draining development.pdf - Khazar University

6 Draining Developmentout of the country. The RMB 800 billion was not intended to be an estimateof the gross flows. It was an estimate of how much had beendetected in roughly a 10-year period, surely a modest fraction of all IFFs,particularly because it included only official corruption and not othersources such as tax evasion and criminal earnings.The Policy Response to Illicit Financial FlowsNorway has led government efforts to focus attention on the issue. In2008, the Norwegian government created a commission to prepare areport on illicit flows. 5 It has also funded, with other nations, the TaskForce on Financial Integrity and Economic Development, for whichGlobal Financial Integrity serves as the secretariat, and funded the conferencethat led to this volume. 6 The governments of Germany and the Netherlandshave also paid attention to the topic. This is reflected, for example,by Germany’s sponsorship of a side event on tax flight at the fall 2008meetings of the World Bank and IMF and the funding by the Netherlandsof an ongoing World Bank study on illicit flows in East Africa in 2010.Despite (or because of ?) the absence of serious scholarly attention,illicit flows have become a topic of high-level policy discussion. Forexample, the G-20 Pittsburgh summit in September 2009, near theheight of the global fiscal crisis, addressed the issue in its communiqué. 7It was also discussed at the October 2009 annual meetings of the WorldBank and IMF Boards (Development Committee 2010).IFFs have often been identified as a contributing factor in the currentglobal financial crisis and a source of instability in the world financialsystem because of the illicitness. 8 Tax havens, more appropriately calledsecrecy jurisdictions, have been inculpated in many major scandals overthe last decade; they have been under attack because they can undermineeffective financial regulation in other nations, both developed and developing.9 Once the spotlight is turned on them, it is hard not to notice thatthey also serve as the destination for the bribes received by many dictators;for example, James Maton and Tim Daniel, in chapter 13 in thisvolume, describe how Sani Abacha, the dictator of Nigeria in the late1990s, kept substantial liquid funds on the Isle of Jersey.More importantly, IFFs have been identified as a major impediment togrowth and to the development of sound financial systems and gover-