 Good afternoon, everyone. I think we'll get underway. I've been told I'm late, and I think I am. So while you finish your lunch, we'll begin the program. Welcome. Thank you for joining us today. My name is Tom Cardamone. I'm the managing director at Global Financial Integrity. And for the next day and a half, we'll be talking about illicit financial flows and global development. And I think this discussion has come at a perfect time, given that the SDGs will be formally approved at the UN at the end of the week. And these issues, as we all know, fit exactly into that discussion. Illicit financial flows, the most damaging economic problem facing the developing world, I think, puts a very fine and exact point on it. Over the next two days, we're going to hear from a number of experts on various aspects of this topic. Raymond Baker is going to lead us off in a few moments to provide some history of this topic and where we've come and where we see ourselves going. Professor Thomas Pogge from Yale, a GFI board member, is going to take a philosophical look at the issue. And maybe challenge some of the conventional wisdom we have about global development issues. Huguette LaBelle, a name many of you I'm sure know, will provide a broader view of the IFF issue. She is also a GFI board member. We're very happy to have her here today. Tomorrow, Jean Ross, a program officer from the Ford Foundation, will lead us off in the morning. She'll talk about accountable government and building the importance of accountable governance and building strong democracies. And interspersed over the next day and a half, we're going to look at specific data issues underlying the research that has driven so much of the advocacy we've done. Devkar, our chief economist, will be talking about that. We're going to talk about trade-based money laundering. We're also going to look at some emerging illicit flows issues such as wildlife trafficking. And then in the afternoon yesterday, we're going to do a deeper dive and examine illicit flows in the context of five specific countries, India, Mexico, Russia, the Philippines, and Brazil. I think numerous thanks are due. Several people getting this book published, which has been nine years in the making, as well as this conference today. Christie Cloud and Joe Spangers from our staff just did a tremendous job and a tremendous amount of work in the editing process. I know one of the authors was late in getting his draft to them, so I apologize for that. Channing May and Lucy Azarian have done Yeoman's work putting this event together. And we thank them as well. All you will hear from all of the authors, save for one Eric Solheim, who was chair of the Development Assistance Committee at the OECD. And prior to that, he was the Norwegian Development Minister, was unable to be with us today and tomorrow due to scheduling conflict. But he wanted me to send his warm greetings to everyone. A couple of housekeeping items before we get underway. We will go to four o'clock this afternoon, and then there will be a two hour reception following that at the fourth estate room. And I'm not quite sure where that is, but when I find out, I'll let you know. It's that way I'm being told. So out the door and then to your right. Restrooms are out the door until your left and then another left. Tomorrow we'll get underway at 8.30. Registration started at 8.30, formal program at 9.00. And we will go through concluding about 5 o'clock. Before I introduce Raymond Baker, I just want to take a few minutes to put this book and this conference into some context. Both the book and the conference are a capstone of a partnership GFI began with the Ford Foundation in 2007. And it's been a tremendously successful collaboration with Ford over the intervening years given the impact the issue of illicit flows has had on international development policy. After Raymond published his book, Capitalism's Achilles Heal in 2005, he launched GFI the following summer, June of 2006. And just a few months after that, we're fortunate enough to meet Leonardo Berlamaqui, who was a program officer at Ford at the time. Leonardo was here. If you don't know him, introduce yourself. And if you haven't said hello yet, certainly make a point to do that. We say fortunate, not just because Ford was a potential funder and we were a new NGO trying to get off the ground, but the fact that Leonardo was an economist and he was from an emerging market country. And I think the combination of those two things gave him a unique perspective about what we were talking about. Raymond and I had met with numerous development experts prior to meeting Leonardo. And while the conversations were rich and informative in both directions, we got the feeling that people weren't really quite sure what to do with the information we were bringing to them. Leonardo immediately grasped what we were talking about, sort of an intuitive sort of got it right from the very start. He knew what we were describing. He knew how it fit and the relationship took off from there. The first grant we got from Ford was for a conference much like this in June of 2007. And I was actually able to find the agenda from that conference. And the first thing that shocked me was that we started at 8.15 in the morning. So we were very eager to get the issue in front of people. I'm glad we started at noon time today. But looking back on that event and a couple of the panel discussions are, I think, really informative. The first one was called what is known about illicit financial flows. So we were very, at the very, very beginning of this process. We were, at that point, we were 18 months before our first annual report on the volume of illicit flows for all developing countries. Today, of course, we know quite a bit about illicit financial flows. They're valued at about $1 trillion per year. About three quarters of that is due to transfer, sorry, trade misinvoicing. We also know that even in the poorest of poorer countries, where the volumes of illicit flows tend to be relatively small compared to some of the other countries, Mexico and India and others, they still have a very corrosive impact on those economies. And we also know that the volume of illicit flows is greater than all development aid and foreign direct investment going in. So you really get a clear understanding of the countervailing economic impact these have on developing economies. Another panel was titled, Including Illicit Financial Flows in the Development Equation, which was a mantra GFI had early on. What's the total amount of money going into these economies and what's the total amount of money coming out? And the illicit amount of money flowing out had never really been considered prior to this. There was talk about capital flight, but that was generally thought to be having to do with illicit money. We're talking about the illicit component, of course. Now, with illicit flows being a key component of what is now known as the Addis Ababa Action Agenda and the SDGs and the great amount of discussion around the connection between illicit flows and domestic resource mobilization, we can clearly see that IFFs are now a part of the overall development equation. So what we talked about in 2007 has now become the conventional wisdom, which we don't see too often in the policy sphere in such a short amount of time. And I think the fact that it is a conventional wisdom is due in no small part to the support Ford has given GFI over the years and the faith Leonardo in particular had in GFI in those early days. And so I would like all of you to join me in thanking the Ford Foundation and Leonardo Burlameque for their longtime support. Now, let's get underway, shall we? Our first speaker needs no introduction, but I'm going to give a short one anyway. I don't think it would be overstating the point to say that if we're not for Raymond Baker, none of us would be in this room today. He has been thinking about writing about and working on this issue longer than anyone else. Nine years as president of GFI, 10 years researching and writing capitalism's Achilles heel prior to that and decades thinking about it before he ever put pen to paper. And given Raymond's long experience conducting business around the globe, he developed a unique perspective on the way global trade works or perhaps doesn't work. And this coupled with his innate sense of fairness due to all people I think has led us to this place. And of course his boundless energy and enthusiasm and optimism have certainly helped propel this issue onto the global agenda. Please welcome Raymond Baker. Thank you, Tom. And thank you, Tom and the GFI staff for producing this piece of work. And Leonardo, again, thank you. You did the heavy lifting on the funding side. We perhaps did the heavy lifting on the analytical and the writing side, but we wouldn't be here if it wasn't for you. I'm going to begin my remarks in 2006. October 2006, Tom Cardamone joined me as managing director of GFI. He was the first person that joined me, and he was managing director right from the beginning. We fairly early on had a conversation, a lengthy conversation, about what do we call this stuff that we're talking about. The subtitle of my book, Capitalism's Achilles' Heal, focuses on dirty money. But I knew that we couldn't call this dirty money because that expression makes people shrink from the subject matter, makes them afraid of the subject matter. Don't want to go there and don't want to talk about that. So what do we call this phenomenon? Came back from Europe a little bit or something, but never mind. What do we call this stuff that we are addressing? And we thought about all sorts of, do we call it corruption? No. There are a lot of elements of this that don't stem from the flow of corrupt money. Do we call it flight capital? No, that tends to put the emphasis entirely on the developing countries. People want to take their money out of those developing countries. And we didn't want to do that. Do we call it black money? No, we're not going to go there. What do we call this phenomenon that we're dealing with? And after going through a whole lot of possibilities, illegal flight capital, the corrosive effects of corruption, what have you, after going through a whole lot of possibilities, we decided to use the words illicit financial flows. This was a decision that Tom and I made. And we did that because each of those three words contributes to what we're trying to say. The word illicit is just a little bit weaker than the word illegal. So we wouldn't offend too many lawyers if we use the word illicit. Financial makes it very clear that we're talking about money, not the product of drugs or human trafficking or elephant or toss or what have you. And the word flows is perhaps the most important because it clearly identifies that we're talking about the origin, the path, and the destination of money as it goes through the financial system. So illicit financial flows was what we decided to call this phenomenon. Among the very earliest people that we employed was Dev Carr. After 32 years at the IMF, Dev agreed to join us and look into this phenomenon. I think Dev had a great deal of skepticism as to what we were doing and whether or not it was possible to examine this subject matter. I told Dev, you can use any methodology you want studying the magnitudes of illicit financial flows except what I did in my book, which was a series of surveys that I had conducted to come to grips with the trade mispricing component, the corrupt component, and the criminal component. Anything except what I did. Dev said, OK, he studied the literature. He realized that the economist Bugwati had been using this kind of information, this kind of analysis four decades ago, applied to particular countries. So the question was, why can't we take this same methodology and apply it to an analysis of all developing countries, which is what we did. GFI's contribution was not the methodology per se, but taking that methodology and applying it to all developing countries. We produced the first analysis and have produced an annual analysis ever since then. With Leonardo's support, we not only produced a global analysis, but as you can see in the book, produced analyses of a number of individual countries. And we continue to do that, do annual analyses, country analyses, and regional analyses of these phenomenon. As Tom said, our first goal was to get the issue of illicit financial flows on the table. And particularly with Tom's very, very hard work over the past 15 months or so, we've got that terminology into the Addis Ababa documents and into the sustainable development goals. Now the job shifts. Now the task is to devote much more of our effort to curtailing illicit financial flows, is getting into the hard work of saying, OK, it's on the table. Now what do we do to curtail this phenomenon and leave more resources in developing countries for their own progress? So I hope that you will share your thoughts and your views with us over the next day and a half and leave us with the ideas that we can take to figure out together with your support how to make this phenomenon curtailed for the advantage of developing countries. Thank you. Thank you very much, Raymond. Thomas Pogge is a person of many talents, along with being a GFI board member. He's an expert in issues related to global development, the environment, and human rights. And is the foremost thinker and writer on the nexus of those three issues. Thomas is director of the Global Justice Program at Yale University and also the Leitner Professor of Philosophy and International Affairs, also at Yale. And while I welcome all of you to read the book we published today, I especially want to encourage you to read Thomas' chapter. It gives quite a bit of food for thought, as I said earlier, about some of the conventional wisdom on the issues of global development. Please welcome Thomas Pogge. Thank you very much. And I will basically just run through a little bit of the background that will make clear I hope why this is such an important issue. Is this working? The lower one? OK, good. So actually it was one slide before. I think it just, you see, when a philosopher tries to do something in the real world, this is what happens. All right. Terrible. It will confirm your worst prejudice. So here we go. We hadn't practiced this though, I have to say, in my defense. So the problem of deprivation in the world is a problem that for quite a number of years we thought we were in a position to solve. And so very recently, I've collected here a few quotes. Very recently, the Dutch minister said that we are now, for the first time in human history, we are able to solve the problem of deprivation, hunger, need, and so forth. But there are a whole number of quotes which say for the first time in history and they go all the way back about 150 some years. So the thing is we have talked about it a good bit of time, but we haven't actually achieved a great deal. Now I'm pointing in the right direction. OK. So here is the state of the world according to the official numbers as they are now. We have a large number of people undernourished, suffering various other deprivations, lack of access to medicines, lack of safe drinking water, lack of adequate shelter. Gosh, this thing is really temperamental. And anyway, I leave these figures. Roughly half the world's people are suffering from one major deprivation or another, things that are relevant, certainly, to human rights fulfillment. And here we have on the next slide the people who die prematurely. And we still have today roughly one third of all people dying prematurely from poverty-related causes. This is a conservative estimate which I made by just looking at all the causes of death and singling out those which are very heavily concentrated in the poor countries. Then you can be pretty sure that they are poverty-related. So for example, nobody dies of diarrhea in the United States or close to nobody in Europe, in Australia, and so on. All these deaths are concentrated among the poor, so I count them as poverty-related. Obviously, there are people who die in the developing countries from diseases that we know only too well, like heart disease and diabetes and so forth. And they often die much sooner than we do because they have lousy medical care and they also often have a much more challenging environment. The immune systems are compromised and so forth. But I've not counted a single one of those deaths in these statistics. So these are just causes of death that are clearly poverty-related. Roughly 50,000 a day, roughly 18 million a year over the last 25-year period, which is also the period of the MDGs. And if you put this in perspective and compare it with government-sponsored violence deaths, you find that while 450 million people died from poverty-related causes in just 25 years, government-sponsored violence deaths were 200 million roughly in the entire 20th century. So four times as long a period, less than half the number of deaths. I'm not saying that they are not a problem. They are a very big problem. The Second World War is obviously a humongous catastrophe. But poverty is an even greater problem in terms of the human misery that it causes. Except that for us, it's a problem that we often don't perceive as very serious because we are not directly affected by it. Now, the first thing to say about why this is persisting, why do we still have so many poor people when the means to eradicate this severe life-threatening poverty have obviously been in our hands for many decades, if not one or two centuries? Well, the answer is in the first instance, the distribution of income and wealth in the world. So this is the global income distribution. I've put the divided humanity into five segments. The top 5% take about 43% of global income. The next 20% take the same amount again. And then you have very tiny slices left over for the bottom two quarters. And in particular, the bottom quarter has almost nothing. The bottom half of humanity has just it had over 4% of global household income. And just to put it in perspective, if they had 6% or 7%, all these deprivations that I showed you could be history. So it's not the case that we would have to sacrifice enormous amounts of our treasure to make poverty go away. Theoretically, 2% or 3% of global household income would be sufficient to solve the problem. So here is the global wealth distribution. We are celebrating this year, in fact, this week, more or less, the end of the MDGs, the Millennium Development Goals. And everybody other than me will tell you that there were spectacular success and that we have really done a lot to lift people out of poverty and so on. I will tell you that we have done no better than we've done in prior decades. It's made no difference. Yes, global income has increased. The global average income has increased. And so poverty has improved a little bit. The poor have dissipated. But no more than in previous decades, also nothing particularly dramatic has happened with regard to poverty. One thing that will also happen in 2015, and you will not see that in any newspaper, is that for the first time, we'll have the top 1% of the human population have more than half the wealth. In the moment, they have 49%. But in the next months, that will cross the 50% mark. And so we'll have 50% going to the top 1% in terms of the wealth and the other 99%, including myself, sharing the other half of global wealth. This is again, oh my god. Now I wanted you to guess something and now it's already been. This is really, I don't know why this is. Maybe because you're sitting behind the column. So let's look at the bottom, the same global wealth distribution. Look at the bottom and you see here that the bottom half of the human population have only 0.6% of global wealth. So 99.4% goes to the top half, 0.6% goes to the bottom half. And what I wanted to ask you is, how many people do we need to take from the top? What percentage of the population from the top to balance out the wealth of the bottom half? This 0.6%. But since you've already seen the answer, I'll give it to you. It's, yeah, this is, it, all right. Now that's technology in action. All right, so it's 0.0000009% of the world's population that you need to make up as much wealth as the bottom half, namely 66 individuals. And that's according to the latest Forbes list of billionaires. So 66 people have as much wealth as the bottom half of the human population. Next. Now, the objection that many of you will make having been good students of the official propaganda about the millennium development goals is, but haven't we seen progress? Hasn't there been fantastic progress? And well, yes, there has been some progress. Can you click next? Because we need to go. Now there should be a bottom half of that. Well, maybe not. Anyway, so the first thing to be said about the progress is that the progress, a lot of the progress is cosmetics. There was a great deal of manipulation of numbers. Again and again and again, our friends at the United Nations and their agencies have changed their definitions, have changed their methodologies. So the World Bank, for example, which is the official keeper of the poverty numbers, they started with $1 a day. Then they went to $1 a day. Then they went to $1.25 a day. So they raised the poverty and it's nice. It's good, right? No, they didn't. Because the dollar was a $1985. The $1.08 was a $1993. And the $1.25, which they're now using, is a $2005. So they lowered the poverty line quite dramatically. Look up the inflation in the United States and you'll see how they lowered it. They lowered it with the effect, I'm not saying intention, but with the effect of creating a better looking poverty trend. As it happens at the very, very bottom, poverty fell faster than it fell at higher levels. And so each time they changed the methodology, they produced a better looking trend. Similarly, with the hunger numbers, as important as can be for judging development and how it works. The left side gives you the official hunger numbers as published each year by the Food and Agriculture Organization of the United Nations until 2011. So each year they come out with a book. It's called Sophie or State of Food in Security. And they published the latest number. Then in 2012, three years before the end of the Millennium Development Goal period, the good people at the FAO said, we will change our methodology. We will use a new methodology. And they called it the improved methodology so that you get the point. And that improved methodology, guess what, produced a different set of numbers with exactly the opposite direction. So that dramatic climb of the hunger numbers above a billion, which you all remember from 2009. It was much discussed, including in the Economist magazine. The FAO itself hung bedsheets out of their windows in Rome and said, we are mad as hell more than a billion people hungry. Never happened. Well, actually it did happen, but it happened in 1990. And since then, the numbers have been steadily decreasing, not withstanding, I have you know, the fact that of course food prices doubled as we all remember from the Arab Spring and so on. Everybody suffered from that except the poor. The poor apparently never noticed that food prices doubled. And their numbers steadily continued to decline throughout this period. As you can hear from my tone, I don't believe these numbers. And the definition that the World Bank, that the food and agriculture organization is giving of hunger is bizarre, right? They look at dietary intake regardless of whether somebody has parasites or absorption problems or diseases as many, many people in the developing countries have. Dietary intake, only energy, they disregard lack of vitamins, minerals, proteins, anything else. If you have enough Coca-Cola, you are fine. You're well nourished. If it's the sugary type, not the no calorie type. So that's the first thing. The second thing is they say that you need enough calories for a sedentary lifestyle, minimal requirements for sedentary lifestyle. So if you happen to work in the developing countries, many, many people do, hard physical labor, that doesn't matter. You still get only the 1800 calories. And they say that it has to be more than a year that you are below that threshold in order for you to count, which again is insane because we all know that children, for example, suffer permanent health damage from much shorter periods of hunger. In any case, this is the new methodology of the FAO and they achieved its purpose. Namely, we can now say that we almost, not quite but almost achieved the hunger goal of the Millennium Development Goals. Next. Now, the thing then is we have global income polarization. We have the poor indeed benefiting some, but benefiting less than they would have benefited if they had participated proportionately in global economic growth. So that's the first thing. And the second thing is that the entire MDG exercise is misleading, is making us think that the morally crucial thing is the comparison with an earlier period. And that is the fundamental mistake. So whether they are right or not about the trend, the important thing is that we should compare the status quo with what would now be possible. So to make that vivid, think of slavery, let's say, and let's say somebody says in 1840 that slavery isn't such a big deal because it's gotten better and better, right? Since 1815, in the last 25 years, we've had a significant decline in whippings. Rape of girls, much less common now. The splitting apart of families with some being sold in one direction, some in the other. It doesn't happen as often anymore and they're actually also better fed. So what are you worried about slavery for, right? Our answer very reasonably would be it doesn't matter that it was even worse in 1815. Slavery is terrible and it can be abolished now and it should be abolished now. And I say no more and no less about poverty. It can be abolished now, it should be abolished now, regardless of whether it was even worse in 1990 or not. Next please. So looking at the history then, it is true as many people say poverty has always been with us and so on, there's always been a lot of poverty but there is something new and the new thing is that poverty today is avoidable and very easily avoidable. And so if you do want to make the historical comparison, I think you have to say that poverty today is much worse from a moral point of view because it is so easily avoidable. There's never been more avoidable poverty in the world and there's probably in terms of absolute magnitude never been more poverty in the world even if in percentage terms it may be less than it was before. Next please. Now what is the explanation? Why is that happening? Why is inequality increasing? I think there is one very simple explanation. That's not the whole explanation, it's all more complicated but one element in the explanation is something that we can broadly refer to as lobbying. This is a very obvious thing. Everybody knows that the rules of the game, the rules of a society, the rules of the global economy and so on have distributive effects depending on what the rules are. Some groups do better, other groups do worse. And anybody who knows that will say well maybe I can influence the rules a little bit in my own favor, right? That's a totally natural human instinct and so you try to influence the rules and with globalization upon us of course people have taken dramatic action to try to influence the rules including the global rules and big corporations, rich people, important governments and so on, they try very hard to make the rules favorable to themselves. Nobody hates the poor, there's no conspiracy or anything but people do love themselves and because they love themselves they try to make the rules more favorable to themselves and the foreseeable result of this sort of effort in lobbying is that those people who are in a position to lobby who can lobby effectively will tend to do better, will tend to increase their share of global income and global wealth and people who are in no position to lobby will correspondingly have less and so inequality increases as Piketty has notably observed in his latest book. Next please. Now one way in which you can influence the rules is in making them more favorable so that you pay less taxes for example and that's, I mean taxes are one motivator, one important motivator for these illicit financial flows and so this whole nexus of illicit financial flows that we will hear be discussing today and tomorrow is one example, one of many examples of rules that are both at the global level and at the national level that drive that inequality spiral that are beneficial to rich corporations and individuals and thereby allow them to increase their share of global income and wealth at the expense of ordinary people and especially the poor. So here you can see the magnitudes, I'm sorry, maybe I did this with my waving my hand. Can you go back one more time? Yeah, so we have just the basic magnitudes, we'll talk about that quite a bit. We have a trillion a year as was already pointed out, 6.6 trillion in the last decade that we have figures for and that's a very, very substantial proportion of the gross national products of developing countries in particular in Africa where it's 5.5%. This is not negligible, this is a massive amount of money and if you compare it with development eight, 0.127, $127 billion a year in the year 2012 which is the same year to which this one trillion figure belongs. Can you now go to the next? Yeah, and for individuals, individuals often store their money abroad, that's not a big problem in the United States. The United States people typically declare their income have relatively little money abroad. It's a much bigger problem in Europe with about 8% of private wealth lying abroad and often in other European countries such as Luxembourg or Liechtenstein or something but in Latin America, in Africa and the Middle East these are much, much larger amounts. So once again, virtually none of the people who have their money abroad pay taxes on that money and again, there is an enormous amount of revenues potentially that poor countries could harvest for the purpose of development or put it conversely because these revenues are lost to the treasuries, there is less development than there could be less poverty eradication than there could be last slide please. Yeah, so this one is the last slide and so this is just calculating the tax loss. So of that one trillion dollars in illicit financial outflows, they are flowing out of the economy which of course is harmful because if they remained all sorts of multiplier effects would kick in and the economy would thrive much more but there is an associated tax loss as well because as I said very often these illicit financial flows are tax motivated and Christian Aid estimates that the loss to the developing countries is in the order of 160 billion dollars a year in tax revenues and that if that money was available to allocate according to current spending patterns the amount going into health services could save the lives of 350,000 children under the age of five every year. So that's a very massive improvement and don't say that they will spend it on corruption and on cars and whatever because this is the existing spending pattern. So it is already taken account of the fact that resources in these countries are not always ideally allocated and of course we could do better and we should presser poor countries to do better in allocating their tax revenues but even with the existing allocation it would make an enormous difference. So the topic is important if human rights are important if the fact that poverty persists is important and I think nothing or very little can really compete in importance with the enormous problem of poverty that I've here displayed to you, thank you. Okay, I'm taking a few questions. Your presentation is magnificent, really appreciate it. I was wondering if the PowerPoint presentation can be made available on request. No secrets here. Okay, thank you. Back there. Yes, could you tell us what you know about how this money is moved out of the third world? The less developed countries to be deposited and hidden elsewhere and who these intermediaries are that move the money? Yeah, so there are many different pathways and with the expertise in the room you shouldn't really want a philosopher to explain this to you but there are many different ways but one very important way is through misinvoicing where you have trade taking place between two related parties, two parties that are friendly with each other. They're exchanging goods and money at a price that is not the world market price and then the side payment is made in some cases so I under invoice you, I send you something at a cheaper price and I say just put the rest into my Swiss account so that would be one way in which it's done. Another thing that's often done is use tax havens. So if you have trade between two entities that are affiliates of the same company instead of trading directly with each other they trade via a third entity that is located in a tax haven also affiliated with the same company and then they can do the same thing. They can essentially, country A, exports to the tax haven at a low price which means they make no profit or very little profit. Then from the tax haven it gets exported to the receiving country at a high price which means that the last country is buying at a high price and also making little profit and the profit then accumulates in the tax haven country where it attracts no taxes. So that's another way of, but there are countless different ways in which money flows and all of them of course, motivated by the desire to make a profit for oneself often to avoid taxes but we'll hear in the next two days we'll hear a lot more from more competent people about this topic. There was also one person next table. Yeah, it doesn't matter, the order doesn't matter. Just to keep it closer to the philosophical at this moment because I'm trying to combine what Raymond said in his earlier presentation about how one has to recalibrate the language from corruption to illegal to illicit because I almost hear a concession in what is being said that it may not be illegal although I think that it's unethical and there may be strong elements of immorality in what it is done. The question is, can you fight what is in the moral domain? And if so, from your philosophical point how do we take this fight forward if we are to indeed mitigate poverty in the way with the money that you have identified gets lost? I think those of us who are interested come from countries who suffer from it have very little grasp on it because the immoral has been made legal and it happens in a place like Washington at the hand of lobbyists and so forth. So would you say that what is needed in the world is a big moral movement against illicit financial flows? Do you think that there's enough tangibility to take it up at the level of legality? How do we fight this? Yeah, so first of all, you're completely right that this is not always illegal. It's often not illegal and of course people take care to change the laws, make the laws in such a way that these shenanigans are actually permissible and very often you can by bribing legislators in poor countries, for example, or presidents there you can make something legal that really shouldn't be legal. What is I think an important meaning element in the word illicit is that it's surreptitious, that it's under the table, it's not something that people want to know. So for example, we have in the moment when tax authorities look at the tax return of a big global company, they look at the consolidated return, they look at their profits and losses all over the world. There's no information about where exactly these profits and losses accrued. Now if we had that information, if companies were required to file this information, things would look very, very strange, right? You have 6,000 employees in Zambia, you have 60,000 employees in India, you have one employee in the Bahamas and 60% of your profit is in the Bahamas. That must be an incredible guy. How is he doing it? I want to hire him, you know? So that's the, if this were transparent, right? It would be very difficult to make it stand, to make it continue. And so transparency here is the first step in the moral campaign, make it transparent. And then when you say we need a big moral campaign, I think I heard a slight skepticism in your voice about whether moral campaigns can succeed, I'm skeptical too. What morality can do is it can highlight issues and it can look for potentially motivated allies. So what we have done, I think where GFI was really instrumental in the last 10 years, was in putting this issue on the table and also nagging a number of rich country governments about the money that they lose, right? For example, sort of tucking on the sleeves of the Germans and saying, you know, that you've got a lot of money sitting in Switzerland, which is not paying any taxes and is that really fair and so on? And if you make a bit of a stink about it, other Germans get upset and they say, well, why should my dentist not pay taxes on her money when I pay taxes and so forth? So now there is a movement that was partly created by GFI about getting more tax honesty going in the European Union in the rich countries. And that now is something that we can build on with regard to the developing countries as well, right? Obviously there's gonna be resistance because countries within Europe will be more willing to reciprocate with each other because if I stop covering your tax cheats, you will stop covering my tax cheats, but very few tax cheats of European countries have their money in Zambia, of course. And so Zambia cannot reciprocate a whole lot for favors done to them by the European Union. That's where morality comes in. That's where we have to say, if you do this, if you really want more transparency and more honest tax accounting of corporations and individuals, make sure that this is not confined just to the rich countries, the poor countries need it even more and they must be included in that. And that demand is difficult to resist. So I think we have a wedge with which we can actually make progress on that issue. So there's a gentleman there. Hello, good afternoon. My name is Frank Vogel. I just wanna go back a bit to the early part of what you were saying. I was under the impression, obviously false. That a lot of the improvement in the data on poverty and so on was due to the great success of China over the last 30 odd years. And you haven't mentioned China at all. And your Christian aid data did not include China. How does this distort the picture? We know very little, I think, relatively speaking, purely out of relative terms, about illicit flows from China or through China or around China. And how do you put what has been happening in China over those last 30 years, which I think is different to your general picture? And how do you put that in terms of the fundamental core issues of illicit flows that we're discussing here today? Good, thank you. So the first thing is China has indeed had a tremendous success in poverty eradication in the period, especially after Deng Xia Ping's reforms. So the late 80s and the 90s were fantastically successful. That led to something very interesting. In September 2000, all the governments of the world came together in New York for that Millennium General Assembly meeting, and they adopted the Millennium Declaration, where they said they would have poverty by 2015 and so on and so forth. At that time, as you can read in the Millennium Declaration, all the goals were formulated in terms of from now to 2015. But then when the Millennium Development Goals were published a few months later, suddenly it said 1990 is the baseline. They backdated the baseline to 1990, and that had two reasons. One reason was that you lengthened the period and because you're now defining it as a proportion, the proportion of hungry people, population growth has a longer time to act, and that will inflate the denominator and reduce the work that you need to do in the numerator. But the second thing is that people obviously said, why should China's success go to waste? These guys worked so hard. Let's include that in our goal. And then, but something really funny happened. Kofi Anan in 2001, he published his first report on how are we doing with the MDGs, and that went up to 1999, for which we had figures at that time. And he proudly announced that in the world's most populous region, East Asia and the Pacific, the poverty goal had already been achieved. In 1999, more than a year before it was even announced. So let no one say that we are not working hard. Now, the second thing is about the problem of illicit financial outflows from China. Again, there are others much better able to answer that question. But China is at the top of the list. I mean, China is a country with massive, massive outflows that was hemorrhaging money. And people, officials, and people who are entrepreneurs with friendly ties to the government, they massively, massively got money out of the country and used the kind of trick, the one that I described in the answer to you under invoicing and then trying to get side payments into foreign accounts and so on. And as you may know, there's now with Xi Jinping in power, there's an enormous anti-corruption effort underway and people are trying to hunt down all the people who took enormous amounts of money out of the country. In China itself, I was just there over the summer several times, they have the wonderful phrase, the naked official. So a naked official is somebody who has already sent their entire family abroad. They're living abroad, have nice real estate and so on and so forth. And it's almost always a he. He is still at the trough, still trying to get some more money, but he has a suitcase packed and is sort of on the verge of leaving, could leave any time within five minutes if the situation requires. So that's the naked official. And there are a ton of those. And Xi Jinping is apparently making quite a serious effort to get people extradited and to get some of the money back. But I mean, experience teaches that the amount of money that you recover is a tiny fraction of what actually flowed out. Good. Any other? Yeah. Time for one. OK. I just got a 10 minute sign, so I think we have eight more minutes. Yeah, OK. Hi, thanks, Dr. Poghi. A question, I guess a historical or a philosophical question, I'm curious about your definition of avoidable poverty. What has changed? Why is it more avoidable now? Is it the technological advances? I wonder a little bit about, was it avoidable in feudal times just by the transfer of bread from the wealthy to the serfs? I guess I'm just curious, what is it about now that makes it more avoidable? Yeah, so I would say that if you take something like 1830, for example, it would have been very difficult, even with all the wealth in the world and all the income-generating capacity in the world. It would have been very, very difficult, first of all, logistically and administratively, to reach the far-flung corners of the earth, everywhere in Africa, everywhere in Asia, and so on, to actually reach poor people and improve their condition. And today, we have fantastic technological and administrative capabilities, just from computers, transportation, and so on and so forth. And so I would say that's one important way of talking about degrees of avoidability, which is what you're driving at, I think. I think the amount of poverty we could have avoided in 1830 would have been maybe half the poverty that existed then, whereas today we can pretty easily avoid pretty much all the poverty that is now in existence. There are obviously tiny exceptions, such as North Korea would be a clear-cut exception, where it's very difficult to get into the country and do something about it. You'd have to negotiate with the regime and so on. If the regime doesn't cooperate, it would be very difficult to do something about poverty there. But by and large, it would not only be possible with administrative, technological, and economic capacities, but it would be relatively cheap. So the political resistance would be relatively small. So we are doing things that pretty easily the American people can be won over to. So for example, we invaded Iraq at some point. And we went in there. This was a trillion-dollar thing. It was a pretty expensive thing. And the president said, this is a good idea. They bought some yellow cake from Niger or something, and so we better get in there. And so people said, yeah, yeah, that's a good idea. Let's just go. And so I think the president today could relatively easily, as an initiative, say, why don't we end hunger? Roosevelt promised it in the 1940s. Let's just do it. And with the same sort of effort that we made in Iraq or in Vietnam or something, we could make an effort to eradicate hunger and deprivation. And we could succeed. We could bring our allies on board. The Europeans would be happy companions if we took the initiative. So in that sense, it doesn't take a miracle, a political miracle. It just takes a little bit of political initiative and will. And we could do it. It doesn't have to come from above. It could also come from below. So if there were a substantial number of people in this country who wanted to do this and wanted to push for the reforms necessary to achieve it, including illicit financial flows reforms, I think politicians would easily be found who would then put themselves at the head of the movement and take that on as a responsibility. So in that sense, I think it is reasonably easily avoidable. It's really seriously possible, not just sort of theoretically possible. Thank you very much, Sotomayor. You touched briefly on the issue of lobbying, but didn't really elaborate on that very much. And obviously, it's what perpetuates the status quo in a way. I was wondering if you could give us some more thoughts on that and how it fits in your vision. It's something that you see as necessary, you will, or something that should be changed? Or if it has to be changed in what direction? Yeah, it should certainly be changed. I mean, first let me say that it is a very, very powerful phenomenon, especially in the United States. And we have now got an election campaign upon us, and we once again have politicians running around searching for money. And the money that they need is in the hundreds of millions of dollars for a presidential campaign, billions of dollars. The Koch brothers have said they would give $900 million. A conservative estimate of how much the next election will cost is in the $6 billion range, but it could easily be a little bit more than that. So these are very large amounts of money. And of course, the people who give the money in almost all cases give the money because they expect something for it in return. So just to give you maybe one example, which is quite interesting, the interesting example was analyzed quite carefully, and is related to our topic. And that's the American Job Creations Act of 2004, a wonderful example. And there we know which companies lobbied for the act because we have data from their annual reports about how much money they spent on trying to get that act passed. And the act, by the way, for those of you who don't know, was a tax holiday. So it was a tax holiday which allowed American companies for a limited period of time to bring money that they had accumulated in tax havens into the United States at a discount. The usual tax rate is 35%. And here, they could bring it in at five and a quarter, an 85% discount. And so a number of companies that had large amounts sitting in tax havens, they said, this is great. Why don't we have this tax holiday? And they called the American Jobs Creation Act and the act passed. And we know to the penny how much each of these companies brought in and how much money they saved. And to make a long story short, for every $1 that these companies invested in lobbying, they got $221 in tax savings. So I don't know how you invest your money, but for me, this would be a very, very lucrative return. So this is commonplace in the lobbying world, right? Because for the Congresspeople, this is not a big deal. It's not their money. It's the money of the taxpayers that they are giving away. And so they don't mind giving $221 of public money for $1 that they actually get into their own little hands, in which they can then spend on the next election campaign. Now, this happens, as I said, all the time. And one last thing that I want to say about it is that this was a domestic thing with international implications, because, of course, it creates and supports the incentive to get money out into tax havens if you can then, at a low rate, get it back into the United States. But what happened in the last 20 years was, of course, that globalization created a whole new supranational architecture of institutional arrangements that are tremendously important distributionally for everything that happens in the world today, that reaches deep into the inner lives of national societies. And this global institutional architecture was very, very heavily influenced by lobbying. Anybody who could lobby the US government, which is both the strongest and the most venal of all the major governments in the world, anybody who had an opportunity to lobby the US government had a say in how these institutional arrangements took shape and now benefits from it. And what we need to do is try to prevent that through more transparency, more democracy, and getting the ordinary citizens both of this country and other countries, giving them more of an understanding of what goes on and more of an opportunity to weigh in themselves, to have their voices and interests considered. OK, thank you. Thank you, Thomas, a sobering analysis to say the least. And apparently, there are no laurels for the international community to rest on. The SDGs are a new opportunity to do the hard and heavy lift that needs to get done. And I think Thomas' presentation sort of sets the context for the rest of our event, the rest of our agenda, and for our first panel. I'd like to introduce or call up to the podium John Kassara, Robert Sibersky, and Dr. Lester Meyers to talk about trade-based money laundering.