draining development.pdf - Khazar University

xForewordcontinues to lag. A recent Global Witness report on banks and money launderingprovided a damning indictment of the enforcement efforts of manynations.No matter how successful we are in reducing barriers to asset recovery, itwill continue to be a time-consuming and expensive proposition. Differencesin legal systems, the demands of due process, the need to respect propertyrights—all of these factors ensure that recovery will never be a straightforwardaffair.That is why Draining Development? and the information and analysis itprovides on illicit financial flows are so important. Far better than reducingbarriers to asset recovery is to not have to recover the assets in the first place.If we can find ways to stop the illegal outflow of money, developing countriescan refocus their energies on development.But as the chapters in this volume show, money flows out illicitly formany reasons, including tax evasion, the smuggling of illegal goods, the traffickingof human beings and other organized crimes, the manipulation oftransfer prices and trade mispricing, customs fraud, the failure of moneylaundering controls, terrorist financing, and bribery. In addition to depletingalready meager public coffers and hiding the profits of crime, illicit financialflows pose a risk to the stability of global financial markets; contribute tosuboptimal investment decisions; undermine tax morale and accountabilitybetween citizen and state; and add to growing income inequality both withinand between countries. The consequences are incalculable.It is our contention that the illicit outflow of money from developingcountries, in particular, has not received the attention it deserves—eitherfrom the development community or from policy makers in developed ordeveloping countries. This book represents an important step toward garneringthe attention the issue deserves. Norway is proud to have assisted theWorld Bank in this endeavour, and together we would like to thank theauthors and the editor for the fine work they have produced.Erik Solheim, Minister of the Environment and International Development, NorwayOtaviano Canuto, Vice President, World Bank