Center for International Policy

MEMORANDUM

July 24, 2006

To: Colleagues and Friends

From: Raymond W. Baker

Subject: Announcement

GLOBAL FINANCIAL INTEGRITY PROGRAM

I am pleased to advise you that a new program, Global Financial Integrity
(GFI), is established.

Stemming from my book, Capitalism’s Achilles Heel: Dirty Money and How to Renew the Free-Market System, (John Wiley & Sons, 2005) a grant has been received to enable establishment of GFI as a program of the Center for International Policy in Washington, D.C. The purpose of GFI is to promote substantially heightened accountability and legality in international financial flows. This is a necessary step in the fight against global crime, terrorism, poverty, and failed states and in the achievement of global prosperity and security.

Using research-based advocacy, GFI will focus on several areas:

1) Changing U.S. law to bar all types of illicit money derived abroad from legally entering the United States. At the present time, the United States bars only a few categories of illicit money arriving from beyond its borders, namely the proceeds of drugs, corruption, crimes of violence, bank fraud, and certain treaty violations. Not barred are the proceeds of racketeering, handling stolen property, counterfeiting, contraband, alien smuggling, trafficking in women, slave trading, environmental crimes, and more. GFI will advocate closing these loopholes.

2) Examining all illicit cross-border financial flows. Capitalism’s Achilles Heel presents an estimate of $1 trillion annually in illicit money moving across borders, half of which—$500 billion a year—shifts illegally out of developing and transitional economies into western accounts. GFI will press the World Bank and the International Monetary Fund to produce their own estimates, encompassing all financial flows, legal and illegal, into and out of poorer countries.

3) Eliminating other elements of the global dirty-money system. Since the 1960s, an entire integrated global financial structure has been created to shift illicit funds across borders. This structure includes some 70 tax havens and secrecy jurisdictions, several million disguised corporations, anonymous trust accounts, fake charitable foundations, and sophisticated money-laundering techniques. GFI will tackle, in particular, the secrecy elements of this structure, urging greater financial transparency.

4) Curtailing abusive transfer pricing. By far the greater portion of illicit international financial flows stems from falsified pricing in international exports and imports, done for the purposes of evading taxes and relocating profits across borders. This process has become normalized in global trade. GFI will draw attention to the scope of this problem and work with the World Trade Organization and other institutions toward achieving accuracy and transparency in the pricing of global trade.

5) Advocating enhanced corporate social responsibility. GFI will work with other NGOs, international organizations, the United Nations, and the Organization of Economic Cooperation and Development to put the issues of global financial integrity on the agenda of corporate social responsibility programs.

6) Strengthening the global financial system. In the fight against terrorism, drugs, racketeering, poverty, and failed states, the global financial system must do a better job of ensuring integrity in all aspects of its operations. GFI will work on constituency building with other NGOs and organizations toward these ends.

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Illegal cross-border financial flows are the biggest loophole in the global free-market system and the most damaging economic condition hurting the poor in developing and transitional economies. GFI will engage governments, institutions, and partners in efforts to address these pivotal concerns.

We look forward to interacting with you.