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EDITORIAL: Speaking at the so-called “Democracy Summit” recently hosted by President Joe Biden, US Treasury Secretary Janet Yellen acknowledged what people in developing countries have known for long — and resented. In an unexpectedly refreshing presentation, she challenged the view that the proceeds of corruption or illegal activity are sent only to those “countries [such as Cayman Islands and Switzerland] with histories of loose and secretive financial laws”, saying they are instead likely to “pass through or land in our markets.”

Secretary Yellen went on to add “there’s a good argument that right now, the best place to hide and launder ill-gotten gains is actually the United States,” noting also that some states in the US allow for creating of shell companies without disclosing who really owns them. Her office has already proposed rules under the Corporate Transparency Act that will create a database of the “beneficial” owners of these companies, and also apply to real estate transactions because as she explained, “many corrupt actors can hide their money in Miami or Central Park skyscrapers – money laundromats on the 81st floor.” These words sound very familiar in this country.

This is the first time that someone in the right place has recognised the existence of dirty money in their financial system and promised to hold the wrongdoers to account. The US, however, is not the only destination where corrupt elites from developing countries park money, stolen from their people, in banks or invest in other ‘money laundromats’.

A particularly attractive destination for proceeds of corruption is Britain. In fact, local residents in London often complain that the fraudulent leaders of other countries have pushed housing prices out of their reach. Yet ill-gotten money continues to flow from several developing countries, including Pakistan, into developed ones.

Prime Minister Imran Khan has been highlighting the issue at every available opportunity. In his address last October to World Leaders Summit Dialogue, organised by the United Nations Conference on Trade and Development (UNCTAD), he reiterated his concern over illicit money flows, amounting to $1 trillion annually, from poor and middle income countries to richer nations and offshore tax havens. “This plunder” he asserted, “is taking place because of the corrupt ruling elites of the developing world”, though, those on the receiving end are also to blame for turning a blind eye to the illicit, immoral activity.

Now that the US has taken the initiative, others should follow suit. In its report released last February, the UN High Level Panel on International Accountability, Transparency and Integrity (FACTI) made 14 recommendations for world leaders to foster financial integrity for sustainable development.

Among other things, it called for setting international anti-money laundering standards that require all countries to create a centralised registry for holding beneficial ownership information on all legal vehicles, and also creation of a multilateral mediation mechanism to fairly assist countries in resolving difficulties on international asset recovery, return, and compensation. If only this could happen countries like Pakistan would not be struggling to provide a better quality of life to their people. It is about time wealthy nations stopped acting holier-than-thou and took good faith measures to prevent and combat inflows of ill-gotten money.

Copyright Business Recorder, 2021

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