 Thanks for your patience with the technical setup here So after that really rousing large Large-scale story from you get we're gonna dig into some of the details As Tom said, my name is Porter McConnell and I'm the director of the Financial Transparency Coalition that you get Referred to if you're not familiar with the FTC and I recognize a lot of your faces We are a global network of civil society and governments and experts And we advocate for a lot of the financial transparency measures that have been brought up Already public registries of beneficial ownership public country by country reporting and automatic exchange of financial information With the general idea that informed governments and informed citizens can be a really powerful and to do it to an opaque financial system I'd like to thank GFI for convening us for the launch of this important book Much has been said already about GFI's Contributions especially to the early diagnosis of the problem and for championing the issue before anyone was really listening. I Will merely add to that my gratitude to them for co-founding the Financial Transparency Coalition in 2009 without which I wouldn't be here This session is a conversation on government trade and balance of payments data There's a major source for the illicit flows estimates in this book The IMF's balance of payments data is used in GFI's analysis of net errors and omissions and Direction of trade statistics are used to identify discrepancies and reports between two trading partners Together with other sources. They tell a story of the gaps the undocumented the unknown in global trade The data are not without their critics as a source for estimating illicit flows Some argue that they're too conservative and fail to capture trade and intangibles like intellectual property Others argue that they're too broad and capture economic activity. That's not necessarily illicit But because the one characteristic that all illicit cash shares is the desire to obscure its source Estimating the size of illicit flows. However, you do it is an exercise in frustration As many of you will probably attest to so why do we do it? There are two reasons in my mind One most of the credible estimates that are out there right now Point to substantial amount of money that's going missing from developing country economies and that's money that could be put to good use To and this to me is perhaps the more compelling reason illicit financial flows exist in the shadows Entirely outside the accountability compact between states and their citizens It's not just undemocratic The research suggests that this kind of asymmetry of information can be toxic to development So that's why we're here to try to understand the data Our panels are going to talk you through the numbers why they matter and their limitations onto the experts Dev car as chief economist at global financial integrity Prior to joining GFI. He was a senior economist at the IMF and during his 32 years at the fund Dr. Carr worked on a wide variety of macroeconomic and statistical issues Both at headquarters and on missions Dr. Carr has a PhD in economics from the George Washington University And masters in database management systems from Howard University and an undergraduate degree in physics from the University of Calcutta Dr. Carr has published a number of articles on macroeconomic and statistical issues Anders Ackers-Goff heads the World Bank's preventive services unit as a lot of you may know the unit was established in Response to recommendations from the independent review panel, which was chaired by former federal reserve chair Paul Volcker The unit identifies integrity risks to the World Bank's portfolio provides consulting services to the banks global practice areas on how to protect against fraud and corruption in the banks investments and builds capacity amongst national agencies Dr. Ackers-Goff has previously served at the World Bank's board and corporate strategy group as well as at the Danish Ministry of Foreign Affairs And last but certainly not least Tamara Razan is a senior economist in the balance of payments division in of the statistics department at the IMF She coordinated the balance of payments compilation guide that the IMF published in 2014 and she leads a team Responsible for the balance of payments and international investment position manual also known as the BPM 6 She provides technical assistance and conducts training on statistics and as a member of the reserve assets statistics team Prior to the IMF Ms. Razan was deputy chief of the balance of payments division at the National Bank of Moldova for 13 years So we'll go with dev first. Thanks Thank You portal I'll start with a few general remarks on the importance of data And my work as a chief economist at GFR. It's all about data Without data, I cannot make any case for or against illicit flows Why I say is that why I say that is because Without data one can make only assertions, but one cannot prove those assertions The problem with illicit flows is that first of all, it's a very difficult measure Because it's illicit is very hard to observe So the correct expression is measurable illicit flows So when you're talking about data, you're obviously talking about measurable illicit flows But measurable illicit flows is much less than total illicit flows Because you cannot get data on for example illicit flows generated due to drug trafficking Due to human trafficking due to other kinds of illicit illegal activities Now when I came for the job interview at GFI I was asked that I have to do two projects and whether I could do it funded by the Ford Foundation first project Estimate the volume of illicit flows coming out of developing countries. I Said yes, I could do that because Mythology exists and I could come up with an estimate based on that methodology The second project was Where is the money going? Okay, where is it lodged? Obviously if you if this coming out from developing countries going somewhere. I Was not sure about the second project And I have a openly express my doubt. I said Well Raymond, I'm not sure what I can come up with that with that such an answer Even the world's best economists Haven't come up with their answer and the reason is that of data lack of data Tax havens are not cooperating Even banks are not cooperating So one can talk about this and that oh we think they're going to the tax havens You know most of it is going to tax havens a little is going to the banks, but One cannot talk about these things in any framework using any framework. So But in spite of that I got hired I guess my answer was convincing but I tried my best and we did come up some with some estimates Although we don't have hard data. I found out some way of Using BIS the Bank for International Settlements data was able to give some kind of a partial answer In spite of all big holes Now the IMF I worked for 13 years in the statistics department of the IMF and Tamara my career towards the Faggot and overlapped a bit with with Tamara's stint there and so My my the basic point I'm making is the IMF is still the premier International organization responsible for Compiling macroeconomic statistics It compiles a whole range of statistics the coverage is very large going back many years and The IMF has been basically my savior in the job that I'm doing at GFI without the IMF I probably wouldn't be able to come up with the estimates that we come up with a premier Publication a flagship publication of the IMF is the direction of trade statistics, which is the crux of our trade Missing voicing numbers Now the other Piece of data that we use is the balance of payments Bottom line, which is the net errors and omissions we take that as a proxy for illegal or illicit Financial flows out of the external accounts of a country. This has been done for years by economists decades as a proxy for illicit capital out of a country trade Missing voicing of course realized not only on The trade that developing countries report to the IMF, but also the industrial countries That report the counterpart so in other words we compare the export and imports of Developing countries versus the import and export of Industrial countries from that developing country Now there have been some issues with regard to Many African countries they're not current they have data gaps so the way I have tried to come up with the filling those gaps is using the international financial statistics, it's not the Not the The main way of or the preferable way of doing things but rather than have a zero there And under stating their illicit flows. I tried to use I use IFS data To fill up the gaps from the DOTS So I just won't like to after having make this general observations Could we have the slide the first slide? the Try to sort of address some of the Some of the criticisms that economists have made from time to time on this methodology of of capital flight economists Talk about capital flight and not so much on illicit flows because capital flight is a more Traditional term they have not been able to come out of it. We are now pushing the envelope. We are putting this issue of illicit flows on the table But economists are still hung up on capital flight and the capital flight The reason why we moved away from capital flight into illicit flows is because capital flight connotes that the problem lies with the Developing countries it is their problem over there. It's a macroeconomic instability governance problems, whatever they need to fix it it absolves the industrial countries Who are playing? Who are absorbing this these flows basically these flows basically end up in industrial countries? So illicit flows Give the give the connotation clear connotation the implication is there are flows coming out and is being absorbed in industrial countries so the The economists there's a group of economists Who do not use the trade mission was in this is that too many issues with? trade data and they basically focus on balance of payments Now we have reached a stage where we put the issue on the table and we have been able to we are successful in that So we have gone past that but there are still hangouts there among the economists because they have They have done this work for years for 30 40 years and They have taken this entrenched positions very hard to get back to but I just want to briefly address the Lack of there's no logic to this as to why they exclude Trade missile voicing because on the guys that all they have errors in compilation. Well, that doesn't hold water See if you look at the basic, this is the basic identity in econ one-on-one This is the first class that anyone takes in economics and Where GDP is just a summation of the different sectors consumption Investment government and net exports if you have a problem with net exports. There's only one component of GDP there are errors in Every other component as well errors in measurement of consumption which consists of private consumption and government consumption Private consumption is typically measured from household service, which I have margins of error The investment consists of private investment in government investment private investment again is based on service those are there are margins of error and the government of course government is Still there, but it doesn't have that much errors But this is in other words the shot long and short of it is that errors due to missing Trade is just a component of other errors and yet the whole world talks about GDP There's no discussion in economics without GDP. The IMF is following GDP numbers with the microscope and The world economic outlook every three months comes up with updates of GDP growth around the world So that doesn't hold water You know just that you know we we should not look at trade because the trade missile rising has numbers that doesn't You know can we have next slide now the the other point I'd like to mention is Statistical errors in the compilation of trade statistics The fund produces an annual report Called the annual current account discrepancy basically the The thesis is here is very simple the IMF comes up with a measure of statistical errors And how does it define statistical errors? Well at the global level exports must equal imports It cannot go to the moon. Whatever countries are exporting it must be Exported imported by other countries now. This is a advantage in trade That is not afforded in any other branch of statistics. I am most other branch of statistics National accounts is open-ended. You don't know what the margins of error are trade you have a boundary condition This is the luxury luxury item. You don't have it anywhere else. At least I'm that I'm not familiar with So the IMF uses this and comes up with a measure of statistical errors The average is point eight percent of gross goods trade Export plus imports so export minus imports over export plus imports is About point eight percent for the last ten years now Compared to that if you're looking at the trade misinvoicing of some large developing countries Interesting developing countries. Let's put it this way. I just took some Developing countries like for developing Ghana Nigeria China India and then I Also cite the US numbers. You can see That the average is much higher than point eight percent. You've got twenty three point eight percent for Ghana You've got nearly eleven percent for Nigeria Eight percent around eight percent for China and seven point six percent for India. Obviously something is going on Tray at the statistical errors cannot explain these kind of large Errors for us. It is like four percent okay, so Basically, so I just established the point that Statistical data are very important and high quality data are very important and the IMF is Contributing to Making High-core I mean to to ensuring that countries follow the guidelines that it issues on the compilation of various data national accounts trade and It's provides technical assistance to member countries and to ensure that the data quality is high and current at the same time Thank you very much. Thank you very much Raymond and Tom for inviting me to speak today. I Started working on integrity issues about eight years ago and The first thing I Recognize is is it's very difficult to explain to people that don't work in the crime field So for example in the World Bank, we do investments all over the world And I have to talk to people that are responsible for these investments about fraud and corruption And they don't immediately connect all of them. So what is the problem? Well, if we look at a crime like a homicide Somebody shot Twice in the back. He's been tied sort of floor this blood. Everybody will agree. There's a murder, right? Whereas economic crimes people don't agree So my job in a prevention unit is to create a murder. I have to say there's a problem Look, the numbers are really bad and you have to do something about it So as a consultant within the World Bank my job is to create problems That's why we are so popular So coming to this field I was thinking back at the time of work that at the Danish Ministry of Foreign Affairs I was as a junior official in charge of putting together the briefings for the ministers traveling on trade missions and I would Make these briefings more efficient and less paper So why produce both an import and export statistic for the same country? I mean, it's almost always the same except that only worked on Countries like when the minister is going to Europe and so on but then the minister traveled to Africa the statistics didn't match I Had the luxury of choosing the number I liked because why would I send two numbers up? Then the minister might say does net up and I had to find out what to do with it, right? So I just sent the largest number up because it looked we had good relations Well, obviously things are different now, so next slide so I tried to look at the The trade issue the trade Misen voicing and and devs data work and reflect a little bit on it given the World Bank's work a Few years ago. I was asked to look at illegal locking in an African country and the bank Well bank had suggested that they have a an export tax because they couldn't really control the movement Of logs and so on so it would be easier at a port and SGS had been hired to tally it up and collect the taxes and so on but still some logs kind of found the way outside the country so first question is Will data statistics be able to reconcile say how logs are counted on the production side with the trade statistic? Right, so if you can start doing this around the world, maybe that would be helpful right the second thing I came across was a recent article in The independent saying that Swiss companies bought a lot of gold from toko Except the toko is not a gold producer really All right, so what is going on and and how do we deal with these data issues? Is there a way to to figure out data-wise that maybe it came from a neighboring country? Right to say, you know, maybe it came from Burkina Faso The second the second thing is beyond evading export duties which can happen in a number of ways is of course import duties We had a recent investigation the World Bank again is no rocket science Company lied about the number of items being imported and the value of the items and We were pursuing the matter, but the World Bank cannot sanction companies for tax evasion. I Thought we could so we have an internal challenge. How do we deal with this? issue The third one the third possible criminal explanation for the differences in the trade statistics Of course that people just steal the resources and move them out aside the country And I don't want to report these things in official statistics Interestingly enough talking to a retired director from the IRS criminal investigation division the stories about Transfer pricing There is no criminal side to this so I asked so have you had any criminal convictions of Transfer mispricing and she said no, okay There may be some examples out here John Maybe others can point to it, but it's very interesting that we have not been able to criminalize that side I put in as a footnote some excellent work by colleagues of mine Rikers showing that when you have kleptocracies companies can actually be powerful enough to go in and change the tariff structure Again, that is not behind any of the data. We are talking about today, but I thought it was an interesting Observation So what we are doing in my unit right now is trying to get a sense of all of the various schemes That are coming out on the tax side because we hear all of these anecdotal examples But we don't really know what is the extent what is the taxonomy and so on next slide Not trying to compete with there for anybody else on data, I wouldn't do very well I tried to look at what are some policy implications of what you guys are talking about so the first thing I thought about was Policy coherence so obviously this is not just a developing country problem, but also one for developed countries So why not create coherence between a development policy of an OCD country and it's say custom services Again very specifically can the US or my country Denmark live with the fact that we import a lot of stuff from a country But it's not in the export statistics. Is that sufficient grounds for example to do a proactive investigation again I asked that of of The former IRS colleague and she said yes, I'm not quite so sure but at least do or should Custom revenue agencies have a risk-based approach to going in and looking at these things All right, it could be data analytics But even your numbers Raven and and there could they form a basis for looking at okay We need to look at oil from this country gold from that country whatever Just just a broad one and then these countries can dig in and and be more detailed For example, just applying a little bit of data analysis We produce the checklist to identify fraudulent bids. This is in procurement and we tested it on past investigation It was 59% effective in identifying fraud and collusion. So what would the similar tool look like in customs, right? Similarly, we use data analysis to identify the highest risk bank projects. We put in the top 20 19 of the 20 are now under investigation All right, we have we brought in data scientists to find out Can we predict the complaints that are more likely to result in a substantiated investigation again? Bring that into customs and elsewhere. Let's try to make data analysis work the second thing I Think we need to consider is Criminalizing certain practices. Okay, we criminalize bribery fine, but it can be hard to prove So lawyers figured out well, maybe we need to do something about conflicts of interest So with conflict of interest, I don't need to show that somebody did something bad and took a bribe I just have to say there's a conflict of interest. So what does it look like in the country of at least international flows? I know this is an abstract question, but think about it The third thing I thought was interesting is lay act basically prohibiting the import of Items like Logs that have been taken in violation of national laws. I think we need to think about that I think we need to think about the disclosure requirements. So if companies are relying on Materials that are high likelihood of ending up on devs list should they disclose? I mean why it's just conflict minerals and you know, there must be other things as well Moving on transparency and enforcement in developing countries obviously We need to support law enforcement in these countries and we know it's hard. It's not just hard to finance but also for them to operate independently a year ago we invited Organizations from more than 130 countries to the World Bank law enforcement officials and what have you and we surveyed them More than two-thirds said that they experienced political interference So are they really allowed to do this kind of work? Well, luckily some of them hooked up like we had One African nation that hooked up with the Swiss so the Swiss could pursue that case that they could not in their country So some of these kind of networking opportunities can allow for a case to pursue Be pursued elsewhere Also important is working across law enforcement agencies So right now my unit is working with Scandinavian tax authorities to come up with their crime threat assessment Toolkit the idea is that maybe other enforcement arms know something that the customs officials should know about All right, so how do we share intelligence? because different agencies have different tools and I know for example from Eric Hilton who is the executive director of the IRS criminal investigation division that the US does not have a Threat assessment that is comprehensive in the sense that it builds on other agencies So is there anything we can do there that brings in this kind of analysis? Something the World Bank and other financial institutions could do and also development institutions is to start comparing procurement data With customs data or it could also happen in developing countries So we finance let's say a thousand computers that cost whatever that is the price that has been charged the government What do the customs declarations say has anybody ever really gone in and matched these things? right, I mean we have a Potential entry point as an international development institution, but other institutions could do the same next slide On the company side There's some discussion ongoing, but not very positive about taking the tax evasion side into corporate social responsibility Maybe one way to think about it We all saw the pictures of the textile factory that had collapsed and also people that were killed in Bangladesh right Corruption was behind that Corruption allowed these conditions to to be accepted But ask the other question do we put Corrupted fuel on our vehicles would that be okay are there other things that we buy as consumers we should not accept buying What will it look like? Right, so that is a discussion that needs to be taken back to the private sector as they go back and look at the supply chains the last three points I Met with Cesar Porezima who is the secretary of finance from Philippines back in spring? 2014 and he suggested global tax identification numbers basically Trade flows should not be anonymous. I think it's a really great idea Maybe some people that are more export than me will say well, they're all of these issues But think about it if you always know who owns some goods and You would then take the tax identification number and the country code and you can see it all over the world and the problem is With reconciling data is you don't have identical numbers It's not like accounting where you can look at how much went into to your bank account And how much did you actually spend I did there's no way to do this really right? You just need to kind of add up and see this a match So do we need that kind of of identification numbers to do real reconciliation? We talked about the heat maps I think this is really key what you brought the up there about where are the major discrepancies and maybe lastly bring in Maybe the maritime bodies They have a lot of information as well. They've established a The maritime anti-corruption network Could we go in and look at what they what data they have on the movement of containers and so on? To to make more robust analysis I know one researcher has suggested that but I'm not as much into the details to say what kind of Fields would be available if you were to to compile the two databases Anyway, those were some thoughts from from my side I have some colleagues from the financial market integrity unit stolen asset recovery if it's really hard questions Thank you very much good afternoon and Thank you for inviting me to take participate in such a forum Coming from a practical point of view so it for me is really difficult to fit my practical skills into your Civil society discussions, but I will try to to bring a little bit of clarity what we are compiling what we are doing Which data we are compiling and how they can use be used in in the analysis So measuring illicit flaws. It's it's a really very difficult task because I elicit and as Dave stated IMF has a leading role in developing the methodology for collecting and compiling statistics on all cross-border movements and This statistic are called external sector statistics and they include a range of data sets Which is balance of payments is international investment position and another data basis And they are also compiling and maintaining different databases one of it is this direction of trade statistics Which is one of the topics of discussions very often today and we have a range of other data sets like Direct investment data set of statistics and so how do we collect and compile this? The IMF is a leader in developing methodology. We are entitled with the ownership of Developing the manuals in compiling balance of payments and external sector statistics And they are trying to to have all member countries to apply the same methodology Because when you analyze something on the international level on the global level you should have something consistent You cannot have a country saying that this is an apple and another country saying this is a peach So if you compare different states, you will have no no Different results. So that's why our task is to have countries to apply the same methodologies the same approach the same Classifications approach to have more or less consistent and comparable statistics unfortunately, it's not a simple task and Countries are different with different capacity the different resources to produce some Reliable data and to come with some reliable data sets in Compilers how to capture illicit flows our manuals state that all flows have to be captured illegal legal and so on But this is what manual says To implement this into practice. Could you imagine how a compiler can capture drugs trading drugs? Well, how a compiler can capture other? I don't know illicit illegal illegal flows It's it's really difficult. They are doing their best sometimes compilers are left alone to to to have this battle with For good data because they don't always have support of their They are policymakers So we are advising and they are doing sometimes I was at compiler for many years and I sometimes I was calling myself a self as a detective because you have to find a Way to contact somebody to give you data and to find a way to collect some pieces of information to be able to put together an Estimate of something so they are using official data. They're using data from official sources They are using ad hoc surveys. Let's say on remittances or something sometimes even they're conducting some surveys at approaching their friends and relatives I myself we were doing Estimating because I'm coming from Moldova where remittances flows are huge in in GDP ratio and I was Developing estimation method in my back home and I was we were asking our friends our relatives our family Was working abroad? What you are doing how much you are bringing in pockets? So this is sometimes you have to be very inventive to come to some to some Figures and when we moved from an old method of estimation and we came instead of 100 million a year After all this new method became to 400 million so yeah of remittances This was a huge huge change and we needed to prepare our users to understand what is happening So but it was accepted because we had some basics and some logics in this This is how they have to work and talking about different fields Today it was mentioned this multinationals and especially those who are extracting resources. This is the biggest headache of Compilers recently I returned from a country where of course because they are put above the law. They are not don't have any Statistical requirements for statistical reporting and they are about they don't pay any taxes in some cases In a country and sometimes they don't have compilers don't have support of the authorities Recently I returned from a country where which are all producing country where The for the compilation of our statistics. There were three people only in the country which huge huge flows in flows outflows of resources and only they were happy Like you that recently a crisis happened there. They had a huge depreciation of their Currency and so on and the central the governor of the central bank started asking every day about the balance of payments What is happening in trade? What is happening this flows of currency and Immediately all those open I came there and it was a legal Document issued which was under discussion for eight years After eight years this this crisis happened and it was approved and they had the right to request data from from all these Companies and so which helped but not in all not all countries are so lucky in many many countries compilers stay with one Two people and trying to deal with what I call data sources So this is just a story how we are trying to have more less reliable sources from different countries because Unfortunately, we have not only developed countries with huge with good resources and statistics We have countries where resources are limited at the minimum. So What we have in in what we are compiling and how to use those data sets our advice and our as a compiler believe me with a huge experience in the compilation There is no ideal data source where illicit flows should be measured and from where I should be deducted because every single data set every single statistics is Built and is designed to fit some purposes Balance of payments is designed to fit the purpose to capture all flows and it captures legal illegal and so on direction of test statistics is fit to to to fit the Purpose of international merchandise statistics even between the we have the same Indicator to measure goods and in both statistics and balance of payments and in in direct of test statistics or International merchandise test statistics they differ among them Because there are different concepts. They are consistent But but in some at some point there are some different approaches. Let's say goods for processing goods for processing is one of the main There are countries which are processing a lot of goods just bringing raw material processing the same oil They are refining it and exporting exporting the produce final product in many cases these Raw products are imported just without change of ownership They are owned by by original owner and they are country provides just processing processing Services and here there is the biggest difference between Direction of test statistic because in in that statistic export and import of this Raw material for processing and export after processing is included in goods as an ordinary import on export of goods in Balance of payments because the payment actually for this processing is done just for the processing fee Not for the goods because woods are not bought by this in balance of payments They capture just the cost of processing and you will not find these flows of import of export of goods in the in the in the goods in balance of payments That's why comparing dots as called and goods in BOP and Taking the difference between them as illicit flows. It's not correct because you will have flows which will not Reflect really illicit flows So that's why you it's practically impossible to deduct illicit flows Comparing micro-economic data micro-economic data sets to do so you have to go to micro data You have to go to countries you have to data go to data by country sometimes even buy Type of commodities by type of activity and so on. It's a huge work. It's a very difficult work Taking even this of short centers another case But again if there is willingness of the authorities to do so you can you can get good results in another country My practice I was a center of offshore center where it's a huge center compared with the population of that island and It does for me I was working in that country for for five years and at the five fifth year We succeeded to impose a reporting by offshore companies for those which were not Not reporting until that time at all. So it does because the the Policy makers decided to take this decision and to have the statistics if there is no support of those Policy makers you cannot have good statistics and if there are no good statistics, you cannot take real and and and good decisions So this is like a circle and that's why it's very important to have the civil society to support the Countries and to support to make policy make make us understand that they have to give more resources to provide statistics I think I maybe I didn't answer your question, but we can if you have questions I can Thank you Thanks, all of you for a complimentary and fascinating presentations, I guess I want to piggyback off of the last thing that Tamara said You need the support of policy makers to collect good stats and good stats lead to good decisions Imagine that you are king or queen for the day What would be the data that you would most want access to? The existing data source or the source that you know as my colleague put it There's the data that's available the data's that collect that is collected But not available at least to the public and the data that is not collected but could be So is there something if you had to say, you know, maybe Dev in your work, what what do you not get that you want? Well? What we now have is basically misinvoicing involving goods and That is a huge part of the measurable illicit flows That is like 75 to 80 percent of illicit flows that is measurable now this DOTS based misinvoicing has been used for decades by economists They don't compare DOTS with BOP with BOP. They compare DOTS within itself and that has been the the benchmark of Studies on capital flight slash illicit flows for the last 50 60 years starting with Bhagwati in 1960s So that is an established, but The the problem is that it is only Misinvoicing related to goods trade. It is not Misinvoicing with related to services trade. So we are losing a huge area of You know statistics where we could Consumably come up with better estimate of illicit flows, but we're not able to do that because services trade on a bilateral basis is Not available for most developing countries most developed countries have it OECD has started this Database they have it but developing countries It's not so one of the things that I wanted when we have taken this up with the statistics department of the IMF We met with them a couple of months ago and we pressed our case that the IMF should collect Start a database on along the lines of the DOTS involving services trade But of course there is this You know different industry different international organizations have different focus and different Toffs that they have and it is easier said than done to you know, we were told that For the IMF to start the IMF cannot unilaterally decide that we are going to start collecting data It needs the support of other industries other international organizations like United Nations, Uncatered and so forth So there is there is some administrative Sort of obstacles to overcome, but that would be a very helpful area That's one area and the second area where the IMF can make improvement and that is Suggest that countries through the customs invoices clearly identified transactions within related parties You see all that they need is just a check mark whether a particular Particular exporter import involves related parties. So that would give you a very solid information Using existing collection methods because existing customs invoices to collect real hard data on MNC trade multinational trade right now everybody is talking in a nebulous term Oh, it could be 70% it could be 50% nobody really knows about the hard numbers, you know We need to talk about numbers and not conjecture and not Assumptions and so forth and there are and in the vacuum that we are operating in people are coming with all kinds of numbers You know these numbers are not based on data But this can be fixed relatively easily if customs were to just collect the information and ask every company Is this transaction involving related parties or not and the company should be able to answer that question And I don't think this will be a huge burden on on the trading partners to answer that question Great anybody else want to take up that that challenge? I Think if I would be a king or a country first of all I would be interested in those data which are not collected and not known because what is known what is collected I know what is there what is collected and not public. I also can have access but sometimes in those Unknown flows could be so much dangerous could be so much hidden that would you never know how it can Against your country spoken like a true detective. Yes And then Andrews his job is to create murders Okay, one more question for me, and then I'd like to open up to to you folks I guess one of the one of the questions I have we're talking about kind of Andrews you mentioned that you know the bank can't really sanction companies for tax evasion. You know, what do we do? How do we get creative around this problem? And the difficulty of criminalizing transfer pricing even the IRS hasn't been able to I guess my questions Coming from the the the advocacy world Right now this fall the European Union is gearing up for a big debate on public country by country reporting For all sectors not just for logging and extractives and banking So I guess my question is to you if you could use your crystal ball. Will it help is that a set of stuff that? Could be useful. I Think so. I Think it's moving the debate from the more theoretical general principle based into something that would lead to Companies and others taking very specific steps in one direction or another I think the creativity of for example the Philippines, you know, they went out and bought newspaper space They then published the major importers. How much they imported for? And how much they paid in customs? So there was one in tobacco that imported a lot, but partly paid any customs So the day after they got a phone call from this company. They wanted to talk, right? So this is a variation of you know, if you do country by country reporting whatever I mean what can come up when you make things public? So I think you need to be very creative and going back to your first question, you know What can we do right now on the data side? I think one is improving the data. The other one is taking action on the data, right? So again, I'm not a customs official. I don't have that experience But I was just thinking you probably have a list of companies that are importing exporting that did you find suspicious, right? And we did the same thing at the World Bank Companies we already Investigating that if you had a lot of complaints about other risk information and maybe you could do something similar Or I heard in one country they organized private sector and say okay write down the on on a piece of paper your most corrupt competitor, right? Right, so there's a way to figure it out Or I talked to a friend of mine in the consulting industry exactly about that and say what are the three most corrupt competitors He named three companies. I shouldn't mention them here And I talked to a head of investigation the same three companies so people know in certain areas, right? So Highlight these entities you're going to go after right be more data-driven, right? And and and publicity results try to show how much money you're recuperating of other other things You're getting out of that to get more popular support for the enforcement side, right? It also goes back to the data side if you didn't have the basic statistics You couldn't buy the space in the newspapers So I think data needs to be also advocacy driven and it needs to drive the proactive reviews, right? So somebody needs to go in a very detailed way and say what pieces of information can help me with what and then take it back Of course, you also have a global data discussion, but that that's a different one Great, that's helpful. I'm gonna open it up to the floor now Be sure when you ask your question to let us know where you're coming from and your name My name is Tolu Animeshago. I'm in Nigerian from Nigeria, but I study at Penn State So please permit me, I take this issue very personally because it affects my country Permitting me a short diatribe on the issue. I would have liked to actually say this after Dr. Labelle's presentation because it pertains more to what she said, but let me just go in anyway. So when the AU, ECA, high-level panel reports came out, there were actually a number of responses Constructive responses from African civil society organizations For example, the CSO I work with back home was able to get funding from Trust Africa, which is a formerly a branch of the MacArthur Foundation to actually produce the first country-level report on the same financial flows And that would have been that is a Nigerian report. The problem for me is these responses have been largely uncoordinated So, um The second issue that was immediately apparent was that developing countries lack the capacity to deal with domestic resource mobilization issues country by country reporting or for example the Accelerate, I don't know if anyone has heard of the Accelerated Payments notification That the UK is currently using and has been notoriously effective in dealing with tax avoidance Such initiatives will not be palatable in a developing country such as Nigeria because our tax system Is just not sophisticated enough to execute such initiatives Which brings me back to the issue of lack of coordination Earlier this year there was The introduction of this initiative tax investigators without borders And I had hoped that there would be you know this overwhelming global support because um Their aim is to help Tax officials in developing countries be able to catch up And be able to come to conversations like the OECD conversations and be able to keep up You know, but there hasn't been that global civil society support and for me the evidence is the fact that it wasn't even mentioned here you know, so I think I will just give a small solution. I think a good place to start is with the funders Ford Foundation funded this MacArthur Foundation has funded the report for the Nigeria country level illicit financial flows. Uh, I I will not be here tomorrow, but open society foundation has a west african branch osiwa open societies initiative for west africa and all these foundations are funding research Producing data, but there's no central coordination You know, so you are having a duality of function a duality of production of data And you know, you're not having that multiplier effect that we could have you know, so, uh that's just my Recommendation because you know, I see the effects of illicit finance on my people You know every day, so I take it very personally and I hope that You know, someone somewhere here will take this seriously and try to instigate that Um discussion. Thank you Thanks for your comments. Um, if if you would do me the favor of um touching base In one of our coffee breaks with my colleague our program manager serif osiwa um We do actually, um, have we have worked very closely with coalition members, um on the stop the bleeding campaign Which is that one of the responses to the unica report and also, um There's there's a bit of there's a bit of work there I'll also on sort of country level estimates and stuff. So please please um, but we take up that challenge seriously other comments I'm terry sprakland. I'm a reporter with tax analysts And I had a question that I think would be most appropriate for anders On the country by country reporting um, there seems to be a lot of resistance because of trade secrecy and competition issues Do you feel that that's uh Significant in in holding this back or or is it really a smokescreen and would it be better to Like as a first step Except uh that the information could be provided privately but not distributed, um You know to the public citizens I have no clue You're bringing a trade-off between say companies that that may not want to say where they're earning the money and getting all of the profits Versus an integrity type goal, right? And I sit on the integrity side. So I think the more you can do on the integrity side with transparency and so on That would be fantastic We we know that in Developed countries with rule of law the openness civil society will scrutinize is generally the approach Whereas in in Countries with greater degree of corruption. There's more like Data is hidden and and then reviewed by by officials, right? I I see that right So you can say what is your confidence in the two approaches? So is it going to be effective? and Who knows it depends on the the country. I think I think we need to throw it out to somebody who's more More versed in this dev My observation is that Private gain Is always offset by public loss? So one is the obverse of the other And so when there's when you're talking about private gain multinationals It's obviously a private gain and they like to keep that Because the loss is in the public sector It's a public good And the government therefore has to step in with appropriate regulation and oversight To minimize public loss That's not a job that the private sector that we can expect the private sector to self police and somehow come up with a minimum private loss there Their objective is maximization of private gains By whatever means possible So the it is the it is incumbent upon the the government to devise particular laws and oversight effective oversight to minimize that public loss And minimize the private gain So unless governments able to do that through appropriate policies And initiating dialogue We are going to continue to have this this this problem So country by country reporting. Yes, it is it is of course imposes an additional burden on on the private sector because they have to come up with this information But that's not good enough if they if they just balk against it I mean They have you know It will be painful for them To forego this private gain That's to be expected When you get to the yes the gentleman My name is Isaac. I took my junior. I'm representing the development brokers. It's a new NGO in Liberia and I just want to make a point of correction first in terms of dr. Label's statement with regards to ma'am ellen justin salif I think as most of you know, Liberia is one of the most corrupt countries in the world And you know, she did have a great auditor mr. Joe Malo, but he They stopped at the audits. There were no real indictments Investigation and prosecution. So, you know, that whole effort really has been undermined because she did get rid of him So, you know, just so people can be aware We are asking the international community and people who donate funds to our country, especially That there should be a higher demand for accountability The impact and results from the funds they gave and transparency in the whole process The one thing I want to see if the Two panelists up there can really push um, the Interlectualization of this whole, you know, um illicit funds because I think there's two different concepts over there And how can we get to where we can kind of merge the two To get to where we really understand what really can we um, you know, unilaterally accept as the information That can be used in the analysis because we are trying to push an analysis in Liberia And we hope that we can have the right methodology the right approach to use results that can impact our country Take that There is not two but one I don't think uh, Tamara and I, uh, disagree on the on on the approach or on the database Tamara is just pointing out I think, uh, that, you know, um, the limitations of Balancer payments compilation in capturing illicit flows and what the methodology, uh, recommends the guidelines recommends And that's what the IMF recommends to the member countries that they use To capture these but so but I'm saying that I'm not saying I'm not Questioning the methodology at all. I'm just saying that as far as Misinvoicing goes we use We just try to keep it within the direction of trade statistics. So the question of a Comparison between direction of trade statistics and BOP and the balance payment does not arise The only suggestion that I was thinking that and I'm apparently this may not be the correct way to approach Given what Tamara said is that the fund, uh, uses a flat 10 percent of the cost of freight and insurance the cif factor To take out 10 percent from from the imports and put it on the FOB basis So you can compare export and imports on the same Taken out taking out the cost of freight and insurance and it's a flat 10 percent So I was thinking that maybe instead of having a constant 10 percent We can have some more realistic variation in the cost of freight and insurance by comparing the balance of payments imports FOB with the IFS imports cif and divide one over the other and come up with the variable cif factor But I think given the methodological that the the issue that tamara has pointed out That's not going to be so easy. I think am I right? Yeah, you are you are right Like there you have it constructive dialogue You have to realize that tamara is an expert in the balance of payments She's a she was a compiler. I do not have that kind of depth of knowledge in balance of payments compilation as tamara has So I'm very grateful to you for pointing out these things. I mean because yes, this is a I could relate to it because the re exports are Are a significant issue which complicate complicates this this calculation, but I come from a more broader experience as an economist And so I'm able to use my macroeconomic background as well as statistical background and combine that and to To to apply that broader experience In this area. So it is this area requires not just expertise in narrow You know statistical issues, but also you have to go and look at the macroeconomics of of things So one more question and then we'll conclude I'm Raymond Baker. My question Is directed to you tamara and I think there's something uh Very straightforward at issue here and that is the difference between Orders of magnitude on the one hand and exactitude On the other hand We recognize that there can be errors in the trade data that we're dealing with Globally our estimate of illicit financial flows is a trillion dollars a year out of developing countries But more importantly, we think that that is very much on the low side And particularly because of the the shortcomings in the trade data trade data as dev said doesn't include cash movements Doesn't include faking within the same invoice that is exchanged between buyers and sellers And doesn't include any services and intangibles So As the high level panels report on illicit financial flows from africa indicated We think that the figure could be twice What we can see In the data My question to you is why is the imf so reluctant to deal in orders of magnitude? And and chooses instead To take the position that In the face of what could be data Shortcomings the answer is no analysis When in fact, you do a great deal of analysis of gdp Which can likewise have all of those Errors in the same data Isn't that a selective interpretation of where you're willing to To do the analysis and and where you're not willing to do the analysis First of all Statistic department. We are not doing the analysis. We are we are building the data series There are there is research department There are other departments and imf that they do the analysis and they come to some conclusions I don't know specifically analysis on illicit flows. I think that Research was the first one but not by the imf which you are discussing And first of all, I agree with you that the magnitude of illicit flows could be double Maybe triple even because it comes not only from services not only from goods It could come only from for interest received from by by Multinationals which is hidden in dividends and so on it could come through any other many other ways so illicit flows can be Composed from from different components We are just stating that Just taking Statistics which are available now and comparing and making some conclusions. It's not enough and will not always will be a correct conclusion because Taking the let's say taking errors and omissions and the balance of payments We cannot say that errors and omissions indicate illicit flows Errors and omissions. First of all, we are defined that these are statistical Shortcomings statistical inconsistencies that Sometimes we are capturing one We are not comparing only within goods. Let's say balance of payments capture flows physical flows and payments for these flows It could be that they are capturing goods, but they are not capturing The balancing entry which is a payment or we are capturing services and they are not capturing goods That's why it's from here Errors and omissions include apart from illicit flows At which level illicit flows could be included in errors and omissions at the level if one country captured this flow another another country Do not capture it So if you compare at the global level So errors and omissions consist not only of illicit flows It has many other components and it's not right to to to attribute it in just to illicit flows You have to go to micro level to micro analysis to be sure that it's you capture correctly and make Correct conclusions from here. Why? IMF doesn't Conduct more analysis on this on this. I I cannot say this because it's not in my There are some analysis but not in statistic department. Statistic department has a task to Build and to have more or less reliable consistent and a comparative time series of data for all member countries And to come to some figures at global level To identify some global discrepancies and to dig farther and to try to to to reduce these global discrepancies by improving data of each country So i want to thank our panelists for their insights and their conversation and thank you for your great questions Thank you