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Analysis

G20 Finance Conclusions
on Tax Havens and Money Laundering, 1999-2009

Drawn from G20 finance communiqués
Anton Malkin, G20 Research Group, August 2009

Summary of Conclusions on Tax Havens and Money Laundering in G20 Finance Communiqués

Notes: *emergency meetings

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Definition

The G20’s approach to tax havens and money laundering has two components. The definition of tax havens and offshore banking follows the approach taken by the Organisation for Economic Co-operation and Development (OECD). It includes transparency and information exchange among the various countries involved, broadly defined as “a situation where a competent authority of one country asks the competent authority of another country for specific information in connection with a specific tax inquiry, generally under the authority of a bilateral exchange arrangement between the two countries” (see OECD [2009], Tax Haven Criteria). Money laundering, for the G20, is often coupled with the separate but related issue of combating terrorism. For the purpose of drawing clear boundaries between the former and latter, it is important to include statements and commitments that explicitly mention money laundering.

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Criteria

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Conclusions on Tax Havens and Money Laundering in G20 Finance Communiqués

Montreal, Canada, October 25, 2000
Communiqué

5. Strengthen our efforts to combat financial abuse, including money laundering, tax evasion and corruption, given its potential to undermine the credibility and integrity of the international financial system, cause serious macroeconomic distortions, and jeopardize national financial sectors. Market integrity is an important pre-condition for financial stability, and we look forward to the joint paper by the IMF and World Bank asked for by the IMFC on their respective roles in combating financial abuse and in protecting the international financial system.

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Ottawa, Canada, November 16-17, 2001
G20 Action Plan on Terrorist Financing

We will implement quickly and decisively measures that the United Nations have identified as essential to combating terrorist financing. We will block terrorists' access to our financial system. We will work with the International Financial Institutions (IFIs), the Financial Action Task Force on Money Laundering (FATF), the Financial Stability Forum (FSF) and other relevant international bodies to prevent abuses to the financial system and threats to its integrity through the promotion of international standards relevant to terrorist financing, money laundering and financial sector regulation and supervision. We welcome the conclusions of the recent FATF extraordinary plenary on terrorist financing. Above all, we will enhance our ability to share information domestically and internationally as a vital component in the fight against terrorism.

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Delhi, India, November 23, 2002
Communiqué

Combating the Financing of Terrorism, and other Abuses of the Financial System

• When we last met in Ottawa, Canada, in November 2001, we resolved to deny terrorists and their associates access to, or use of, our financial systems. While that meeting was shadowed by the events of September 11, 2001, today the recent tragic events in Bali and Moscow reinforce our resolve to combat terrorism and those that would fund it. To this end, we reviewed the progress made in implementing our Action Plan, including the freezing of terrorist assets, implementation of international standards, exchange of information, provision of technical assistance, and reporting on our actions. We also agreed to continue our efforts to eliminate other abuses of the financial system, particularly money laundering. We pledged to carry forward our work in this regard, through support of the activities of International Financial Institutions (IFIs) and other relevant international fora, and through appropriate domestic actions. We will review progress on these matters at our next meeting.

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Morelia, Mexico, October 26-27, 2003
Communiqué

We took note of the diversified ways for individuals and companies and other entities to abuse the international financial system to undertake illicit activities including tax evasion. We discussed and explored ways to enhance the bilateral exchange of fiscal, financial and customs information needed by countries to enforce their own fiscal and other laws. These measures will contribute to efforts to combat abuses of the financial systems such as fiscal evasion, fraud and money laundering. We are committed to cooperate to effectively fight such abuses and make a strong call on all countries especially those OECD countries that have not taken necessary steps- in particular in allowing access to bank information- to join us in this effort and look forward to having regular reports on the progress of international initiatives in this area. We also agreed to monitor developments in Offshore Financial Centers (OFCs), based on the IMF’s work.

We remain committed to disrupting terrorist financing networks. We recognized that this effort requires a focus on both the formal and informal financial sectors. Therefore, while we will continue efforts to improve our formal financial systems, to expand their scope, and to protect them from this abuse, we will also concentrate efforts to subject informal financial sectors to appropriate monitoring and enforcement actions. We pledged to carry forward our work in this regard, through support of the activities of IFIs and other relevant international fora, and through appropriate domestic actions. We resolved to advance our implementation of the AML/CFT standards. We welcomed the good progress on the IMF/World Bank pilot program in cooperation with FATF, and we look forward to making terrorist financing and money laundering assessments a permanent part of IMF and World Bank work. In this context we urged FATF to make progress, as appropriate, in the enlargement of its membership.

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Berlin, Germany, November 20-21, 2004
Communiqué

9. We reaffirmed our commitment to fight the abuse of the international financial system in all forms. To this end, we have committed ourselves to the high standards of transparency and exchange of information for tax purposes that have been developed by the OECD’s Committee on Fiscal Affairs as set out in the attached statement. We will work to implement the high standards of transparency and effective exchange of information through legal mechanisms such as bilateral information exchange treaties, and we also call on those financial centres and other jurisdictions within and outside the OECD which have not yet adopted these standards to follow our lead and take the necessary steps, in particular in allowing access to bank and entity ownership information.

10. While we have made progress in fighting money laundering and the financing of terrorism since 11 September 2001, much remains to be done. FATF regional style bodies are expected to be an important element of our efforts and we welcome the recent establishment of the Eurasian Group on Money Laundering and Financing of Terrorism (EAG). We look forward to the early admission of China in the FATF. We are committed to implement the revised FATF Forty Recommendations and the FATF Special Recommendations. We welcomed the decision by the IMF and the World Bank to make comprehensive assessments on money laundering and terrorist financing a regular part of their work. We are agreed on the importance of responding to the challenges posed by illegal cash couriers and by the use of the informal sector for remittances and we supported the FATF’s current efforts to address these issues more effectively. In this context we welcomed the new FATF Special Recommendation IX on cash couriers and urge its efficient implementation.

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Berlin, Germany, November 20-21, 2004
G20 Statement on Transparency and Exchange of Information for Tax Purposes

We, the Finance Ministers and Central Bank Governors of the G20, are committed to enhancing good governance and fighting illicit use of the financial system in all its forms. Consequently, we are committed to transparency and exchange of information for tax purposes. We regard this as vital to enhance fairness and equity in our societies and to promote economic development.

Financial systems must respect commercial confidentiality, but confidentiality should not be allowed to foster illicit activity. Lack of access to information in the tax field has significant adverse effects. It allows some to escape tax that is legally due and is unfair to citizens that comply with the tax laws. It distorts international investment decisions which should be based on legitimate commercial considerations rather than the circumvention of tax laws. The G20 therefore regards it as a mark of good international citizenship for countries to eliminate practices that restrict or frustrate the ability of another country to enforce its chosen system of taxation.

We are therefore committed to the high standards of transparency and exchange of information for tax purposes that have been reflected in the Model Agreement on Exchange of Information on Tax Matters as released by the OECD in April 2002. We call on all countries to adopt these standards.

High standards of transparency require that governmental authorities have access to bank information and other financial information held by financial intermediaries and to beneficial ownership information regarding the ownership of all types of entities. High standards of exchange of information require that such information be available for exchange with other countries in civil and criminal tax matters. Exchange of information in tax matters should not be limited by dual incrimination principles in criminal tax matters or by the lack of domestic tax interest in civil tax matters. There must be appropriate safeguards on the use and disclosure of any exchanged information. Exchange of information should therefore be implemented through legal mechanisms providing for the use of such information only for authorized tax purposes, thus ensuring the protection of taxpayers’ rights and the confidentiality of tax information.

We call on all countries with financial centres to adopt and implement the high standards articulated by the OECD so that we can move towards an international financial system that is free of distortions created through lack of transparency and lack of effective exchange of information in tax matters. It is important that countries which do meet these standards have confidence that they will not be disadvantaged and that financial centres in countries that choose not to meet these standards will not benefit from that choice.

The G20 therefore strongly support the efforts of the OECD Global Forum on Taxation to promote high standards of transparency and exchange of information for tax purposes and to provide a cooperative forum in which all countries can work towards the establishment of a level playing field based on these standards.

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Xianghe, China, October 15-16, 2005
Communiqué

9. We reaffirmed our commitments to the purposes of the “G20 Statement on Transparency and Exchange of Information for Tax Purposes” that was endorsed last year. In this context, we welcome the efforts of the OECD Global Forum on Taxation to promote high standards of transparency and effective exchange of information for tax purposes.

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Melbourne, Australia, November 18-19, 2006
Communiqué

Other business

Further to our 2004 commitment to achieving high standards of transparency and exchange of information for tax purposes, we welcome the release of the Global Forum on Taxation 2006 assessment which shows that progress has been made in the implementation of those standards. Further progress is needed and we encourage continuing implementation efforts and call on those countries and territories that have not yet implemented high standards of transparency and exchange of information to do so.

We reaffirmed our commitment to take action against money laundering and terrorist and illicit financing. We commend and encourage closer cooperation between the IMF and World Bank and the Financial Action Task Force (FATF) as well as FATF-style regional bodies in promoting stronger implementation of international AML/CFT standards. We call on FATF and FATF-style regional bodies to continue to broaden the support base for their work and for all countries to strengthen their AML/CFT regimes and publish their comprehensive country evaluations.

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