Joint statement on the fight against illicit financial flows

by OECD Secretary-General Angel Gurría and Thabo Mbeki, Chair of the High Level Panel on Illicit Financial Flows from Africa

The issue of illicit financial flows (IFFS) is at the forefront of the international agenda. Both the OECD and the High Level Panel have focused attention on this problem and have identified ways in which to tackle it. In the wake of recent revelations in the media exposing the use of secrecy, shell companies, and offshore accounts for illegal activities, there is an urgent need for the international community to come together, as money-laundering, tax evasion and international bribery which form the bulk of IFFs, affect all countries.

While there has been significant progress in the past few years due to a global crackdown on opacity and secrecy in financial and tax matters, more needs to be done. The Governments of African countries and the rest of the world should come together and strengthen the efforts to foster even greater international cooperation to end the illegal practices which continue to harm all communities.

We resolve to ensure that African countries can fully benefit from the ongoing international efforts at improving tax transparency and call upon all African countries to join these efforts. We acknowledge the important role played by the work of the Global Forum on Transparency and Exchange of Information in bringing about financial transparency in tax matters. We encourage all African countries to participate in this work on an equal footing, and to join almost 100 other jurisdictions in signing the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

In addition, we recognise the importance for all countries to tackle Base Erosion and Profit Shifting (BEPS) and welcome the opening up of the BEPS project to all interested countries.

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Introductory remarks by Angel Gurría, Secretary-General, OECD

It gives me great pleasure to welcome His Excellency Thabo Mbeki back to the OECD, along with colleagues from the High-Level Panel on Illicit Financial Flows from Africa. As you know, this is Integrity Week at the OECD and we are still amidst the aftershock of the Unaoil scandal and the Panama Papers. Your visit, Mr. President, could not be more timely.

Recent events have underscored the urgency with which illicit flows must be tackled

When President Mbeki last visited the OECD two years ago, we spoke at length of the challenges presented by illicit flows for African countries. Of the brake that they put on development and poverty reduction. And of the importance of addressing them if we are serious about enabling African governments to mobilise their own resources for development.

Since then, the Panel released its report, informing successful outcomes in both Addis Ababa, and at the SDGs Summit in New York last September. Congratulations, Mr President.

SDG 16 could not be clearer: the international community has committed itself to reducing illicit flows significantly by 2030, to strengthening the recovery and return or stolen assets, and to combating all forms of organised crime. There are also commitments to address corruption and bribery, and to develop effective and accountable institutions.

The Panama Papers have shone a light on the ongoing risks posed by jurisdictions which do not commit to, and do not effectively implement, international tax transparency and anti-corruption standards. It has also laid bare the role that professional enablers – such as lawyers, accountants, financial institutions, corporate and trust service providers – play in maintaining a shroud of secrecy over illicit activities such as tax evasion, money laundering and corruption.

Mr President: I welcome your statement following the release of the Panama Papers. Together, we must keep up the pressure on those countries that enable financial opacity, or that have laws enabling banking secrecy and the registration of shell companies. As your work has shown, the impact of these practices is felt globally and, quite often, in some of the world’s poorest countries.

Collective action is crucial – for Africa, and for the world

The only real solution to these challenges is to ensure transparency of financial flows and specifically on beneficial ownership. This effort cannot only be led by Africa – it involves each and every member of the OECD too.

In 2014, we released a report on how our member countries are doing in countering illegal flows from developing countries. We measured their performance against international standards on money laundering, tax evasion, bribery and asset recovery.

In the area of tax transparency, there has been significant progress in the past seven years driven by the OECD’s work to establish global standards that ensure government authorities have access to the information they need to detect and investigate tax and other financial crimes.

But while those standards are robust, they are not enough. Without global adoption and effective implementation, they will remain as lifeless as the papers on our shelves.

Taking the next step on tax transparency requires several things:

• First, we need to ensure that all countries and jurisdictions commit to and implement the existing standards without further delay. Just last week, the G20 noted that it will consider defensive measures against non-cooperative jurisdictions if progress is not made.

• Second, we need to get on and tackle the beneficial ownership issue. We are already looking at ways in which the transparency around beneficial ownership can be improved, including a possible standard on automatic exchange of beneficial ownership information.

• Third, we need to address the role of professional enablers, who facilitate tax evasion and other financial crimes. This includes transferring and holding funds offshore through complicated arrangements to mask the beneficial owners of those assets.

The OECD stands ready to support Africa in its fight against illicit flows

The concerns of African countries are very close to our heart. We work very closely with African governments in many ways, for example:

• We are proud to host the Global Forum on Tax Transparency, which now has 21 members from Africa participating on an equal footing. And in 2014, the Global Forum launched its Africa Initiative, recognising the need to allow even more countries to benefit from its work.

• We’re advancing our work on the “supply side” of corruption with partner countries, building on the Anti-Bribery Convention. We are now working with the African Development Bank to develop a publication on Anti-Bribery Policy and Compliance Guidance for African companies.

• We are also encouraging a whole-of-government approach to tackling secrecy. In 2011, the OECD launched the Oslo Dialogue, which brings together senior officials from tax administrations, finance ministries, law enforcement, and other parts of government to fight the scourge of financial crimes.

Finally, I know that President Mbeki and the Panel have an interest in addressing the issue of large multinationals which strip African countries of much needed revenues through artificial arrangements that result in Base Erosion and Profit Shifting (BEPS). Unlike some of the other challenges I’ve discussed, the BEPS challenges are about companies using and abusing legal loopholes to avoid paying tax. But it doesn’t make them any more desirable. That’s why the OECD launched the BEPS Project and has now created an inclusive framework to support implementation and tackle the remaining technical issues. It is open to all countries on an equal footing and will meet for the first time in June. We are also very proud to be working with African countries as they develop tax audit capacity through the Tax Inspectors Without Borders project, in partnership with UNDP.

In short: the OECD is committed to doing its part. I look forward to hearing President Mbeki’s thoughts on these issues and others.

President Mbeki: please keep pushing us to do more for Africa! The floor is yours.