Stop En­abling Cor­rup­tion

Of­fi­cial poli­cies make it pos­si­ble for graft to thrive. Re­form must start with gov­ern­ment

Bloomberg Businessweek (North America) - - Bloomberg View -

Graft may al­ways be with us, but gov­ern­ments can choose ei­ther to tol­er­ate and even as­sist it or to con­front it vig­or­ously. One of the sim­plest and best ways to fight back is through shar­ing in­for­ma­tion. Let­ting the fruits of bribery, em­bez­zle­ment, and tax eva­sion be hid­den away en­ables the crime.

Ahead of the May 12 Anti-cor­rup­tion Sum­mit in Lon­don, more than 300 econ­o­mists called on world lead­ers to re­strict the use of shell com­pa­nies and ve­hi­cles that con­ceal the own­er­ship of as­sets. They make a good case. There’s noth­ing wrong with own­ing as­sets abroad, and in­vestors are en­ti­tled to ex­pect ap­pro­pri­ate con­fi­den­tial­ity—but that doesn’t jus­tify a pol­icy of hid­ing in­for­ma­tion from tax and law en­force­ment au­thor­i­ties.

Pres­sure on gov­ern­ments that of­fer such in­vis­i­bil­ity can yield re­sults. For ex­am­ple, fol­low­ing the out­cry over the so-called Panama Pa­pers, Panama and four other ju­ris­dic­tions promised to share in­for­ma­tion on non­res­i­dents’ hold­ings of as­sets.

Yet tax havens aren’t nec­es­sar­ily poor or small. Real es­tate is one of the eas­i­est ways to laun­der ill-got­ten wealth, and in this re­gard, Bri­tain has de­vel­oped a rep­u­ta­tion it shouldn’t want. More than 100,000 prop­er­ties in Eng­land and Wales, and more than 44,000 in Lon­don alone, are owned by for­eign com­pa­nies. Prime Min­is­ter David Cameron has promised changes, such as making for­eign com­pa­nies that own prop­erty in the U.K. de­clare their as­sets on a public regis­ter. He’s also an­nounced plans for an anti-cor­rup­tion co­or­di­na­tion cen­ter in Lon­don and tougher treat­ment for ex­ec­u­tives who fail to pre­vent fraud or money laun­der­ing in their com­pa­nies.

The U.S. is an­other haven. “How ironic—no, how per­verse— that the USA, which has been so sanc­ti­mo­nious in its con­dem­na­tion of Swiss banks, has be­come the bank­ing se­crecy ju­ris­dic­tion du jour,” wrote a Swiss lawyer re­cently. The White House says it will act to re­strict the use of shell com­pa­nies. <BW>

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