The UN General Assembly in session. Credit: UN Photo/Manuel Elias

By Matti Kohonen
LONDON, Feb 15 2024 (IPS)

In late November, the UN General Assembly passed a landmark resolution signaling a start on working on a UN framework convention on taxation.

This is a testament to decades of work especially by civil society and African states in pushing for a greater role for the United Nations in global tax governance where Global South countries hold a majority.

Rich countries may now boycott it.

Too much is at stake. Over the past decades, global tax norms have mostly been made at the Organisation for Economic Development and Co-Operation (OECD) and have mainly been negotiated between the European countries and the United States.

They have also largely relied on multinational enterprises (MNEs) regulating themselves where intra-firm trade is regulated as if companies were trading with unrelated parties.

These companies are estimated to shift US$950 billion of profits towards tax havens, leading to associated corporate income tax revenue losses of US$200 to US$300 billion.

In Europe, tax abuses have led to accusations of unfair competitive advantage in the European Union. Apple for instance was fined €14.3 billion (US$15.6 billion) for unpaid taxes in Ireland, while offshore leaks in Luxembourg – called LuxLeaks – showed how over 340 large companies had secretive tax rulings reducing their taxable income.

Making matters worse, countries like Ireland and Luxembourg with extremely low corporate taxes had huge influence when the OECD negotiated the global minimum tax agreement, gaining concessions through the European Union position.

This ultimately led to an agreed 15% global minimum tax rate which was very low due to opposition of key European tax havens like Ireland and Malta where corporate taxes are even lower. The US Treasury had tabled a 21% initial proposal, while many in the Global South, academia and civil society advocated for a 25% rate.

But that is not all.

Loopholes introduced into this deal have reduced its effectiveness even further, such as the carve-out where companies with at least some minimal assets and employees in a tax haven can continue to benefit from its favourable tax regime, thereby reducing significantly the impact of the global minimum tax.

Luxembourg is likely a key beneficiary of this carve-out, as companies may end up slightly upsizing the employment and physical assets there to benefit from the favourable tax regime for their global operations.

Some tax havens in the Global South countries as well, like Mauritius and Panama, offer similar loopholes as Luxembourg.

The UN tax convention should resolve these issues. Negotiations held between the Africa Group, Small-Island Developing States, and the group of G77 and China for all Global South countries should provide a more even platform that benefits countries most harmed by tax abuses.

Importantly, setting global tax regimes at the UN would ensure that key issues such as promoting gender equality, human rights and environmental justice will be included in the overall negotiations which are also key to achieve the UN Sustainable Development Goals.

Starkly, these key development and equality priorities which need funding to be achieved are not even mentioned in the OECD-led tax negotiations.

The UN tax convention would also spur the creation of open and public ownership registries of all owners of companies, trusts and other legal entities as the global standard (known as Beneficial Ownership Transparency).

This is crucial to tackle fraud and corruption and uncover those ultimately responsible for human rights and environmental crimes such as illegal fishing, illegal logging and labour abuses as opposed to simply going after middlemen and operators who benefit from these crimes.

Worryingly, the OECD’s Global Forum and the Financial Action Task Force (FATF) – the global money laundering and terrorist financing watchdog – do not promote public beneficial ownership registries as a preferred option, and instead propose the creation of centralised which are closed to everyone including journalists and civil society organisations.

The first intergovernmental tax negotiations at the UN are expected to start in early March, focusing initially on process-related issues such as electing a bureau, agreeing an agenda, and determining how civil society groups, businesses and other stakeholders will participate in the process.

In June or July, we expect to see the substantive issues being raised. That is when rich countries are expected to try to stall and limit the scope of the negotiations and keep power to themselves at the OECD level.

Our hope to end tax abuses by multinational companies and the wealthy now rests on the resolve of the Global South. And for Global North countries to realise this is also in their own interest.

Matti Kohonen is executive director, Financial Transparency Coalition.

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By Matti Kohonen
LONDON, Jun 22 2023 (IPS)

The sanctions against Russian oligarchs who hold billions of dollars have mostly failed to have a real impact beyond freezing a few yachts and properties. So, what went wrong? Now we know.

The “Rotenberg Files”, a mass leak of over 42,000 emails and documents, has showed how Russian oligarchs Boris and Arkady Rotenberg hid their assets and those of Vladimir Putin, using trusts and private equity investment funds, taking advantage of the lack of public beneficial ownership registries.

Since the Russian invasion of Ukraine in 2014 and especially since 2022, sanctions on Russian oligarchs and legal entities linked to the Russian invasion of Ukraine include 12,900 designations against Russia. Some estimates say that Russian oligarch offshore wealth is over US$1 trillion, but sanctions so far have only frozen US$58 billion, due to difficulty in establishing ownership.

Sanctions vary but have been mainly implemented by G7 countries and the European Union. Their effectiveness depends on setting up beneficial ownership registries that cover all possible legal vehicles, and the obligation to cross-check beneficial owners against sanctions regimes by a wide variety of professional enablers for due diligence purposes.

This has largely not happened. Despite progress in establishing centralised beneficial ownership registries, a commitment made by nearly 100 countries, very few of them are open to public access and are ridden with loopholes. In reality, global South countries are now leading the way in establishing effective BO registries after the European Court of Justice ended public access to EU-wide BO registries in November 2022.

This has allowed trusts to become the legal vehicle of choice by Russian oligarchs to hide their wealth. They are also very hard to detect as the presence of a trust deed can be kept at a lawyer’s office if there is no requirement to register the trust in a beneficial ownership registry. Many BO registries do require declaring trusts, but there are loopholes that allow for setting up trusts in jurisdictions that do not require registration of trusts or have loopholes regarding thresholds or exemptions. Only 65 countries require some form of registration of trusts.

Eight of the 18 BVI companies mentioned in the Rotenberg leaks were ultimately dissolved, and two relocated to Cyprus. This implies that Cyprus has become a key location to use trusts and other instruments to conceal ownership. As a European Union member, Cyprus was obliged to create a central register of beneficial ownership in line with the EU’s fifth Anti-Money Laundering Directive. Trusts based in Cyprus do come under this requirement, but the Rotenbergs used a loophole in the BO laws to conceal ultimate ownership that goes around the existing EU 5th Anti-Money Laundering Directive.

They effectively created a complex ownership structure around different entities in order to be below the trigger points for reporting beneficial ownership (in most cases 25 percent of control), yet still retaining control through power through potential voting coalitions in the complex structure that were concealed elsewhere. The structure used by the Rotenbergs involved a US entity that is owned by entities elsewhere, including Italy, the UK, Luxembourg, Cyprus, Bahamas (four entities), the British Virgin Islands and Cayman Islands,

Along with trusts, private equity firms have been revealed as another preferred vehicle to dodge sanctions. Investment vehicles called “closed mutual funds,” in Russian abbreviated as “ZPIFs,” held these assets. They are not considered legal entities under Russian law, and thus are not under obligations to reveal their shareholders to the authorities. The leaked files show that 13 ZPIFs were linked to the Rotenbergs.

To evade questions about the true nature of the beneficial owners, the leaked files show that “there is a practice where the General Director of the Management Company is recognized as the ultimate beneficiary”. The ZPIF’s invested in Russian companies, Monaco real estate, and other assets where beneficial ownership checks do not take place. Companies where they owned minority stakes could do business relatively normally.

Private equity and mutual funds are a global concern. According to a recent report, “Private Investments, Public Harm”, there are nearly 13,000 investment advisers in an $11 trillion industry with little or no anti-money laundering due diligence responsibilities in the USA, with the real possibility that sanctioned oligarchs use such vehicles to conceal their ownership. The US Enablers Act seeks to remove the exemption from due diligence checks from investment managers but the bill did not pass last December.

Art is another way to conceal ownership, as art dealers are not under any reporting requirements for money laundering purposes. A July 2020 report by a U.S. Senate subcommittee detailed an elaborate scheme in which the Rotenberg brothers spent more than US$18 million on art purchases in the months after they were sanctioned by the U.S. in March 2014. They acquired several artworks, including a US$7.5 million René Magritte, through a web of offshore companies based in Cyprus and the British Virgin Islands.

The tools to hide wealth used by Russian oligarchs to evade sanctions are exactly the same than the ones used by those behind natural resource crimes such as illegal, unregulated and unreported fishing, or indeed wealthy billionaires abusing laws to pay less than what they should in taxes. One cannot create a regime to just catch Russian billionaires. An overhaul of ownership transparency, from companies and trusts to art, vessels, aircraft and among other asset classes, including private equity and hedge funds, is required. Otherwise Russian oligarchs and kleptocrats around the world will continue dodging controls, keeping their shady money safely hidden.

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By Matti Kohonen
LONDON, Dec 12 2022 (IPS)

The European Court of Justice on November 22, 2022, made a ruling that reversed much of the progress we have made in a decade in the fight against corruption, economic and natural resource crimes, tax abuses and other forms of illicit financial flows across the world. In the ruling, the court declared invalid the part of the European Union’s Anti Money Laundering Directive that allowed public access to registries about companies’ beneficial owners (that is, the real people who own or actually control them).

This has a direct impact in the fight against environmental crimes, particularly illegal, unreported and unregulated (IUU) fishing which is devastating the world’s fisheries resources, accounting for up to one-fifth of global catches.

The financial secrecy surrounding the owners of vessels is a key driver of IUU fishing as secrecy makes it harder to catch the real perpetrators of this illegal trade. In a report published by the Financial Transparency Coalition in October 2022, we discovered that among the top 10 operators of vessels reported to be engaged in this illicit practice, one was based in Spain while a total of 30 vessels were flagged to Italy, making it the highest European flag jurisdiction for IUU fishing. In total, we found that 12.8% of all vessels engaged in IUU fishing were flagged to a European country.

Matti Kohonen

This is a welcome present to owners of IUU fishing vessels who often use complex corporate structures to hide their identities and evade punishment. Underscoring this problem, in our investigation we found the individual shareholder data was only available for 16% of industrial and semi-industrial vessels engaged in IUU fishing.

But the ECJ’s ruling impact will be felt well beyond Europe’s borders. Most of the world’s IUU fishing takes place in Africa which loses US$11.5bn in illicit financial flows linked to IUU fishing every year. A significant proportion of this illicit catch in Africa is caught in West Africa, with US$9.5bn losses in this region alone, with much of the fish caught there by foreign fleets ending up in Europe. In total, the European continent imports some US$14bn worth of seafood from the global South each year, making it a key market for seafood products.

The court’s decisions rested on a narrow interpretation of the purpose of the beneficial ownership registry, limited to fighting money laundering and terrorist financing. Fishing related offences are not yet recognised as ‘natural resource crimes’ by the Financial Action Task Force (FATF), the global anti-money laundering regulator, while illegal logging and illegal wildlife trade (IWT) related offences are already included in their definition of what constitutes money laundering. If this were to be upgraded by FATF, we could claim most, if not all, IUU fishing offences as money laundering crimes.

The ECJ decision also rests on a narrow interpretation of the ‘right to private life’ as a fundamental civil right as subscribed in the EU Charter of Fundamental Rights of the European Union that partly lays the legal foundation for the EU. Worryingly, the court did not consider any evidence of the benefits of public access to beneficial ownership information in both fighting money laundering and terrorist financing, let alone the risks that natural resource crimes pose to other rights, such as the right to a healthy environment recognised as a human right by the UN General Assembly in 2022.

Ultimately, the real winners of this ruling are the thousands of companies engaged in IUU fishing and other environmental crimes across the world, and which benefit from money laundering at the tune of billions of euros per year. The ruling undermines collective action to make the money trail of these crimes more traceable, at a time when countries especially in the global South are desperate for funds amid a cost of living crisis and high inflation.

Reacting to the ruling, the European Council signalled that member states should ensure that any natural or legal person demonstrating a legitimate interest has access to information held in the beneficial ownership registers, including especially journalists and civil society organisations as long as they can demonstrate legitimate interest in relation with fighting money laundering and terrorist financing.

However, this is insufficient since this will likely only apply to journalists and civil society in the same country as the registry, and application processes generally take a long time. Also one will need to know the company of interest before accessing any information, blocking the option of looking through public registries to spot risks and red flags.

The EU Parliament should be expected to start negotiations on a new anti-money laundering directive next spring. It must not allow the ECJ ruling to stand, for everyone’s sake.

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By Matti Kohonen
LONDON, Nov 18 2022 (IPS)

G20 leaders met in Indonesia in the midst of multiple crises, with 85 percent of the world population expected to face austerity measures and severe budget cuts next year that will impact the most vulnerable compounded by an insufficient response to the Covid-19 pandemic, with only 38 percent of relief funds going to social protection in global South countries.

The G20 summit motto was “Recovering Together, Recovering Stronger” yet the Joint Declaration failed to deliver any alternatives to the wave of austerity engulfing the world. It ignored the option of raising enough tax revenues from large corporations, taxing the wealthy and tacking illicit financial flows and tax abuses which alone accounts for over US$200 billion of tax revenue lost per year due to profit shifting in the global South.

For one, the summit blocked any progress towards the negotiations of a UN Tax Convention that would address the issues of corporate tax abuses and illicit financial flows, as denounced in an open letter from the Asian People’s Movement on Debt and Development (APMDD).

In an open letter denouncing this inaction to tackle corporate tax abuses and IFFs, delivered to embassies of Indonesia, India and Brazil, Lidy Nacpil from the Asian People’s Movement on Debt and Development (APMDD) said that the summit blocked “any progress towards the negotiations of a UN Tax Convention that would address the issues of corporate tax abuses and illicit financial flows,” but there was no reaction.

Making matters worse, the Organisation for Economic Co-operation and Development (OECD) failed to deliver on mandates to publish country-by-country reporting before the summit. This would have allowed to monitor the performance of mechanisms to prevent for example multinational companies shifting profits to tax havens and avoid paying taxes.

The data was only published on 17 November, a day after the summit, which was too late to hold the G20 leaders accountable. According to Alex Cobham, Director at the Tax Justice Network, “without the transparency data, neither the Tax Justice Network nor any other independent research can evaluate how much each government is losing to multinationals’ corporate tax abuse, or any progress made to curb tax losses in recent years.”

But that is not everything since the summit did not confront the hidden offshore wealth and kleptocracy problem. Maira Martini from Transparency International said that the G20 members “in recent years have dragged their feet, unable to agree on key measures and failing to implement even those to which they had already committed. In the meantime, the corrupt have consolidated wealth and power, allowing them to attack everything from sustainable development to global security to democracy.”

In an open letter released ahead of the Bali summit, Transparency International representatives from across G20 countries called on their governments to take immediate action against cross-border corruption. The Joint Declaration stated its support towards implementing Financial Action Task Force (FATF) recommendations for improved financial transparency, but does not say that beneficial ownership registries should be public, a critical element to enable stakeholders and the authorities to uncover hidden assets.

Also the declaration included regional efforts related to signing of the Asia Initiative Declaration in July 2022 on tax and financial transparency in Asia. However, it did not specify whether this initiative would create a stronger standard than the current OECD transparency standard, or simply implement an OECD standard in the Asian regional context.

Positively, the Bali Joint Declaration made a link between increased beneficial ownership information and tackling natural resource crimes, but offered no specific proposals to address this issue. Indonesia loses an estimated US$4 billion in Illicit Financial Flows (IFFs) each year due to illegal, unregulated and underreported (IUU) fishing alone, while Africa loses an estimated US$11.5 billion to this illicit activity. It would be vital that beneficial ownership information on all vessels and fishing companies is collected on a public registry, to hold those responsible for illicit fishing activities accountable.

Between 75 and 95 million people are expected to be thrown into extreme poverty this year as a result of the pandemic and the effects of rising inflation and the war in Ukraine, according to the UN. Many other are struggling to make a living and feed themselves as governments around the world are resorting to painful austerity measures.

The G20 had an opportunity to offer solutions to these crises and a lifeline to struggling nations. Unfortunately for all of us, they have failed.

Matti Kohonen is executive director, Financial Transparency Coalition.

IPS UN Bureau

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The G20 membership comprises a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85 per cent of global gross domestic product and over 75 per cent of global trade. The members of the G20 are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union.

By Matti Kohonen and Isabel Ortiz
LONDON / NEW YORK, Oct 24 2022 (IPS)

Finance ministers of the G20 and the world met in Washington, October 10-16, to discuss how to navigate multiple crises, including rising cost-of-living, broken global supply chains, climate shocks, and the lingering COVID-19 pandemic.

All this weighted heavily on the IMF outlook, pointing to a bleak future ahead.

This is particularly bad news for developing countries. Using IMF data, our research showed that recovery spending in the last two years of the pandemic in the Global South was only 2.4% of GDP on average, a quarter of the level recommended by the UN and a fraction of what rich countries spent.

Meanwhile, only 38% of the total went to social protection, with corporate loans and tax breaks getting the lion’s share.

Things will get worse unless there is a fundamental policy change. This year recovery funds have dried up and, as most countries are heavily indebted, the IMF projects large expenditure cuts.

In 2023, at least 94 developing countries are expected to cut public spending in terms of GDP. Our report estimates that 85% of the world’s population living in 143 countries will live in the grip of austerity measures by 2023, and the trend is likely to continue for years.

Unless these policies are reversed, people in developing countries will suffer as a result cuts to social protection and public services at a time they are most needed, with 3.3 billion people (or nearly half of mankind) expected to be living below the poverty line of US $5.50/day by the end of 2022.

This crisis will affect especially women who received half less COVID-19 recovery funds than their male counterparts.

But the impact goes far beyond women. Elderly pensioners and persons with disabilities will receive lower pension benefits. Workers around the world will see less job security, poorer pay and working conditions as regulations are dismantled.

A recent study on inequality found that the vast majority of countries were making labor markets more flexible to help big corporations. As inflation keeps rising, worsened by higher consumption taxes, families will be much affected while any support they receive will be less due to austerity cuts.

South Africa reflects the crisis of countries falling into the austerity trap. The government provided Social Relief of Distress (SRD) grants of R350 (US$24 in 2021) per month that were instituted at the start of the pandemic, supporting for the first-time low-income individuals who are of working age.

These grants have been extended several times, providing a lifeline for those worst hit by the pandemic.

However, despite the cost-of-living crisis, the government -advised by the IMF- is now considering reducing social expenditures and helping only the most vulnerable, leaving many low-income households without any support. Other austerity measures being discussed include cuts to the salaries of civil servants, and labor flexibilization reforms.

Instead of these austerity cuts, the South African government and the IMF should focus on raising additional revenues to fund social protection and public services, making sure everyone pays taxes, reducing corporate tax loopholes and exemptions, taxing excess profits and wealthy individuals.

Similarly, Ecuador has been shaken by social unrest because of austerity reforms. In 2019, after large riots, the government of Lenin Moreno flew from the capital and had to stop a loan with the IMF that had proposed cuts to subsidies and other austerity reforms.

In 2021, the same austerity policies were proposed again by the IMF, such as cuts to subsidies and public services, reducing social protection and labor regulations.

In 2022, farmers, indigenous men and women, marched again to the capital with pitchforks to join students and workers protesting austerity policies, forcing President Lasso to back down and agree to grant subsidies and other demands.

These are only two examples reflecting the austerity storm gathering around the world. This is extremely unfair and will generate unnecessary social hardship, as populations are struggling with a severe cost-of-living crisis, especially at a time when many countries are losing significant amounts of revenue to tax abuses, illicit financial flows and tax exemptions to large corporates that are wholly unnecessary.

Austerity cuts are not inevitable, there are alternatives even in the poorest countries. Instead of austerity cuts, governments can increase progressive tax revenues, restructure and eliminate debt, eradicate illicit financial flows, and re-allocate public expenditures, among other options.

Policy makers must act on this. All the human suffering and social unrest that austerity inflicts is unnecessary.

Civil society organizations have launched a global campaign to End Austerity, including, among others, ActionAid International, European Network on Debt and Development (Eurodad), Fight Inequality Alliance, Financial Transparency Coalition and Oxfam International.

Austerity campaign calls on citizens and organizations from all around the world to fight back against the wave of austerity sweeping the globe, supercharging inequality and compounding the effects of the cost-of-living crisis.

Our decision-makers need to wake up and change course. There is no time to lose.

Matti Kohonen is Executive Director of Financial Transparency Coalition; Isabel Ortiz is Director of the Global Social Justice Program at Joseph Stiglitz’s Initiative for Policy Dialogue

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By Matti Kohonen
LONDON, May 31 2022 (IPS)

At this year’s World Economic Forum (WEF) at Davos which ended last week, the attention of the world’s financial and economic elite was captured by the war in Ukraine whose president Volodimir Zelensky used his address to call to “complete withdrawal of foreign businesses from the Russian market”, despite 380 of the largest multinational companies still operating in Russia.

Many companies still present in Russia were sitting in the audience while Zelensky spoke including HSBC that still maintains operations for existing clients, and Credit Suisse that is scaling them back without signalling that it would pull out of Russia due to the invasion. This is especially troubling given the leaked data in Suisse Secrets about how Credit Suisse oiled the wheels of many oligarchs prior to the Russian Invasion in Ukraine.

The banks at Davos are likely to hold assets of many of the over 6,163 sanctioned Russian individuals and entities despite anti-money laundering efforts to trace these funds hidden behind shell companies. This money in turn is often held in accounts in banks participating at the annual Davos meetings and their assets may never even be revealed due to the lack of stricter banking and financial transparency laws.

Ironically, even talking about these secretive accounts, and the leaks related to these is a criminal offence in Davos under draconian Swiss banking secrecy laws, so raising the issue could get you arrested and fined. Credit Suisse only committed itself to “stop new business in Russia while meaningfully cutting exposure by 56%.” The imbalance is striking, and none of the panels at Davos addressed this uncomfortable issue.

Alarmingly, this signals a business-as-usual approach by many of the top companies represented in Davos, not only failing to tackle Russian oligarchs but more broadly ignoring the issue of offshore funds held by powerful individuals and politicians from the global South.

Revealingly, the event only had 52 participants on the official list from Africa, out of a total of over 1,500 disclosed participants. Winnie Byanyima, director of UN AIDS, was one of them. She called out vaccine inequality and asked delegates to “stop pushing Africa to the back of the queue in terms of vaccine access” and called the patent protection laws a form of institutional racism in times of a global pandemic like COVID-19.

The debt crisis should also have been on the Davos agenda, as on the eve of the opening of Davos on 19 May we saw Sri Lanka descend into a balance of payment and debt crisis as their 30-day grace period to make debt payments to its creditors expired. The dues are mainly due to private creditors who form the largest single creditor group to Sri Lanka, many of whom again such as JP Morgan and Goldman Sachs were sitting in the audience at Davos, unwilling to commit to debt restructuring of private creditor debt.

Some of these issues were picked up by the annual Global Risk Report, where the key global risks that are identified in the next two years include extreme weather and livelihood crisis, followed by risk of not tackling climate change. Debt ranks as the 8th greatest risk, not something picked up by many of the respondents to the annual survey – of whom 63% were male, and 41% were from the business sector, largely overall represented by Europeans with 44% of all respondents drawn from the region, with only 6% from South Asia.

Why then the media focus on a Davos meeting that fail to deliver anything meaningful? It is a symbol of our age, and a place where the corporate elite get together and offer their view of the world – and where a few critics get to express their opinion about how it is failing to deliver each year. Given the mounting crises we are currently facing, and the role of responsible big business should take, this is plainly not enough.

Matti Kohonen is the director of the Financial Transparency Coalition and previously worked at Christian Aid as the Principal Advisor on the Private Sector, working to ensure that the private sector is a responsible and accountable actor in global development.

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By Matti Kohonen
LONDON, Mar 3 2022 (IPS)

The war in Ukraine has highlighted Russian kleptocrats funnelling billions of dollars out of the country and investing them in London and other major global financial centres, prompting political leaders in Europe and USA to crack down on this shady money. Russian oligarchs are believed to hold as much as $1 trillion in wealth abroad, often hidden in offshore companies whose true ownership is hard to determine.

Focusing only on Russian oligarchs however would be a terrible mistake.

In a bid to undermine Russian’s war effort, the European Commission, France, Germany, Italy, UK, Canada and the US announced the launch of a transatlantic task force against Russian oligarchs and officials close to the Kremlin and their lawyers, real estate agents and other ‘enablers’, aiming to identify and freeze their assets held in their jurisdictions. Yet this declaration does no say anything about kleptocrats everywhere, such as those in developing countries who use Global North tax havens to hide their assets.

Last year the Pandora Papers investigation, for instance, showed that hundreds of public officials in 90 countries such as Kenya and Jordan used shell company schemes to hide wealth offshore and avoid taxes with the assistance of global banks and law firms – revealing among others that South Dakota had become the tax haven of choice.

More recently, the Suisse Secrets investigation led by the Offshore Crime and Corruption Reporting Project showed that Credit Suisse bank handled $100 billion in hidden wealth of thousands of clients – the majority of them from developing countries including Venezuela, Egypt and Ukraine – linked to corruption, drug trafficking and other major crimes.

Tackling offshore secrecy and tax abuses, not just from Russian kleptocrats, has never been more urgent than today as the world also continues to fight the Covid-19 pandemic. Every year $1.6 trillion is laundered by criminals, equivalent to 2.7 percent of global GDP, while $7 trillion in private wealth is hidden in haven countries. Meanwhile 100 million people are expected to be pushed into extreme poverty as a result of the pandemic, while the gap between rich and poor continues to grow.

A year ago, the United Nations Financial Accountability, Transparency and Integrity (FACTI) panel proposed 14 recommendations to overhaul the financial system, fight tax evasion and crimes and generate a fair global tax system. The report was endorsed in a UN General Assembly resolution in November 2021 and would have helped tackle the growing power and influence Russian kleptocrats, but was largely ignored as rich countries do not want to share the proceeds from these shady deals.

Yet things seem to be changing. Prime minister Boris Johnson’s recent promise to rush forward a public register to reveal the ultimate owners of properties across the UK is welcome news. An estimated $230 billion-worth of UK property is held overseas, much of it anonymously to avoid publicity, and escape money laundering or tax laws, or worse.

Meanwhile Switzerland is now pledging to freeze assets of 367 sanctioned Russian individuals and companies, a historic step for this country in freezing assets of people linked to illicit funds. Swiss national bank data showed that Russian companies and individuals for example held assets worth more than $11 billion in Swiss banks in 2020, an underestimate given most assets are not held directly.

But this is not enough. For one, all illicit financial flows should be targeted, not just those from Russian oligarchs, while all assets should be placed in public beneficial ownership registries for everyone to see. Crucially, these registries should be connected to a multilateral system called a Global Asset Registry where all assets would be listed, as suggested by THE INDEPENDENT COMMISSION FOR THE REFORM OF INTERNATIONAL CORPORATE TAXATION (ICRICT) and major economists like Thomas Piketty and Gabriel Zucman.

Currently, organisations or individuals trying to hunt for hidden wealth are still often served with pre-action letters by top law firms and threatened with lawsuits after they are named. For instance, Tom Burgis, who wrote the book Kleptopia about dirty money in conquering the world is being sued now by a London company owned by oligarchs from the former Soviet Union. Similarly, Swiss journalists were not able to participate in reporting the Suisse Secrets due to the country’s draconian banking secrecy laws which make this a crime.

The Ukraine crisis should be seen as a historic opportunity to clamp down on kleptocrats everywhere, not just the Russians, putting an end to the secret world of finance that enables them to hide and launder their shady money. The last time a similar opportunity arose was following the attacks in the United States on 9/11 when the authorities wanted to uncover terrorist funding networks and assets, but no significant public wealth and asset registries were introduced, and reforms ignored real estate money laundering, ultimately being ineffective. We cannot afford to repeat the same mistake.

Matti Kohonen is director of the Financial Transparency Coalition, a major global coalition of organisations working on tax crimes, money laundering and illicit financial flows. He previously worked at Christian Aid as the Principal Advisor on the Private Sector, and is a founding member of the Tax Justice Network and author of an edited volume ‘Tax Justice: putting global inequality on the agenda’.

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