Give with one hand, take with the other

The UK’s new International Development White Paper talks up London’s role in helping developing countries, but it remains the world’s destination for stolen assets…

Photo by Viktor Forgacs on Unsplash

Britain’s renewed ambitions to tackle global challenges such as climate change and extreme poverty are vital – but corruption corrodes all, and the actions of London’s financial centre can make and break the White Paper’s aims. 

In July 2023, a UK court ordered the confiscation of £101 million from a former Nigerian state governor who abused his political office to get rich, using London to launder and hide the stolen money. The UK has pledged to return any stolen funds recovered from James Ibori back to Nigeria. 

Whilst London’s ‘unique position’ to scale up international development finance is mentioned throughout the new White Paper, its ‘unique position’ as the money laundering capital of the world is not.  

Our financial centre plays a starring role in the movement and harbouring of stolen funds from countries which, in the eyes of the new strategy, need it most. According to a 2019 report, the UK receives about £90 billion in illicit funds from developing countries every year.1  

Previous drafts of this White Paper did not properly consider the detrimental role that corruption and illicit finance plays has on the UK’s development objectives, so what has the final version got right? Importantly, where is more work needed?  

To its credit, the White Paper recognises the extent of the threat. 

Taking the strategy as a whole, before diving into details, the government has listed “tackling dirty money and corruption” as a priority, under the umbrella of “strengthening and reforming the international system”. As one of the elephants in the room, the UK appears to accept the reality that advanced economies are acting as warehouses for the stolen assets of low-middle income countries - but it does not go as far to name the elephants. 

The government also accepts the need for a ‘long-term and cross-government approach’ to solving this problem. There’s no harm in reiterating these classic Whitehall phrases – in this case, they do signal recognition of wider geopolitical corruption risks: autocratic regimes, the financing of violent conflict and terror, and the undermining of democratic systems. Again, this tracks with the government’s recent legislative progress on economic crime and the inclusion of anti-corruption remarks in the Integrated Review Refresh.234 

One final point on the bigger picture – we welcome the government commitments to review and bolster support given to civil society and investigative journalists in 2024 and praise the work to bring in multistakeholder views. 

There are some worthy commitments in this white paper. 

Despite some recent bumps in the road, the acceleration of using public beneficial ownership and transparency data is welcome. Using existing African networks is important, as is the admission that the UK needs to get its own offshore jurisdictions in order. The announcement of an Illicit Finance Action Plan with Britain’s Overseas Territories to be delivered by March 2024 is important, but, frankly, represents a worrying deadline extension for results that were expected by the end of 2023. Publicly accessible beneficial ownership registers should be the starting point for reforming Britain’s illicit finance issues, not the end. We hope this delay is for small technical changes to the beneficial ownership plan, rather than an overhaul. 

The deployment of a new International Centre of Expertise on Illicit Finance shows leadership, as do commitments to engage in new “whole-of-government” pilot projects to tackle corruption and illicit finance in five developing countries.   

The white paper gives considerable airtime to the green transition and has climate change at its heart, with welcome recognition of the need to ensure greater value for countries holding key transition mineral deposits. Given corruption risks in this area, the references to responsible business practices and addressing state capture are important points to improve on when delivering climate related investments. 

We are pleased to see government acknowledge that poorer nations are disproportionately locked out of the global automatic exchange system for corporate financial data, in the form of country-by-country reporting – making it much harder to address illicit financial flows. We commend the commitment to improving access to this data amongst low-income countries. 

But, there are areas of uncertainty. 

Additional finances to boost enforcement against economic crime in the UK is sorely needed. The commitment to maintain a five-year rolling framework for the National Crime Agency and the Crown Prosecution Service to “enable consistent and predictable planning” is good news but leaves much to the imagination of what the framework includes, and the extent of additional financial support.  

Unsurprisingly, there is a drive to improve the involvement and engagement of developing countries as part of international bodies like the Financial Action Task Force (FATF). Such multilateralism and use of international institutions is important, but we hope the UK will begin frank conversations surrounding the serious drawbacks in current FATF frameworks – they are in serious need of review and update. 

And finally, there are some missing parts of the puzzle. 

Remember the James Ibori case, the Nigerian state governor who used London to hide the £101 million stolen from his home country? Well, he wouldn’t have been able to do that without the help of professional enablers such as accountants and lawyers to get the money into the UK. Yet, on its surface, the White Paper doesn’t reference the immense role that third parties have on the movement of corrupt funds and illicit finance, nor any action to curb it.  

Recent legislation is limited in tackling the issue of professional enablers – without continued action from the government, we will be unable to successfully combat international corruption cases. We hope that this work is going on behind the scenes and that the government will publish their plans soon. The public shares that hope too – in a major new large sample opinion poll we’ve conducted with Survation, early results show that 74% agree that “British professional services (accountants, lawyers, estate agents, etc ) should be better regulated to ensure they detect and prevent economic crime, and held more accountable when they fail to do so.” 

Tax transparency is also fundamental to the sustainable development of a country and its government’s capacity to respond to citizen's needs. Mandating public country-by-country reporting for larger multinationals operating in the UK would send positive ripples around the world, by opening a window for lower income countries onto how much income, profits and taxes are being generated in each jurisdiction. 

To meet its White Paper goals and reduce international corruption and the flow of dirty money, one of the best things the UK can do is address the adverse role of London and our Overseas Territories.