Briefing Document / Sept. 24, 2009

Corruption hunters demand action from G20

To the Heads of State and Finance Ministers of the G20

We are writing to ask the G20 to ensure that its Pittsburgh summit this September results in a strong and explicit statement on the need to fight corruption through more effective use of the anti-money laundering framework.

The April summit recognised that as steps are taken to repair and protect the world's economy, the poorest countries must not be forgotten. It devoted significant attention to the risks posed by tax havens and non-cooperative jurisdictions, which contribute to huge loss of tax revenue by developed and developing countries alike. The G20 also acknowledged the need to assess non-cooperative jurisdictions from an anti-money laundering perspective.

There remains a missing link, however, and that is a recognition of the appalling impact of corruption on developing economies, and the role that the world's biggest economies can play in tackling it. Developing countries do not just lose revenue because of tax injustices, they also lose it because of looting by those entrusted with the functions of state.

As President Obama pointed out on his visit to Ghana in July, ‘development depends upon good governance,' and ‘no country is going to create wealth if its leaders exploit the economy to enrich themselves.'

Our work in exposing and fighting corruption has shown us that in too many countries, it is the looting of state assets by the political elite that holds development back. It has also shown us that corruption cannot take place without the help of the global financial system, with banks and secrecy jurisdictions continuing to provide safe haven for corruptly acquired funds.

It is therefore imperative that the anti-money laundering laws are used effectively to prevent banks accepting the proceeds of corruption.

The G20 has already asked Financial Action Task Force (FATF) to ‘revise and reinvigorate' its review process for assessing jurisdictions' compliance with its standards; this is welcome, and we eagerly anticipate FATF's report on what it has been doing to achieve this.

There is another task, however, that the G20 must ask FATF to do: use its recommendations more aggressively to ensure that countries have, and enforce, the right laws to prevent banks taking corrupt funds. In this respect the name and shame policy used by FATF in the late Nineties has been very effective.

Since 2001 FATF has had a dramatic impact in ensuring that banks are focused on avoiding processing terrorist funds. This campaign to create international controls against the financing of terrorism has had results: banks are now, broadly, checking their customers are not terrorists. But there has been no similar campaign to ensure that banks worldwide do not accept the proceeds of corruption, despite the dramatic impact this could have on the development outcomes and stability for poor countries.

The approach of a fourth round of mutual evaluations (the process by which FATF members assess each other's anti-money laundering standards) offers a significant opportunity to make its standards more meaningful in the fight against corruption, whether by clarifying the standards themselves to make them sufficiently explicit, or by raising the bar at which they are assessed.

As the report of the G20's Working Group 2 highlighted in March, the crucial issues requiring attention are those of politically exposed persons and beneficial ownership. In addition, there is the need for greater transparency over the beneficial ownership of companies and legal arrangements such as trusts and foundations, which are some of the most frequently used vehicles to hide corrupt money - as well, of course, as tax evading money.

We call therefore on the G20 to make a clear statement about the importance of the global fight against corruption, and the need for FATF to use the AML tools at its disposal more effectively to prevent banks accepting corrupt funds. Such actions will be mutually reinforcing with the actions already being taken to improve flows of information regarding tax.

Yours sincerely

Richard Findl - Public Prosecutor, Germany

Manuel Garrido - former Anticorruption Chief Prosecutor, Argentina

John Githongo - former Permanent Secretary Governance and Ethics, Office of the President, Kenya

Dr Gavin Hayman - Campaigns Director, Global Witness

Dr Edward Hoseah - Director General, Prevention and Combating of Corruption Bureau, Tanzania

Eva Joly MEP

John Morlu - Auditor-General, Liberia

Irfan Qadir - former Prosecutor General Accountability, Pakistan

René Ramarozatovo - former Director General, Independent Anti-Corruption Bureau, Madagascar

Nuhu Ribadu - former Chairman, Economic and Financial Crimes Commission, Government of Nigeria

Cobus de Swardt - Managing Director, Transparency International