Developing countries lose roughly $1 trillion per year to crime, corruption and tax evasion, much of which is facilitated by opacity in the global financial system- GFI

Share

WASHINGTON, DC – More than two years after the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the U.S. Securities and Exchange Commission (SEC) is scheduled to vote today, August 22, 2012, on implementing regulations for Section 1504 of the bill, which requires companies operating in the oil, gas, and mining sectors to publicly report on the payments they make to foreign governments on a project-by-project basis. The release of the regulations will enable Section 1504 to take effect, and the effected companies will shortly need to begin reporting as required by law.

Section 1504, also known as the Cardin-Lugar provision, has garnered praise from civil society groups around the world as an historic measure to bring increased stability, accountability, and transparency to a multi-billion dollar, global industry.

“Cardin-Lugar will help combat everything from undisclosed investor risk to tax evasion to corruption,” said Heather Lowe, Legal Counsel and Director of Government Affairs at Global Financial Integrity (GFI), a Washington DC-based research and advocacy organization that supports the measures. “It is a game changer, put simply, for good corporate governance efforts worldwide as well as for governance efforts in the countries in which extractive companies operate.”

GFI estimates that developing countries lose roughly $1 trillion per year to crime, corruption and tax evasion, much of which is facilitated by opacity in the global financial system. The organization explained that the transparency measures included in Sec. 1504 could help significantly curtail these illicit outflows.

For example, Libya—the tenth biggest oil exporter worldwide—lost $43.32 billion in illicit outflows from 2000-2009, according to GFI’s research. Over the weekend, Najwa al-Beshti, the former head of contracts at Libya’s state-owned oil company, wrote in The New York Times that he witnessed “systemic underpricing of oil and the discounting of prices for select foreign companies.” Mr. al-Beshti goes on to argue that Section 1504 “can help prevent such corruption from happening again,” thereby helping to “prevent future tyrants from emerging.”

“Implementation of strong Cardin-Lugar regulations will help curtail corruption, money laundering, and corporate tax evasion in Libya, Angola, Nigeria and elsewhere,” added Lowe. “It’s a significant advancement for the developing world and for investors.”

Use Facebook to Comment on this Post

Leave a Reply