13 Sep 2019

Combating corruption and illicit financial flows through law

There is a multitude of rules and regulations designed to make it harder not only to pay bribes but also dodge paying taxes, but multinational companies find ways to circumvent them. The world is their playing field, and new U4 Senior Adviser Sophie Lemaître suggests to re-name the tax havens:  Law havens.

Sophie Lemaître is adamant about the importance of securing navigation space for civil society organisations, about the need for researchers and practitioners to work together to create lasting change, and about anti-corruption. And she fervently talks about corrupt practices, tax and how multinational companies and government officials avoid paying taxes and hide proceeds of corruption by using “law havens”.

-The focus on the term tax havens can be misleading. This is not only about tax. It is about legal frameworks which offer financial secrecy, opacity, accommodating regulations or lack of judicial cooperation. Countries like the Netherlands, British Virgin Island, Singapore, or Mauritius are not merely tax havens. They are law havens, says Lemaître, Senior advisor at CMI’s U4 Anti-Corruption Resource Centre.

Her PhD thesis was recently published as a book, for which she has won both the 2019 Ethic award from the French anti-corruption civil society organization Anticor and the Rennes Foundation’s 2018 2nd PhD Prize for the human and social sciences: Corruption, tax avoidance and money laundering in the extractive industries sectors: The art of playing with Law. Here she describes how multinational companies and government officials manipulate and play with legal instruments to pursue illicit practices and what can be done to counteract it.

Enforcing the law to create lasting change
Law, like so many other institutions and instruments, can be used or misused. It can say whatever you want it to say.

-Legislations to prevent corruption, tax evasion and avoidance, or money laundering can be excellent, but none of this matters if the law is interpreted or implemented in a way that enables illicit practices or if it is not enforced, says Lemaître.

Despite all the work that has been done and the increased focus on tax evasion and tax avoidance and illicit practices after the Panama and Paradise Papers, efficient implementation and enforcement still seem to be missing. According to Lemaître, lacking implementation of existing laws are one part of the explanation. Another lies at the level in which the work is done. Countries’ efforts in fighting corruption or tax evasion/avoidance takes place on a national level. But the companies in question operate on an international level and benefit from the legal advantages provided by some countries which do not “play fairly”. Country to country and international cooperation and investigation is to be lifted higher on the agenda. A level playing field is also needed. Still, it is not all gloom.

-During the past five years or so there has been a sharp increase in the attention towards illicit financial flows and how multinational companies and government officials circumvent the law. Investigative journalism has contributed greatly, and so has civil society organisations. Many governments, like the French, have experienced pressure from ordinary citizens on a level that has never been seen before and have had to take their demands seriously. So activism works. It is just a slow process. Change in practices and habits take time, she says.

An untraditional way toward the goal
Sophie Lemaître comes to U4 Anti-Corruption Resource Centre with broad experience from law, anti-corruption and advocacy work. She has worked for research centres, for NGOs and in the UN system in the forestry and extractive industries sectors. At U4 Anti-Corruption Resource Centre, Sophie will be in charge of the natural resources topic as well as the illicit financial flows theme. And that is no coincidence. Corruption in the natural resources sector is a topic close to heart for the lawyer with a Master’s degree in Environmental Law and a cv that includes her advising governments on anti-corruption measures and taking foreign bribery cases against governments and multinational companies.

Though her first Master’s was in international business law and included an internship for a major multinational company, her experience at CIRAD on illegal logging and corruption convinced her that environmental law, natural resources, and the fight against illicit financial flows was where she needed to focus and made her choose this path.

-We depend on these resources to go about with our lives. Spent wisely, revenue from natural resources can build infrastructure, reduce poverty, build schools and hospitals. But in so many resource rich countries, the majority of people don’t get their share of the revenue generated by the exploitation of these resources. All they see is human rights violations, environmental damage, corruption and land grabbing. Local communities and civil society organisations that oppose the often reckless extraction of natural resources are being violently cracked down on, says Lemaître.

Combining research and practice
As a U4 Senior advisor, Sophie will use her varied background from both research and practice to the table to propose new leads and new ways of thinking about corruption and anti-corruption interventions. An important part of the job is to organize and host workshops in developing countries, and to meet with practitioners who experience corruption first hand. She looks forward to the co-creation of knowledge that emerges in the meeting between research and practice.

-In our workshops, we don’t simply share our experiences, we work together to learn from each other and to arrive at new knowledge that can feed into our research on anti-corruption and ultimately into anti-corruption efforts, she says.