A new global solution to money laundering will mainly just help rich countries

October 19, 2017

The pattern of illegal money flowing from the developing world to the West has been well-established.  Funds are stolen by kleptocrat X in developing country Y. They’re laundered through Western banks and law firms, ending up in a tax haven (often a UK crown dependency or overseas territory), and thence to London, Geneva, or New York, where they buy a lush house and new life for kleptocrat X. For country Y, however, the money is gone. Global leaders have been setting up structures to fight this system, spurred on by an appeal from the G20 in 2014.

The headline effort, made by the OECD, the rich-country club, is the Common Reporting Standard (CRS)—a structure for countries to automatically exchange information about bank accounts held by foreigners. So, Switzerland hands over data every year to Canada about Canadians with Swiss bank accounts, and vice versa. That way, both countries have more information with which to track down unpaid taxes.