A massive leaked document from global law firm Mossack Fonseca revealed by International Consortium of Investigative Journalists (ICIJ) has revealed that Nigeria’s rich and powerful elite including politicians, celebrities, and wealthy individuals were responsible for the average export of $17, 804 billion out of the country from 2004 to 2013 through illegal and suspect transactions.
An average of US$14, 802 billion in physical cash and US$2, 984 billion in trade misinvoicing also left the country within the period of 2004 to 2013. The document estimates that nearly US$1 trillion of unrecorded money shifts out of emerging market and developing countries annually.
Heather Lowe, Legal Counsel & Director of Government Affairs, Global Financial Integrity (GFI), a Washington DC-based research and advisory organization noted that “The size of the leak is unprecedented, but the tricks Mossack Fonseca has allegedly used for its clients are neither new nor surprising. Anonymous shell companies and the failure of governments to require lawyers, corporate service companies, or banks to collect beneficial ownership information on clients leave the door wide open for dirty money to flow around the globe virtually unhindered.”
The document implicated familiar names in the global community with abuse of financial secrecy, including UBS, HSBC, Société Générale, Cyprus, Switzerland, and the British Virgin Island.
“This is about so much more than just corruption – trade misinvoicing accounts for the bulk of illicit financial flows; the proceeds of crime are the next largest component,” said Lowe.
The leak also exposed the offshore holdings of 12 current and former world leaders and details of the hidden financial dealings of 128 more politicians and public officials around the world.
One of the factors that gave rise to the situation is the lack of transparency in the global financial system occasioned by tax haven secrecy, anonymous companies, trade-based money laundering, and lax financial crime enforcement which drains at least US$1.1 trillion per year out of developing and emerging economies. This is more than these countries receive in foreign direct investment or foreign aid combined. The global shadow financial system bleeds the world’s poorest economies and propels crime, corruption, and tax evasion.
The GFI pointed out that doing legitimate business in secrecy jurisdictions should not be seen as illegal, but what the documents shows is how individuals and businesses are systematically abusing the secrecy they provide. This is done in concert with banks and law firms which help to hide their clients’ money and do everything to avoid due diligence checks.
Tom Cardamone, Managing Director, GFI, said that “Illicit financial flows are the most damaging economic problem facing the developing world. The Addis Ababa Action Agenda and the new Sustainable Development Goals have solidified this link between illicit financial flows (IFFs) and development. The international community needs to set strong targets for curtailing IFFs and take action towards improving global financial transparency.”
GFI asserts that for half a century a serious flaw has been committed in development economies. This is the study of only one side of the financial equation for development – the money going into developing countries – while almost completely ignoring the other side of the financial equation for development – the money coming out of developing countries.
FRANK ELEANYA AND LOLADE AKINMURELE
