Anonymous shell companies* siphon USD $1trillion from developing countries

$1 trillion, enough money to employ half a million primary school teachers, is lost to corrupt activities undertaken by multinational companies in developing countries, according to a study by international advocacy group ONE.

The group states the lost money could alternately educate an extra 10 million children every year, provide antiretroviral medication for over 11 million people living with HIV/AIDS, or pay for 165 million vaccinations in sub-Saharan Africa alone.

A 2011 report by the World Bank, titled The Puppet Masters, estimates anonymous shell companies made an appearance in 70 per cent of major corruption cases between 1980 and 2010.

Director and co-founder of Global Witness, a London-based anti-corruption NGO, Charmian Gooch told the Sydney Morning Herald the group had turned up similar results: shell companies were consistently at the centre of all sorts of scandals, from suspect oil deals to blood diamond transactions.

Research from the World Bank indicates setting up a shell company is a low-cost enterprise, costing corporations between $900 and $7,000 AUD. In countries like the United States, where regulations are particularly lax, large corporations can create shell companies within an hour.

The crusade against shell companies has recently found new life as G20 leaders recently pledged to pursue tougher anti-corruption policies and chase illegal tax evaders and money launderers. The G20 recently released an anti-corruption action plan for 2015-2016.

“At the end of 2014, corruption continues to represent a significant threat to global growth and financial stability,” the plan reads. “Corruption destroys public trust, undermines the rule of law, skews competition, impedes cross-border investment and trade, and distorts resource allocation.”

“As a group of the world’s largest economies, the G20 remains committed to reducing the incidence of corruption and building a global culture of intolerance towards corruption.”

* A shell company refers to a non-trading company used as a vehicle for various financial manoeuvres.

 


 

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TI Corruption Perception Index 2014 Launch
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