governance that can lead to political instability. While, on the one hand, IFFs impede government efforts to mobilize domestic resources, on the other hand they can serve to finance criminal or terrorist activities.

As the first line of defence at the borders, Customs has an important role to play in combating illicit financial flows while facilitating legitimate trade. The misuse of trade for the movement of illicit funds, as well as the physical cross-border movement of money, are areas that relate directly to Customs’ competence and expertise and are subject to strong enforcement measures.

Background

The G20 Leaders’ Communiqué from the Summit held in Hangzhou, China, in September 2016 highlighted, among other things, the importance of addressing cross-border IFFs derived from illicit activities. More specifically, paragraph 36 of the Communiqué welcomed communication and coordination with the World Customs Organization (WCO) to address cross-border financial flows derived from illicit activities, including deliberate trade mis-invoicing.

The WCO welcomed this opportunity to contribute to the work of the G20 and has been proactively considering ways to work with the G20 on the development of a study on cross-border financial flows coming from illicit trade, including deliberating on this issue at its Policy Commission held in December 2016.