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U4 Helpdesk Answer

Evidence on the transit and destination financial centres used for the proceeds of corruption

The corrupt have relied on loopholes in the global financial system to hide their proceeds of corruption or launder their ill-gotten gains. Their methods include, among others, using foreign bank accounts or investing in real estate, luxury goods or other assets overseas. They have sought to obscure their ownership of these assets using shell companies or trusts, particularly in secrecy jurisdictions. Disguising the true origin of the funds via a complex paper trail – often involving multiple jurisdictions – can allow corrupt actors to integrate their assets into the legitimate economy. The foreign countries and jurisdictions that are implicated in these schemes can be referred to as either transit or destination financial centres, depending on which role they play in facilitating or hiding the proceeds of corruption.

12 July 2023
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Evidence on the transit and destination financial centres used for the proceeds of corruption

Main points

  • Corrupt officials who steal public funds have strong incentives to transfer their proceeds of corruption to foreign jurisdictions, which include protecting their funds from being easily reclaimed by domestic authorities and providing them access to foreign goods.
  • Evidence suggests that transit financial centres commonly implicated in these schemes have high levels of financial secrecy and favourable legal conditions for financial enablers, which permits the establishment of anonymous structures to obscure the beneficial ownership of corporate vehicles that can be used to hide stolen assets.
  • Destination financial centres may also be characterised by high levels of financial secrecy, but, in addition, tend to exhibit strong rule of law and political stability, geographic and cultural proximity to the kleptocrat’s source country, as well as high levels of trade and foreign direct investment.
  • This area of research is still being developed and, as such, there are several limitations to the available evidence. Data on stolen assets is patchy due to their hidden nature and there is a lack of qualitative comparative analysis on the characteristics of destination and transit centres.

Cite this publication

Maslen, C. ; Bergin, J. (2023) Bergen: U4 Anti-Corruption Resource Centre, Chr. Michelsen Institute (U4 Helpdesk Answer 2023:17)

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This work is licenced under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International licence (CC BY-NC-ND 4.0)