Written by Dr Mary Alice Young (Bristol Law School, University of the West of England) and Dr Michael Woodiwiss (Arts and Cultural Industries, University of the West of England). Originally posted on the Tax Justice Network.
In 2005, Raymond Baker from Global Financial Integrity (GFI), calculated that economic aid from Western countries to poor countries amounted to approximately $50 billion each year. Baker also found that the dirty money accumulated by various kleptocrats and high level crooks in these countries amounted to around $500 billion a year, with much of it channeled through anonymous shell companies set up in secrecy havens in the British Overseas Territories and Crown Dependencies.
Fast forward ten years since Baker’s publication for GFI, and we observe in 2015 the Conservative Government spending in excess of £1 billion on economic aid through the Conflict, Security and Stability Fund (CSSF). Parliament is not told how this money is spent (Report on the Conflict, Security and Stability Fund (CSSF) but the spending is thought to strengthen the UK’s national security goals, as the money is purported to help tackle conflict and build stability overseas. A significant portion of the CSSF budget is allocated for tackling ‘organised crime’ or ‘transnational organised crime’ in conflict-affected settings and fragile states, an issue which is deemed as presenting one of the most serious security threats to the UK.
The general misuse of UK economic aid sent to corrupt countries is nothing new as indicated by headlines generated by earlier initiatives. For example, ‘Ten most corrupt countries in world have received £2.7 billion of UK aid since David Cameron took office’. Funds misdirected into the wrong hands exacerbate rather than address corruption and violence problems, as the US Plan Colombia and Merida Initiative in Mexico amply demonstrate. The lack of parliamentary oversight for the CSSF continues to leave open opportunities for corrupt political, law enforcement, criminal justice and business actors in poor countries to misuse aid funding. The lack of accountability and transparency in our onshore and offshore financial systems continues to mean that any criminal, not just foreign but domestic as well, can hide and then legitimise their loot.
The National Crime Agency acknowledges that many hundreds of billions of pounds of international criminal money is laundered through UK banks, including their subsidiaries, each year. Last year the authors of this blog piece reminded a parliamentary committee in Written Evidence that the UK’s financial secrecy jurisdictions have played a pivotal role in creating criminogenic environments, and these allow opportunities for successful organised crime to flourish. Since vast amounts of criminal money continue to be ‘laundered’ through the City and the Crown Dependencies, we asked the Committee whether the UK Government should clean up its own house before it attempts to clean up conflict-afflicted situations. The Committee declined to engage with our questions and instead heard ‘from a range of informed witnesses’ who told them that the UK is looked to as a ‘thought leader’ in relation to ‘policy on building stability overseas, and to security and justice policy in particular.’ (Para 43).
Such complacent assumptions jar with the Conservative government’s continued acceptance of the practices that take place within the UK’s financial secrecy jurisdictions. In May 2016 the Italian journalist, Roberto Saviano, asserted that the City of London’s financial services industry facilitates a dirty money system that makes the UK the most corrupt nation in the world. Such assertions have been echoed by the EU Committee’s Vice Chairman of the Panama Papers Committee, Fabio De Masi, who responded to the scandal by highlighting that the UK has hindered European Union plans against tax evasion because it remains ‘at the heart of the world’s largest web of tax havens and intricately connected with the world of offshore finance’. De Masi condemned the fact that, ‘the who is who of global tax havens is thriving under the eyes of Her Majesty.’ It has long been known that secrecy jurisdictions legitimise the profits of illegal activity, including, of course, illegal activity in those countries that receive funds from Western foreign aid budgets.
Last month Theresa May announced a snap general election. She told Parliament and the British people about her desire, ‘for a UK that is free to chart its own way in the world’ and that upon leaving the EU, Britain ‘will regain control of our own money, our own laws and our own borders.’ A victory for hard Brexit, however, would be good news for those wishing to pursue a career in criminal money management. Foreign and domestic criminals will still be able to access secrecy havens and store their loot in a ‘strong’, ‘stable’ and largely unaccountable UK financial system.