By David McNair of the ONE Campaign

While the newswires are dominated by the threat of Isis, a critical opportunity to cut the support networks that fuel terrorism, criminality and tax evasion is passing unnoticed.

Terrorists rely on financial support – money channelled through the shadows of the western financial system. Secret companies and trusts, perfectly legal in many countries, allow criminals to fuel trillions of dollars through our financial system, evading tax while keeping their identities secret, building a virtual brick wall against law enforcement agents working to follow the money.

The United Nations Security Council has implicated such financial instruments in a range of terrorist activities, from the 2008 Mumbai bombings to arms trading in Afghanistan. According to UN reports leaked last year, a web of at least 16 anonymous shell companies, including at least one registered in the UK, were used in a scheme to circumvent UN sanctions by shuttling 35 tonnes of weapons to groups like Hezbollah.

New research from The ONE Campaign suggests these secret companies also fuel corruption and tax evasion and hamper economic growth in some of the world’s poorest countries. Developing countries lose at least a trillion dollars a year through money laundering, bribery, tax evasion and other criminal acts. If steps were taken to halt this trillion dollar scandal, ONE estimates the recovered revenues could pay for health care that would save 3.6m lives every year.

It’s the critical elements of financial secrecy that fuel this scandal.

Anonymous companies are the weapon of choice for terrorists, criminals and the corrupt. The World Bank estimates that 70 per cent of the biggest corruption scandals of the past two decades have involved anonymous firms. David Cameron, the UK’s prime minister, sought to put an end to this secrecy during last year’s G8 summit. The UK will soon pass legislation requiring the ownership of companies to be made public. But the job remains incomplete, for many of the world’s jurisdictions allow this secrecy to flourish – notably many British linked havens. The British Virgin Islands is the global capital of these companies, with the US state of Delaware a close second.

ONE estimates that as much as $20tn is held in offshore tax havens. Many are UK linked, from the Cayman Islands to Jersey, Guernsey and the Isle of Man. A new information-sharing agreement between countries could help end the massive losses incurred by both developed and developing countries. If Ghanaian tax officials have information on a resident’s bank account in Switzerland, not only are they more likely to challenge tax evasion, but that resident is also going to be a lot more nervous about hiding his or her money. Sadly, some G20 countries want to kick the agreement into the long grass. Cameron must ensure the issue stays high on the political agenda and a global agreement is reached and implemented by 2017.

Oil and gas exports from Africa totalled $438bn in 2012 – more than nine times the value of international aid. Yet citizens of African countries rarely know where the money goes. All too often it lands in off-shore or Swiss bank accounts while the people of the country go without essential services. The EU and the US have already passed legislation requiring oil, gas and mining companies to publish what they pay to governments. This information would allow journalists and citizens to follow the money and ensure discrepancies are highlighted. Similarly, disclosing budget information would help organisations like the Kenya Taxpayers Alliance (quite different from its UK namesake) to track where money has been misspent.

In November, we will have a unique opportunity to clamp down on these forms of financial secrecy and get the information into the public domain when the world’s leaders meet for the G20 Summit in Brisbane. These issues are on the agenda, but it will need a concerted effort to ensure the right solutions are agreed.

Financial secrecy does untold damage to our economies and to the fight against poverty, and enables those who seek to threaten our peace and security to flourish. Cameron may have other things on his mind at present but to ignore financial secrecy would not only undermine his own G8 legacy – it would weaken our fight against terrorism.

Dr David McNair is director of transparency and accountability at the ONE Campaign.

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